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Campaign Donations: Freedom of Speech or of the Press?

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On Wednesday, the US Supreme Court overruled the $123,000 cap on what any individual may donate to federal candidates over any two-year election cycle, on the grounds that the cap violates First Amendment free-speech rights.

Although this ruling leaves the $2600 limit per candidate intact, it is a big step in the right direction. However, I would submit that the case against campaign contribution limits is even stronger in terms of Freedom of the Press than it is in terms of Freedom of Speech per se.

Narrowly construed, Freedom of Speech is your right to express your opinion to those within earshot (subject to impartial noise abatement restrictions), without fear of prosecution. But the framers of the Bill of Rights realized that in order for your opinion to have a chance at being effective, you must also have the right to mechanically reproduce it. In the 18th century, this meant printing leaflets, pamphlets, newspapers and books, though today this obviously extends to electronic media as well.

Now printing up pamphlets etc. requires money that increases with the size of the run. Unfortunately, not everyone has the resources to print up and distribute a million copies of their little book or pamphlet. However, a law that restricted the circulation of a newspaper to say 1000 copies or its budget to $100,000 per year in order to be “fair” to competitors that no one wants to read would obviously violate Freedom of the Press.

Freedom of the Press gives you the right to use your own resources as you see fit to propagate your ideas, even if you happen to have more resources than someone else. It does not just apply to established organizations with access to White House “press passes,” but to anyone with the cash to pay a printer or TV station to support a particular policy or political candidate. It does not give you the right to use other peoples’ resources acquired through taxation or theft, but just your own, legitimately obtained resources.

If there are other individuals who share your political views, you will probably be more effective if you combine your resources and coordinate your efforts by forming a campaign committee, political party, or political action committee. Although the US Constitution makes no explicit mention of the Freedom of Association, the Supreme Court has in the past ruled that it is implicit in the First Amendment, most notably in the 1956 case NAACP vs. Alabama. (See, e.g., Wikipedia).

Any restriction on individuals’ campaign contributions, whether to individual candidates, political parties, or PACs, is therefore an abridgement of the Freedom of the Press, if not of the Freedom of Speech. Sadly, only Justice Clarence Thomas favored removing all restrictions on political contributions in Wednesday’s decision.

The bizarre 2010 Citizens United case threw out limits on political spending by corporations and unions but not by individuals. Surely any rights corporations and unions have derive from the personal rights of their shareholders or members and therefore cannot exceed those rights. Although corporations are “fictitious persons” for the purposes of owning property, incurring debt, and entering contracts, they are obviously not real persons themselves. In particular, although corporations should (under the Freedoms of Association and of Petition) have the right to lobby concerning legislation or regulations that will directly affect their business, it does not seem unreasonable to block publicly traded corporations with an explicitly commercial purpose from overt political contributions to candidates or political parties, so long as their shareholders are free to contribute to explicitly political organizations directly and without limit.

In the past, wealthy individuals like H. Ross Perot and Donald Trump who legitimately want to use their abundant resources to influence public policy have had no choice but to submit themselves as candidates in order to bypass campaign contribution limits. Removing individual campaign contribution caps will allow such individuals to delegate their efforts to others, without having to inflict themselves on the voters.

Disclaimer: The author is not an attorney, but an economist. More learned comments are welcome!

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Hooray! The Medicare Doc Fix Is Fixed Until Next April!

23972583_SCongress has given up on repealing the Sustainable Growth Rate (SGR) as a way to pay physicians under Medicare. Last June, John Goodman wrote in this blog about the futility of politicians’ efforts to “fix” the way they pay physicians.

At the end of 2013, Congress passed another short-term fix that prevented physicians’ reimbursements from being cut by one quarter until March 31 — a three-month fix — which I analyzed in a post last December (and compared it to a Soviet-style price fixing system).

Last week, lawmakers passed another fix, this one running for a year. And, just as always, these politicians who are elected for two-year to six-year terms voted to massively increase spending today, in exchange for significant cuts a decade hence.

According to the Congressional Budget Office’s score of the bill, it increases Medicare’s physician payments by $15.8 billion over ten years. However, $11.2 billion (71 percent) is spent by 2015, and $13.3 billion (84 percent) is spent by 2016.


Can Obamacare Be Fixed? Part II

priceless_180x270The reason we have so many problems in health care is that almost everywhere we look, people face perverse incentives — patients, doctors, employers, employees, etc. When they respond to those incentives, they do things that make costs higher, quality lower, and access to care more difficult than otherwise would have been the case.

At the root of those perverse incentives is bad public policy.

Pre-Obamacare Distortions That Affected Important Choices

Insurance or Uninsurance? Because we were spending far more on free care for the uninsured than we were spending on subsidies for individually purchased insurance, millions of people had an incentive to be uninsured.

Public or Private? Because we spent far more on such public programs as Medicaid and CHIP than we spent on subsidies for individually purchased insurance, millions of people had an incentive to choose public insurance rather than private insurance.


Employer-Based Health Insurance: “Job Lock” Is Not the Problem, “Insurance Lock” Is

HealthInsOver at The Incidental Economist, Austin Frakt is publishing an interesting series on “job lock”. This is the idea that, because most of us get our health benefits from our employers, we are “locked” into jobs we don’t like because they offer benefits which we do like (or need).

We get our health benefits from our employer because they are non-taxable. If employees bought health insurance on our own, we would pay premiums with after-tax dollars. Given this government discrimination, the idea of job lock makes sense: If we got our homes from our employers, we would surely hesitate to switch jobs, which would result in forced eviction from the current home to a new one.

But while there may be some job lock due to employer-based benefits, the problem has become way overblown in public discourse, with politicians like Nancy Pelosi claiming that Obamacare would free the masses to pursue artistic dreams, free of wage slavery.

As discussed in a previous blog entry, job lock — as an independent factor in employees’ choices — is significantly reduced (if not eliminated) by HIPAA, a law passed in 1996. If you had a job with health benefits and took a new job, HIPAA meant that the new employer’s insurer could not underwrite you for health status, or exclude pre-existing conditions, if you had maintained continuous coverage at your old job. (Most states had similar laws by 1996.)


Joseph Stiglitz: The Price of Inequality

9780393088694_300Although Joseph Stiglitz has a reputation as one of the most prominent defenders of big government, I found much to agree with in his book, The Price of Inequality. It does appear to me that throughout the political spectrum, from left to right, there is a substantial consensus that government is the cause of many of the problems people perceive. The disagreement is over how to solve those problems.

Stiglitz sees many negative consequences from income and wealth inequality, and while I would question whether these negative consequences are as substantial as Stiglitz says, we both agree on the negative impact that government policy has in our society. Stiglitz, a critic on the political left, is in surprising agreement with David Stockman, a critic on the political right, that many of today’s economic and political problems are caused by government.

Both Stiglitz and Stockman argue that cronyism is damaging both our economic system and our democratic political system.


The Coming U.S. Government Default?

tir_18_4_210Social Security, Medicare, and the federal component of Medicaid are easily the leading sources of the U.S. government’s worsening fiscal nightmare. By 2037, the ongoing growth in spending for these programs will have pushed up total federal spending to 35.7 percent of GDP, according to the Congressional Budget Office. This share is about 75 percent larger than the average since the end of the Korean War.

But federal tax revenues can’t keep pace; it’s practically an “iron law” of our political culture that the U.S. government takes in approximately 17 percent to 20 percent of GDP, argue economists David R. Henderson and Jeffrey Rogers Hummel. In fact, you can count on one finger the number of years since 1950 that the feds took in more than 20 percent of GDP. (The year: 2000; the take: 20.4 percent.) Only during World War II did federal revenues get close to reaching as high as 22 percent of GDP.

Nor would a policy of high inflation solve the problem, Henderson and Hummel argue. One reason is that the public holds much more of its cash balances in the form of privately created bank deposits and money-market funds than in government-issued notes and coins; consequently, the potential income gain for government via monetary expansion is relatively small. This helps explain why, in recent decades, developed countries never generated revenue exceeding 1 percent or so of GDP from their inflationary policies. Only if the Federal Reserve were willing to sustain a policy of hyperinflation could the government hope to cover the fiscal shortfall exclusively via the expansion of money and credit, but it’s extremely unlikely that the Fed would invoke the “Zimbabwe option.”

Therefore, unless federal spending on “entitlements” and transfer payments slows down in the coming decades, the government will face the prospect of defaulting on the national debt.

“The default could range from outright repudiation to partial repudiation,” Henderson and Hummel write in an article for the Spring 2014 issue of The Independent Review. The worsening financial health of Medicare Part A and Social Security are among the potential triggers of default, they explain.


This Large Health Insurer Has Effectively Admitted Obamacare Is Failing

21323119_SPeople can be forgiven for being confused about the effects of Obamacare. For over a year now, there has been a lot of evidence that the upward trend of medical costs has tempered. Some have said that we have finally bent the cost curve.

Much of the declining rate of growth of medical spending is surely due to the recession. John Goodman and Peter Ferrara have made the case that the impressive rise of consumer-driven health plans, and Health Savings Accounts, have made patients more discriminating purchasers of health care.

And yet, premiums are going through the roof. Those who are profiting from Obamacare are loathe to criticize it too openly. And yet, WellPoint, a large insurer, has just announced that it expects to demand “double-digit plus” rate increases in the Obamacare exchanges in 2015.

WellPoint dominates the exchanges. This news is an admission that the exchanges are seeing applicants too old and sick to keep premiums in line with what was originally expected.

The Obama administration is crowing that it has dragged six million people across the finish line into the exchanges by March 31 – or at least sort of. This, in itself, is no sign of success.

The fight over Obamacare exchanges has just begun. Whether the White House or the insurers win is hard to predict. Taxpayers will surely lose.

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

“Pot” Holes?

14448260_SA recent story published on Fox News New York reports that New Jersey state senator Nicholas Scutari plans to introduce a bill to legalize the sale of marijuana there, tax purchases at the current sales tax rate of seven percent and deposit 70 percent of the proceeds into New Jersey’s highway trust fund.

Like most other states, New Jersey has created such a “trust fund,” financed more usually by imposing excise taxes on gasoline and other motor fuels at the pump, for the purpose of building and repairing roads and bridges.

Sen. Scutari’s proposal gives new meaning to the term “user fee”.

In the parlance of orthodox public finance, a user fee is supposed to align the benefits received by taxpayers (drivers, in this case) with the costs of consuming some public good or service, such as transportation infrastructure, the provision of which often is seen (erroneously) to be a proper function of state and local governments. (The error committed here, as history teaches, is that roads and bridges profitably could be built and maintained by private companies having exclusive rights to collect “user fees”, aka tolls; the Erie Canal is an apt example.)

Federal, state and local excise taxes on gasoline traditionally are justified on the theory that those who drive more miles per day, month or year and, consequently, consume more gasoline, impose more wear and tear on a state’s highways than people who drive less or commute via “public” buses and subways, transportation modes that also could be provided by the private sector (e.g., Denver, CO, or the Washington, DC, metro area, where bus services once operated under private ownership).

But, are marijuana users responsible for more potholes than people not driving under the influence of cannabis? I doubt it. Moreover, 20 percent of NJ’s pot tax revenues will be earmarked for financing state drug-law enforcement efforts and 10 percent for government initiatives targeting “women’s health”.

The latter two earmarks expose the real purpose of Sen. Scutari’s bill, which in public choice perspective, obviously is to generate more revenue that New Jersey’s legislature can spend so as to buy the votes that will enhance the reelection aims of its members, the prime imperative of any democratically elected politician.

Because the revenue from imposing new taxes or raising the rates on existing ones deliver revenue windfalls to the spending programs for which they are “earmarked”, self-interested politicians never will allow legislative “intent” to be fulfilled. Tax revenue is fungible and so some of New Jersey’s pot tax receipts rationally will be reallocated to budgetary line items from which the parochial political returns to spending are higher.

It is for that same reason that highway “trust funds” routinely are raided to plug holes in other line items of state budgets.

Just like state excise taxes on tobacco or the revenues raised by taxes on state-run lotteries, which are dedicated to financing public education or other seemingly worthy public causes, New Jersey’s pot tax will fill the state’s coffers with little or no impact on the condition of the state’s roads and bridges or its overall budget balance.

Universal Government Preschool: Nilla Wafer Wishes and Juice Box Dreams

9947688_SEarlier this month President Obama released his behemoth education budget, complete with $75 billion in mandatory funding over the next decade for universal government preschool programs.

This should come as no surprise. Obama has made universal preschool a cornerstone issue, and supporters in the press have been spilling lots of ink, largely because there’s scant evidence of long-term benefits.

Government preschool enthusiast Nicholas Kristof of The New York Times admits as much in a recent column, noting that “early education has always had an impact not through cognitive gains but through long-term improvements in life outcomes.”

Those of us not deluded by Nilla Wafer wishes and juice box dreams are probably wondering how a better life is possible without cognitive improvement.

Frankly, it isn’t—and that’s a big problem for high-profile backers of universal government-run preschool.

President Obama’s $100 billion Preschool for All initiative took center stage of his 2013 State of the Union. Democratic House Leader Nancy Pelosi also made universal preschool a top priority in her Economic Agenda for Women and Families released last summer.

For all the publicity, the pricey plans went nowhere fast in Congress. Scaled-back funding did make its way into the omnibus spending bill passed earlier this month, including some $250 million for states to expand preschool through the Race to the Top Early Learning Challenge, along with an additional $600 million for the country’s longest-running preschool program Head Start.

But those amounts were a far cry from the billions upon billions of dollars preschool supporters were hoping for. Even the president’s current funding request will be a tough sell.

One reason is that government-run preschool impacts quickly fade out once students enter elementary school according to official evaluations by the U.S. Department of Health and Human Services. Touted localized programs are also suspect in terms of real results.

Claimed impacts from the small-scale Perry Preschool and Abecedarian preschool programs from the 1960s and 1970s have never been replicated—a real red flag for policymakers looking for model programs. A subsequent federally supported program in Chicago during the 1980s offered in-home care, tutoring, and parent classes for low-income, at-risk participants—hardly a run-of-the-mill “preschool” program.

But what about other studies by Harvard and UCLA researchers cited by Kristof purportedly showing positive long-term outcomes for Head Start participants? Both studies note the well documented phenomenon of fade out. Yet researchers can only estimate the likelihood of better outcomes on participants because only short-term evaluations are conducted—even though Head Start began in 1965.

None of this has stopped Obama, Pelosi, Kristof, and others from linking any number of long-term benefits to government preschool, from more than 10 to 1 rates of return on taxpayer subsidized “investment,” to reduced incarceration rates, and higher college attendance rates.

In the real world, private investors demand proofs of concept before they invest their hard-earned dollars. We should hold government to the same standard with any program it seeks to implement or expand—especially when those programs affect children.

Kristof was right that preschool is one of the top public policy issues this year. But he’s wrong that those of us who question the results are off base and need schooling.

It’s high time for preschool boosters to make good on their promises of preschool-driven excellence to generations of children and taxpayers—now, not decades from now.

Lessons from a German Homeschooling Family about the Nanny State

WunderlichFamily-September2013-500px-500x373The saga of a German homeschooling family represents a needed refresher course about the true origins of our fundamental rights.

Uwe and Hannelore Romeike, along with their seven children, were on track to be deported from the United States. What was their high crime and misdemeanor? Drug trafficking? Gun running? Cybercrime?

No—it was homeschooling.

Homeschooling has been illegal in Germany for nearly a century, but the Romeikes opted to school their children at home for educational and religious reasons. Faced with an imminent fear of losing custody of their children, in addition to jail time and fines, Uwe and Hannelore Romeike fled to Tennessee in 2008 with their children and sought legal asylum, which they were granted in 2010 by U.S. Immigration Judge Lawrence Burman.

That should have ended the matter, but apparently granting a homeschooling family asylum in the United States constitutes a threat of the highest order, at least according to the U.S. Department of Homeland Security’s Immigration and Customs Enforcement (ICE), which challenged the Romeikes’ asylum ruling.

Recall, ICE is an entity that claims its Homeland Security Investigations (HSI) directorate is “critical” and:

...responsible for investigating a wide range of domestic and international activities arising from the illegal movement of people and goods into, within and out of the United States. HSI investigates immigration crime, human rights violations and human smuggling, smuggling of narcotics, weapons and other types of contraband, financial crimes, cybercrime and export enforcement issues. ICE special agents conduct investigations aimed at protecting critical infrastructure industries that are vulnerable to sabotage, attack or exploitation.

Apparently, ICE believes when homeschoolers are detected we should dial our terror-alert color wheel all the way up to red—and head straight for the Board of Immigration Appeals, which revoked the Romeikes’ asylum in 2012 on the basis that having your children taken away by the state for educating them at home isn’t a serious threat.

But clearly homeschooling is a big threat to the Obama administration.

Last March the Home School Legal Defense Fund (HSLDF), the organization defending the Romeikes, created a White House petition asking President Obama to protect the family’s asylum. Obama declined to respond, but his Department of Justice sure went on the offensive.

In its June 26, 2013, brief to the U.S. Sixth Circuit Court of Appeals, Obama’s DOJ essentially argued that the German government is right to take children away from their parents and force them into government schools because “[t]eaching tolerance to children of all backgrounds helps to develop the ability to interact as a fully functioning citizen of Germany” (p. 8).

So according to the Obama administration’s handbook on functional citizenship intolerance from government somehow fosters toleration among schoolchildren. Got it.

The Romeikes lost their asylum appeal last year, and earlier this month the U.S. Supreme Court declined to hear their case. Just one day later, the Department of Homeland Security suddenly reversed its opposition and informed the Romeikes they could remain in the United States indefinitely.

The DHS’ change of heart may seem like welcome news for the Romeikes this time, but it should be little consolation to lovers of liberty.

We are endowed by our Creator—not government—with certain unalienable rights, including the right of parents to educate their children as they see fit. If we forget the true origin of our rights and allow our government to defend or attack them willy-nilly, where on earth will we go for asylum?