Monthly Archives: July 2009

What Could Have Been

Posted on by adamrule
Reply

It only took a week to drain the cash-for-clunkers $1 billion program budget. Seeing how many cars have been sold in the last seven days, congress has just approved another $2 billion for the initiative. I’ve seen billion so many times this summer, the word has lost its value.

It seems the initial clause that the CARS program would run until Nov. 1 or when money ran out was just rhetoric. The government is just having too much fun selling cars and taking the credit for saving the economy.

Michigan has to be loving this too. There is no doubt that the government intervention is moving cars, the Great Lakes State’s boon industry.

Yet, we don’t know what damage we have done. There are untold billions of goods that were not created, were not stocked, were not purchased because money flooded the car market. The government is not invigorating the economy, it is setting it off balance, pronouncing one sector over the others.

Those industries hurt by a loss of sales will be unable to point directly to the government and blame them when they go under. There will be no smoking gun. Yet what goes unseen still exists. It is just that the voices rejoicing over what is seen (thousands of car sales) are too loudly jubilant at their good fortune for the rejected parties to be heard.

It sounds like a sorry plea to lament what could have been. But oh, what could have been!

Adam Rule – MCPP Intern

Policy Wonks Welcome!

Posted on by ewreynolds
1

Fight for Liberty

E. Wesley — Mackinac Center Intern

If you’re curious about historical anniversaries in the fight for liberty, join me at my new blog Landmarks of Liberty.  I’ll be discussing battles, documents, and events that gave us the liberty (what’s left of it) that we now enjoy.  So, if you’re a policy expert who needs some historical background check me out!  Comments are more than welcome.

Give Them Roots and Give Them Wings

Posted on by adamrule
Reply

Mike Cox, Michigan’s current Attorney General, is running for the Governorship in our State’s 2010 elections. Today, the Detroit News printed a letter of his addressing the mass exodus of college graduates out of Michigan, and hinted at legislation he may be looking to pass if voted into office. While Cox laments Michigan graduates leaving the state as a great injustice and proposes tax incentives to retain them, such action would be a detrimental solution to a nonexistent problem.

Cox opens his argument stating:

In a few weeks, about 40,000 students will begin their college careers at a Michigan university. Unfortunately, when these students are ready to graduate, less than half will choose to stay in Michigan if recent trends hold. Families will see one another less, students educated with billions of our tax dollars will use their talents to build other states’ economies, and employers will continue to leave Michigan. Our economy will never turn around if this brain drain continues.

To remedy this problem he says:

…we should give our college graduates a three-year income tax exemption, putting money directly into their pockets. This tax credit would be an investment in Michigan’s talented graduates and our economy. The funds could help pay down college debt, go toward a home and, most of all, serve as an incentive to use their education in Michigan.

The movement of college grads is not a problem, as Kenneth Darga, a state demographer pointed out in a presentation to the Michigan Revenue Estimating Conference last year. Young adults have a lot of mobility and while Michiganders may be moving elsewhere for work, remember the other half of the ledger, those from the other 49 states, and even other countries moving into Michigan to work.

As to the horrible side effects of this ubiquitous phenomenon, lets take them one at a time.

“Families will see one another less…” Lament globalization then Mr. Cox. Besides, remember you are talking about young adults here, so stop saying “Michigan must compete for our children” These “children” have the right to vote for or against you in a few years. We also have the right to chose if being close to family is a reason to stay in Michigan.

“…students educated with billions of our tax dollars will use their talents to build other states’ economies…” Yes, we know the government makes bad decisions with taxpayer money. The government is taking a risk investing so much in college education; another reason to privatize.

“…employers will continue to leave Michigan” This is a bit of circular logic. Graduates go outside of Michigan because employers are outside of Michigan. The company must be there first to attract the employees, not the other way around.

By offering a three year tax break, the state would also be barring qualified graduates from other states from entering Michigan’s workforce as Michigan students would be flooding local businesses. This is not desirable as innovative businesses practices could stagnate if diverse schools of thought were not allowed in from out-of-state universities.

While lower taxes would be wonderful, such an uneven regulation is not advisable, and is merely a haphazard remedy to a perceived problem.

Adam Rule – MCPP Intern

Dynamic Interventionism

Posted on by razma766
Reply

complex_network_managementKurt Bouwhuis, Mackinac Center Intern

One would have to put forth much effort to find a year in history in which any government lessened in size.  A significantly less amount of effort would have to be applied to find any government that increased in size in the same year.

There are several reasons for the steady growth of government – Among them is mans natural pursuit of power, concentrated benefits and dispersed costs, increases dependence on government, politicians tailoring their efforts to please the median voter, etc…  One reason that is often overlooked is what I would like to call dynamic interventionism.  Dynamic interventionism can be thought of as intervention in market “a” breeding interventions in markets “x,y, and z.”

A simple example from the United States today can help illustrate this point.  Suppose I am a politician who advocates free immigration on principle.  I may not decide, however, to vote for free immigration under the United States current political structure because immigrants tend to use government benefits and drain taxpayer money.  The same benefits that alter my voting pattern on immigration may also make it more difficult to empirically speak of the merits of private charity (as it is being crowded out by government charity).

In short, the more government grows, the more justification there is for government to grow.

Should girls stop watching sports?

Posted on by jskorup
Reply

Bonnie Erbe thinks so.

The article is about the incident with Erin Andrews, the ESPN reporter who was filmed, while naked, through a peephole in her hotel room. This has caused a national outrage. Though some have blamed Ms. Andrews herself (partially unfairly and partially not, that’s a separate issue) and others have blamed everyone, most of the outrage is directed at men, culture, or sports.

Ms. Erbe’s decides to blame all three.

In her piece entitled, “Erin Andrews Peephole Video Scandal Shows Pro Sports Culture is Nothing But Bad”, Erbe agrees with another writer who says, “It’s about men being men at their worst. It’s about the false notion that it’s OK to be intolerable and horny and barbaric because it’s all part of the guy sports experience. It’s our right, right?”

Um…no. Nobody believes that. This is typical however, but Erbe’s main point is summed up nicely.

I wish women would stop propping up men’s sports. If women didn’t attend NFL games or NBA games, or even watch them on TV to help drive up ratings, they would be doing more to stop men from behaving badly than they could ever do otherwise. If they encouraged their sons to play sports instead of paying to watch other people play baseball or football or basketball or soccer, they would be sending the message that athleticism is good, but pro sports culture is bad. And it is, nothing but bad.

This makes no sense. Can we not just hold individuals accountable without denigrating an entire culture? What if you classified a whole racial group in this way? Sports culture has nothing to do with encouraging men to “behave badly.” There are parts of all culture that are “good” and “bad”, but you call those things out as they happen. It’s not like sports is intended for something bad.

“And [sports culture] is nothing but bad.” Is she serious? What exactly is “sports culture”? I suppose if you define it as denigrating towards women than there is no way around it being bad, but who defines it that way except people like this? Besides that, her point about “encouraging” their sons to play sports instead of watching sports contradicts her point: If there is “nothing but bad” in pro sports culture, why encourage anyone to play sports at all?

Valuing Life

Posted on by adamrule
Reply

Adam Rule – MCPP Intern

Today MI Health Facts put up a great post about increasing medical costs and how government control of health care is likely to affect what treatments are used and what research is pursued.

It seems government control will make health care, a very inelastic product, more elastic. Treatments that are pursued at any cost because they regard one’s own life and death will be made with less passion by the government who will no doubt be much more reserved in dropping thousands on remedies that are less than guaranteed to work. What value will the government place on life?

Here is the post:

Proponents of Obamacare believe that reforms to the health care system can bring down or eliminate unnecessary costs in health care and that by facilitating these changes the government can bring overall health spending under control and create economic stimulus and universal insurance coverage in the process.

No one is foolish enough to deny that there are unnecessary costs in health care, as there are in any sector of the economy, nor does anyone argue that it wouldn’t be better if these costs, which come from corruption and fraud, could be brought under control.

But that isn’t what causes health care spending to increase much faster than the rate of inflation each year. Rather, progress in medical technology, procedures and pharmaceuticals, which are expensive – but effective – account for most of the cost increases America sees each year. The Washington Post has an excellent article using treatment for heart attacks as an example.

While some medical discoveries are high yield and cheap – such as the discovery that taking aspirin increases the chance of survival of a health attack – most of these “low-hanging fruit” discoveries have been made already and instead health care improvements are happening at a slower and more expensive rate.

… the fight against heart disease has been slow and incremental. It’s also been extremely expensive and wildly successful.

In the 1960s, the chance of dying in the days immediately after a heart attack was 30 to 40 percent. In 1975, it was 27 percent. In 1984, it was 19 percent. In 1994, it was about 10 percent. Today, it’s about 6 percent.

Over the same period, the charges for treating a heart attack marched steadily upward, from about $5,700 in 1977 to $54,400 in 2007 (without adjusting for inflation).

So although health care has become significantly more expensive, the cost has produced significant improvements in patient well-being.

Government bureaucrats deciding on which treatments qualify as “efficient” use of health care dollars would never question an expense such as administering aspirin after a heart attack. Something as simple as taking a three-cent pill to decrease mortality from heart attacks by six per cent is a no-brainer. Less clear, though, is what bureuacrats will decide when the discussion surrounds a treatment that quadruples costs while only lowering mortality by, say, one per cent.

Soon another clot-dissolving drug, called TPA, came on the market. It cost $1,200 compared with $300 for streptokinase. The new question was: Is TPA worth it? By 1994, the conclusion was: Yes.

Several studies showed that TPA shaved mortality by 1 percent (to 6.3 percent) compared with streptokinase. The cost of treating a heart attack went up another notch.

Doctors and patients have overwhelmingly shown that they believe that these large investments are worth making for even marginal improvements in health. For doctors it’s a matter of protecting their patients and for patients it can be a matter of life and death.  But once government middlemen get in the way, it’s realistic to expect them to act with a degree of detachment from individual patients and cases. (Or, rather, it’s unrealistic to presume that they would be attached to each individual case.)

On the contrary, some legislators, such as Paul Kucinich, seem to believe that rationing is actually necessary and desirable – that everyone needs to make significant sacrifices in their health care consumption to insure that the government’s noble goals can be met. To them, these medical advances might not seem worth the extra cost imposed on the system since spending could have instead been used to buy cheaper treatments for these patients and others. The problem with this is that this diverted spending is at the expense of those whose lives could have been saved if they had their choice of medical treatment.

It’s no secret what happens once rationing takes hold of a health care system. Horror stories abound from countries where they are already in place. Costs can and should be cut by doing all that can be done to root out corruption in the health care system, but cutting care to cut costs isn’t worth it.

Lay Your Weapons Down

Posted on by adamrule
2

Last Friday Governor Granholm focused her weekly radio address on the Michigan Economic Development Authority (MEGA), and called for help in keeping the program running. MEGA, which offers tax breaks as an incentive to draw employment to Michigan, has already reached its legal limit, and cannot offer additional tax breaks for the remainder of the year. Speaking of MEGA Granholm said:

Their efforts have been so fruitful that they’ve used up almost all the MEGA tax credits available this year under present law.  If Michigan can’t award more credits until next year, we could miss out on tens of thousands of new jobs and even lose existing jobs.

How much one can give away is not a good measure of economic effectiveness. I could walk outside right now and hand out money from my own wallet to people walking by on the street, but I have not made the economy more ‘fruitful’. I have not gained any goods or services from this transaction. I could have used that money to commission a new piece of furniture, and not only would I have given money away, one more chair would have come into the world.

MEGA has proven to be unfruitful and inefficient. A 2007 report by the Mackinac Center found that for every $123,000 in MEGA tax incentives, only one construction job was produced – jobs that lasted only two years.

Gov. Granholm also stated:

MEGA tax credits are performance-based. That means that a business can use the credit only if it creates or retains a certain number of jobs.

Again, the Governor has fallen for a fallacy. Creating jobs is not economic performance. It is the creation of goods and services that increases wealth. Simply creating, or retaining jobs does not increase wealth.  MEGA has not been creating very many jobs either. The Mackinac Center found that over a ten year period of operation, only 13,541 jobs could be attributed to MEGA; very different from the 62,000 Governor Granholm is claiming it created or retained in just this past year.

The Governor concluded:

Expanding the number of MEGA tax credits will enable us to bring thousands of new jobs to Michigan, which we need right now obviously.  I urge the state Senate to quickly pass House Bill 4922.  Virtually every other state is out there competing for these companies with incentives.  With the competition for jobs so fierce, Michigan can’t afford to be without one of its key economic development tools for very long.

This gets at the heart of the issue. States across the nation are taking taxpayer money and using it to entice businesses to shuffle around the country. State governments need to stop wasting our money by building bigger and bigger programs to fight with each other. Its time to disarm.

Adam Rule – MCPP Intern

Wishful Thinking

Posted on by razma766
Reply

Kurt Bouwhuis, Mackinac Center Intern

The following is a few sentences from a recent post by Eric Baerren on Michigan Liberal.

“And serious consideration means avoiding interest-group shenanigans and dealing with the realities of the state budget and of the plan itself.” — This is wishful thinking!  How do you avoid “interest-group shenanigans?”  Stating that politicians should ignore interest groups is like stating that we should all just ignore that pesky force called gravity before we take turns jumping off the Empire State Building.

“I wish that someone, somewhere would at least acknowledge what this means, which is building a future based on making things worse for people.  Again, it’s not like public sector employees have usurped benefits overly generous when compared to private sector employees.  It’s that private sector benefits have just simply gotten so crappy.” — Just because a price fluctuates does not mean we are “building a future based on making things worse off.”  If public sector employees are receiving even a penny more than the private sector employees (for the same task) then the government is being overly generous.  Private sector wages are determined through voluntary association with several parties attempting to make themselves better off.  Public sector wages, on the other hand, are determined by politicians (acting only in the best interest of “society”) who allocate confiscated funds called taxes.

Health care fallacies

Posted on by jskorup
Reply

-Jarrett Skorup

Writing in his New York Times blog, economist Paul Krugman makes some common mistakes when talking about health care.

His piece is entitled “Why markets can’t cure health care” and he is attempting to refute the idea that less government would make health care more efficient and better for everyone.

I’m not going to dissect the whole article, but one of Krugman’s main points is this idea   He writes,

“[I]nsurers try to deny as many claims as possible, and…try to avoid covering people who are actually likely to need care.”

This is a point a lot of progressives are making, usually after mentioning that insurance companies only care about profits and don’t care about people.

Well…so?

I could care less if an insurance company cares about people or not.  Do you really think government bureaucracies care about you more because the government isn’t making a profit?  Does the post office and DMV show more caring to you than Walmart?  What makes people evil the minute they step into the profit-making world?

If Krugman’s theory is correct, then insurance companies would deny 100% of the claims filed.  Is that accurate?  No, in fact, only 3% of claims are denied each year.  Also, Massachusetts universal health care policy turns down more people then the private insurers.  (MassCare turned down 22.8% of claims versus about 5% for private insurers).

Why would these evil companies decide to fulfill 97% of claims anyways?  Don’t they understand that they are losing billions in profits?  The reason is simple economics…if you denied every claim, you would have no customers and your profit would be zero.  Also, if you deny legitimate claims and violate your contract, you could be sued and lose millions more.  Companies don’t fulfill claims because they want to; they do it because they have to.

Now, there are a few things that need to be cleared up.  First of all, the government controls 50% of health care spending in the United States, and this has gone up from 10% in the 1960s. More government in health care, as well as better medicine and treatment, is what’s caused prices to skyrocket; not the free market. 

Second, giving government MORE control will not help keep cost down.  If we look at the states who provided universal health care themselves, it has been a disaster.  Obama cites Massachusetts, and yet a study found that they were the slowest payer of health claims  to doctors (taking 56 days versus 22.6 for private insurers) and had the highest denial rate of care.  Hawaii’s system has also been a disaster.

Third, the government is not “competition”.  Obama has said, “One of the options in the exchange should be a public insurance option — because if the private insurance companies have to compete with a public option, it will keep them honest and help keep prices down.”

This has been said repeatedly by President Obama and it makes no sense.  There are thousands of health care companies, how is that not enough competition?  Government “competition” does not mean competing on an equal playing field, it means getting in and setting prices.  How has that worked out in the past? 

Basically, the government cannot be an impartial umpire if it owns one of the teams playing and sets the rules of the game.  More involvement will mean worse care, worse service, and higher costs.

Ideology and the Minimum Wage

Posted on by razma766
Reply

minwage

Kurt Bouwhuis, Mackinac Center Intern

Bellow is a blog post from Cafe Hayek from June, 2006 that is relevant to both the Federal increase in the minimum wage and the proposed increase in the minimum wage in Michigan.

by: Don Boudreaux

In a private e-mail sparked by my most recent post on minimum-wage legislation, someone accused me of being an “ideologue.” His evidence, of course, is my opposition to such legislation as a means of helping low-skilled workers.

I realize that Humpty Dumpty instructed Alice that a user of a word can mean by that word whatever he or she wants that word to mean. But we live in a wonderland if we imagine that such use of language facilitates communication.

Am I an ideologue for continuing to believe that a higher price of labor will cause employers to hire less labor, or to extract more output from any given amount of labor? Does this insistence that the law of demand describes reality reveal ideological blindness? (I know, I know: it’s theoretically possible for a minimum wage to increase employment if there’s monopsony power in labor markets. But any such allegation of monopsony power – any allegation that each employer of low-skilled labor does not compete with other employers to hire such labor — flunks the smell test. One of the few benefits enjoyed by low-skilled laborers is their possession of highly versatile abilities, thus making it quite easy for each of them to switch jobs even for a modest difference in relative wage rates and work conditions.)

If I am an ideologue on this matter, then so is everyone else. Everyone. I’m certain that no one really believes that the law of demand sometimes is suspended. For example, I’ve met no one who, upon finding that he cannot sell his house at his current asking price of $250,000, re

asons that he will attract more potential buyers if he raises his asking price to $260,000. I’ve never heard of a supermarket that seeks to clear out excessively large inventories of canned peas or laundry detergent by raising the prices it charges for these items. I’ve never heard of a construction contractor who

believes that the higher the price he asks to do a job the more likely he is to be awarded the contract for that job. I’ve never encountered a car salesman who, upon my rejecting the price he asks for a car that I just test drove, says “Okay, okay. I’ll talk to my manager and ask if he’ll accept an even higher price for this baby.” I don’t encounter advertisements by merchants bragging that their prices are the absolute highest in town — guaranteed! Do any of you, Dear Readers, know of such behaviors? More importantly, do you know people who are generally more likely to purchase something as its price rises? If you do, surely you are by now a person of enormous wealth.

What is it about unskilled- and low-skilled labor that makes many people fancy that the law of demand does not apply to it? Are the greedy, profit-lusting employers of this labor so foolish that they’ll just dish out more money for the same output as before, without economizing further on labor – say, by buying less of it or by extracting more work from each man-hour hired? Or are low-skilled workers so daft or dysfunctional that they consistently refuse to respond to pre-minimum-wage-hike differences in wages and work conditions?

No – the true ideologue is one who suspends his awareness of all that he knows about reality in order to continue to believe in some pet possibility – some pet possibility that is inconsistent with reality.

Precautionary or Reactionary Law?

Posted on by adamrule
Reply

The Michigan Economic Growth Authority (MEGA) was created in 1995 to promote economic growth, private investment, and job creation in Michigan. To do so it established a government committee with the power to offer tax incentives to businesses already in or moving to Michigan. While reading through the law that established MEGA I found the below amendment. (Eligible businesses are those applying for tax breaks, while authorized businesses are those who have been approved for such incentives)

207.808a Fee or donation.Sec. 8a.

Beginning on the effective date of the amendatory act that added this section, the authority shall not require an eligible business, as a condition of becoming an authorized business, to pay an unreasonable fee to or make a donation to the Michigan economic development corporation or a foundation or fund associated with the Michigan economic development corporation.

For more information on MEGA, and why it has largely failed to promote growth, check out the Mackinac Center’s evaluation of the program on its 10th anniversary.

Adam Rule – MCPP Intern

Sloppy Krugman

Posted on by razma766
Reply

Here’s a letter Don Boudreaux sent to the New York Times:

And these data ignore the fact that Massachusetts’s plan relies in part on subsidies from Uncle Sam.

Don
http://www.cafehayek.com/
http://marketcorrection.powerblogs.com/
…………..

24 July 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

I’m surprised that Paul Krugman points to Massachusetts’s three-year-old program for creating universal health-insurance coverage in that state as a model for the national level (“Costs and Compassion,” July 24).  Krugman himself admits – in a column devoted to insisting that such government plans will reduce health-care costs – that Massachusetts “is now looking for ways to help control costs.”  If Massachusetts’s experience is Mr. Krugman’s best real-world case for how such reform itself controls costs, why are legislators in that state “now looking” – three years later – “for ways to help control costs”?

But control costs they must.  A 2008 Kaiser Family Foundation study of this Massachusetts reform finds that “the costs for this program have exceeded previous estimates.  The Governor’s budget request of $869 million for 2009 is about $400 million more than that for 2008, and it is believed that this funding level may still fall short.”*  And just last month, Cato Institute scholar Michael Tanner reported that “since the program became law, insurance premiums have been increasing by 10 to 12 percent per year, nearly double the national average. On average, health insurance costs $16,897 a year for a family of four in Massachusetts, compared to $12,700 nationally. Meanwhile, total health-care spending in the state has increased by 28 percent.”**

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

* http://www.kff.org/uninsured/7777.cfm

** http://www.cato.org/pub_display.php?pub_id=10279

To Raise a City

Posted on by adamrule
Reply

This past week I had the opportunity to attend the lecture of a man who is part time university professor, part time mayor of a small town in Utah. He recounted a meeting in which he and city board members were presented with a development proposal that had fulfilled all zoning requirements. One disgruntled board member, however, asked the mayor if he could deny the proposal anyway. His reason: the project did not meet his tastes. City planning, though not always this corrupt, is still greatly hindering both our economy and society.

A few months ago I stumbled across New Urbanism, a city planning movement seeking to develop self sustaining clusters of homes, businesses, and municipalities connected to each other by extensive public transport. New urbanites decry suburbia and claim their methods will revitalize failing city centers, improve safety, and develop stronger communities.

First, urban sprawl is a charged phrase carrying all sorts of negative connotations that are largely unfounded. Secondly, while tighter communities might result from New Urbanism, planning is still not the answer. Artificially developed communities will never be as strong as ones allowed to grow naturally through free real estate markets.

It is deregulation and accountability that will revitalize downtowns, and possibly satisfy the New Urbanists as well. Take for example charter schools. Being leniently regulated and held more accountable for results than traditional schools, charters provide a unique experiment in community development. Charters have taken a number of steps that have fostered social and professional partnerships including contracting with local shops for food services, providing dorms on site for employees, providing educational programs for area adults, and sharing facilities with churches and other nearby schools. The result has been safer schools, more involved parents and neighbors, better education, and stronger communities.

Rather than focusing on urban sprawl, the result of citizens seeking safer streets and better schools, cities need to focus on those factors that drove people away. By seeking first deregulation, cities can foster communities that attract people, rather than forcing them inward by increased measures against subburbs.

Adam Rule – MCPP Intern