Competition and Cooperation

choice_180x270Competition is often used to describe market activity, and cooperation is often used to describe political activity, but competition more accurately describes politics and cooperation more accurately describes markets.

Market activity is based on voluntary exchange, and transactions take place only if all parties agree. Parties engage in voluntary exchange for their mutual benefit, which is cooperation at its finest. All parties benefit, or the transaction does not take place.

In politics, it is almost always the case that people involved have conflicting agendas, and when one side wins, the other loses. This is obvious at the national level, where the Republican Congress finds itself at odds with the Democratic president. At first it might appear that the conflict comes from party differences–Republicans versus Democrats–rather than being an inherent characteristic of politics, but a look at Florida politics provides evidence that politics leads to conflict.

Florida’s state government is solidly Republican, with a Republican governor and solid Republican majorities in both houses of the legislature. Yet, the Republican House and the Republican Senate have reached an impasse on the state’s budget, leading the Speaker of the House to adjourn three days prior to the scheduled end of the legislative session, without passing a budget.

The only thing the Florida legislature is constitutionally required to do is pass a budget, so the legislature will have to reconvene in a special session to do so. It’s not Republicans and Democrats who are disagreeing; it is Republicans who can’t reach an agreement among themselves.

They agree on almost everything, but politics causes people to focus on areas where they disagree, whereas markets cause people to focus on areas where they agree.

Their main disagreement is over Medicaid funding–an interesting story in itself–which stands in the way of their cooperating even in areas where there is no disagreement. In markets, two people could disagree about almost everything, yet cooperate because they only interact based on their mutual interests.

Think about it. When you go to a restaurant, or a store, you might disagree with your server, or store clerk, on political views, religious views, and a host of other issues; yet, it never comes up because both parties are interested in completing a mutually advantageous transaction. Meanwhile, in Florida politics, disagreement among Republican legislators on one issue keeps them from moving ahead on other issues where they do agree.

The next time you hear someone talking about competition in markets, or cooperation in politics, take a moment to consider how misleading those labels really are.

Health Spending Crushing a Stalled Economy

health_costsMarch’s estimate of last year’s fourth quarter Gross Domestic Product (GDP) showed that health spending was chewing through a weak economy. Today’s release of the advanced estimate of this year’s first quarter GDP might best be described as health spending crushing a stalled economy.

GDP barely budged, increasing by a trivial 0.2 percent annualized. Although personal consumption expenditures increased at a much higher rate, the largest component of that increase was health services, which contributed 0.62 percent to the change in GDP. (Housing and utilities, at 0.59 percent, was second.) Investment spending and exports were in the tank.

Seasonally adjusted at annual rates, GDP increased by only $6.3 billion from the fourth quarter. Health services consumption, on the other hand, increased by $23 billion. This is a dramatic increase in a segment of GDP committed to a government-controlled and relatively unproductive sector of our economy.

Campaign Finance Reform—After I’m Elected

Election pledgesWho knew that the New York Times had embraced irony?

In a news piece—not its opinion page—”Clinton Fundraisers Show Scope of Family Network“:

WASHINGTON — Hillary Rodham Clinton is tapping some of the biggest donors to her family’s philanthropy for her presidential campaign, even as the charity is under scrutiny over its own fundraising practices.

Starting what could be a $1 billion-plus fundraising effort, Clinton began raising money for her presidential bid Tuesday in New York, the state she represented in the Senate. The hosts’ connections with the Clinton Foundation show how intertwined the charity is with Clinton’s political career. Even her campaign finance director, Dennis Cheng, had a leading fundraiser role at the foundation before departing for the campaign.

The former secretary of state has faced persistent questions about the foundation’s acceptance of donations from foreign countries and its corporate ties in recent weeks.

And as she starts holding fundraisers this week, plenty of overlap can be seen between long-term political donors and foundation funders.

In New York, Clinton’s first event was at the home of fashion designer Lisa Perry, a longtime Democratic donor to Hillary Clinton’s campaigns, and husband Richard C. Perry. A hedge fund executive, Richard Perry has donated between $250,000 and $500,000 to the Clinton Foundation, according to the foundation’s voluntary disclosures, and supported Hillary Clinton’s Senate and presidential bids.

A second event is co-hosted by Alan Patricof, the finance chairman for Clinton’s Senate campaigns. He and his wife donated between $100,000 and $250,000 to the foundation.

Speaking to 150 donors gathered in a midtown Manhattan apartment at the third event of the day, Clinton stressed her commitment to reforming the campaign finance system — and her goal of raising $100 million for her primary campaign.

[Read the rest, here.]

“Reform for thee but not for me!”

Do Drones Degrade al Qa’ida?

drone2On April 23, the White House announced that one of their drone strikes had killed two al Qa’ida hostages, one Italian and one American.

A few weeks back I discussed the evidence regarding drones and civilian casualties. I argued that, as opposed to being “surgical instruments” capable of eliminating terror groups while minimizing damage to civilians, drones may in fact be worse at reducing “collateral damage.”

Civilian casualties are not the only talking point when it comes to drones. One area of particular interest involves drones’ supposed ability to eliminate al Qa’ida and other terrorist groups more effectively than other means. Nowhere is this idea more clearly demonstrated than in President Obama’s 2013 address on drone policy.

[Drones] are effective…. Dozens of highly skilled al Qaeda commanders, trainers, bomb makers and operatives have been taken off the battlefield…. [T]he primary alternative to [drones] would be the use of conventional military options…. Conventional airpower or missiles are far less precise than drones.

So, are drones really more precise than conventional air power? Has the increased use of drones over the past several years worked to degrade and dismantle terror groups?

If you were expecting a resounding “yes,” I’m sorry to disappoint. Available evidence indicates that drones are not inherently better than other means at taking out terror threats. In fact, drones may have led to an expansion of terrorism activity domestically and abroad.

Proponents of drone use often credit drones as a tool for eliminating “high level” fighters, or leaders of terrorist groups. These targets are particularly important from the perspective of the military. The idea is that by eliminating the leaders of terrorist groups, the structure of the group will weaken and eventually dissolve.

However, drones may not be eliminating these “high value” targets. Reports state that since 2008, drone strikes have killed very few terrorist leaders. Researchers at Stanford and NYU, for example, found that such targets comprised a mere two percent of total casualties. Government reports have shown that drones have killed twelve times as many low-level to mid-level fighters than leaders of al Qa’ida and the Taliban.

As opposed to eliminating these groups, there is evidence that these strikes may be increasing the recruiting ability of terrorist groups. To give just one example, one researcher found that countries in which these strikes have been conducted have seen significant jumps in terror attacks, as much as 58 percent in some cases. Similarly, other research has found that drones strikes not only fail to eliminate al Qa’ida recruitment, but lead to an increase in propaganda output.

This evidence leads to a much broader policy question: Are offensive strikes the best way to eliminate terrorists in the first place? Again, evidence suggests we may want to look to other means to degrade terror groups. It’s been found that most terrorist groups (43 percent) break apart as members of the group decide to pursue changes via their state’s political process. Other groups (40 percent) are broken apart by local operations. A mere seven percent of terror groups are actually ended by military force.

Just as the issue of civilian casualties is important when discussing the U.S. use of drones, it is important to examine whether or not drones are actually achieving the stated objectives of thwarting terrorists. While it appears that strikes have taken out some high-level targets, this group is incredibly small compared to the overall number of casualties. As opposed to eliminating terror, U.S. drone strikes may have the opposite effect.

Tax Freedom Day, 2015

TaxFreedomDayThe Tax Foundation announces “Tax Freedom Day” every year to mark the date on which the average U.S. taxpayer has earned enough income to pay in full all federal, state and local taxes owed. The date this year is today, Friday, April 24, 2015.

“Tax Freedom Day” is determined by taking the ratio of the estimated total tax burden imposed by governments at all levels ($4.8 trillion) to national income. That works out to 31 percent, and 31 percent of the 365-day calendar year falls on April 24. Tax Freedom Day thus is an estimate across all Americans, but it captures the idea that in 2105, the average person must earn income for 114 days in order to “pay” his or her tax bill and therefore can “keep” everything earned from now until December 31.

Obviously, not everyone is required to pay all of the taxes included in the Tax Foundation’s calculation. Only smokers pay federal, state and local excise taxes on cigarettes, for example. And, fortunately, not everyone dies; estate taxes apply only to the heirs of those who do. But “Tax Freedom Day” supplies a rough and ready estimate of the weight of the heavy hand of government on the average American.

Trends are more informative. Tax Freedom Day this year is three days later than it was last year, reflecting an increase in the total tax burden on the average American. It was latest in 2000 (May 1). The date of Tax Freedom Day varies not only over time, but also across states. It occurs earliest this year in Louisiana (April 2) and latest in Connecticut and New Jersey (May 13). The Tax Foundation also estimates that the typical American household owes more in taxes than it spends on housing, food and clothing.

Since voters are “rationally ignorant” (not “stupid” as MIT economist Jonathan Gruber once said was the reason Congress enacted the Affordable Care Act), the Tax Foundation, where I serve as a policy adviser, supplies an easily understood if imperfect measure of what government costs them. If one looks impartially at the programs and policies those tax revenues partly finance (much money spent at the federal level is borrowed), one must conclude that what government mainly does is to transfer income from taxpayers in general to well-organized special interest groups, including farmers, private corporations, peddlers of “green” alternatives to fossil fuels and too many others to list.

Tax Freedom Day is both a cause for celebration and a sobering reminder of what Justice Oliver Wendell Holmes, Jr. called the “price we pay for a civilized society.” The current price is way too high.

Barack Obama Has the Last Word on the Medicare “Doc Fix”

DoctorObamaOn April 15, President Obama signed the so-called Medicare “doc fix,” a bill that I previously warned would recruit Republicans onto Obamacare’s B-Team. I had also hoped that they would reject the bill, especially after Medicare’s Chief Actuary delivered an even harsher verdict on its consequences than the Congressional Budget Office had. Unfortunately, massive majorities of Democrats and Republicans in both the House and Senate voted to increase deficits by $141 billion in 10 years and half a trillion dollars in 20 years.

During the three-week period the secretly negotiated “doc fix” legislation was being rushed through Congress (“rushed” because the Senate was in recess for most of it), I wrote an article suggesting Republicans who voted for it might be casting their first vote for Obamacare.

Well, don’t take my word for it.


Obamacare and Employment

Vox’s Mattew Yglesias, an undaunted Obamacare supporter, has listed “7 charts that show what Obamacare critics are getting wrong.” The first is, you guessed it, that chart from the Gallup survey of health insurance, which (wrongly) claims Obamacare reduces the number of uninsured Americans.

Another chart claims that Obamacare is not causing part-time work at the expense of full-time work. Here it is:


Note how Mr. Yglesias’s chart begins in 2010, just when we finally started climbing out of the Great Recession. Trends in employment are caused by many things. Obamacare is only one of them. However, Obamacare did not cause the Great Recession (having been passed in 2010). And its effects are not bad enough to completely crush recovery. However, as comedian and U.S. Senator Al Franken has said, “It takes a lot more work to drive the car out of a ditch than to drive it into a ditch.”

Financial Advisor Doug Short has a great chart showing how part-time-workers and full-time workers flipped as a result of the recession. So, as we come out of it, of course full-time workers will gain.


The question is: What is the effect of Obamacare at the margin, notwithstanding all other effects? To answer this question, University of Chicago’s Casey Mulligan is the go-to source. Obamacare clearly induces many workers of a certain income to lose hours.

* * *

For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

An Argument for “Selling” Babies

13427818_S“Behave, or I’ll sell you.”

This “threat” was one I heard with some regularity as a child. It was my mother’s way of letting me know that I was driving her up a wall. It was usually followed by something like, “then they’ll pay me to take you back.” (In retrospect, if this was true, my mother missed out on a serious profit opportunity.)

This week marks National Infertility Awareness Week. The idea behind the campaign, as the name suggests, is to raise awareness of the variety of fertility problems that keep many couples from conceiving children naturally.

As a “woman of reproductive age,” this is an issue that has crossed my mind on more than one occasion. Will my soon-to-be husband and I be able to have children? Will it be easy or difficult? We can’t know until the time comes. For several friends and acquaintances, however, they do know, and it’s not the answer they were seeking. They know that, even if the reasons are unclear, they have been unable to successfully conceive or bring a pregnancy to term.


Is FDA Reporting Drug Shortages Adequately?

21096315_SFor a number of years, there has been a problem of shortages of certain generic drugs for injection. These are often important cancer drugs. In 2012, I wrote a report that concluded over regulation by the Food and Drug Administration (FDA) was the primary cause of the shortages.

The President and Congress acted, but their actions did not result in improvement for over a year.

Today, the FDA claims to have improved the situation. However, an article in Health Affairs points out that the number of drug shortages reported by the FDA and the number reported by the University of Utah Drug Information Service (UUDIS), the leading private source of this data, are diverging dramatically:


Is Sexual Orientation a Choice?

libertyPresidential candidate Marco Rubio says, “I believe that sexual preference is something that people are born with,” but goes on to say, “I don’t believe same-sex marriage is a constitutional right.” Let’s consider both of these ideas from a political perspective.

First, whether people choose their sexual orientation or are born with it is irrelevant from a political perspective. As long as people’s actions are not violating the rights of others, their choices about sexual partners and any other personal matters should be of no concern to the government. So, I’ll criticize Rubio for making this statement, not because he’s right or wrong, but rather because as a political candidate he should have said that whether people are born with their sexual preferences should have no bearing on politics or government.