The Independent Institute


The USA’s Trifurcated Legal System

43221213_MLThe FBI’s recommendation against the prosecution of Hillary Clinton for her wanton, illegal mishandling of classified information in her emails puts on display once again the reality of the so-called rule of law in the USA. This reality is, above all, that the system is trifurcated: there is effectively one set of rules for the great mass of white, middle-class citizens; another set for blacks, Mexicans, and poor whites; and, most notably, another set for the powerful and connected members of the ruling elite.

For the first group, which for the most part tries to be “law-abiding” and supportive of “law enforcement,” the laws, regulations, and cops are obnoxious at times, but not for most people intolerable. People get used to being told what they must do and refrain from doing. They may grouse about certain laws, but they remain loyal to the political and governmental system that puts those laws in place and oversees their enforcement. These people are inclined to view instances of police abuse as the misfeasance of “a few bad apples.”

The second group has a clearer view of reality. They understand for the most part that the laws and the cops are not there for their protection, and indeed are part of an overall arrangement that looks all too much as if it were deliberately designed to humiliate, oppress, and persecute them, often in the guise of enforcing drug laws or petty commercial regulations that act as barriers to their self-employment or operation of small businesses. To members of this group, the cops are an army of occupation, and the disproportionate number of blacks and Mexicans in jails and prisons as well as the various state and local convict-labor arrangements testify fairly clearly to the correctness of their perception.

School May Be Out, but the Criticism of Common Core Isn’t Taking a Vacation

52399931_MLAs the school year was winding down, results from the most recent National Assessment of Educational Progress (NAEP), also known as the Nation’s Report Card, showed flat reading performance, and a decline in math performance among high school seniors compared to their pre-Common Core predecessors. So much for college-readiness.

“Worrisome” and “stalled” were just some of the reactions to the news. As Jane Robbins of the American Principles Project summed up: It’s “Time to Admit the Obvious: Common Core Has Failed Spectacularly.”

But Robbins isn’t alone.

An anonymous teacher leaked questions from a fourth-grade Common Core reading assessment produced by PAARC, Inc. [Partnership for Assessment of Readiness for College and Careers ], a federally subsidized testing consortium that has received nearly $186 million in funding.

Don’t Blame “Underfunding” for Soaring College Prices

39703687_MLDeath, taxes, and rising college prices – these are among life’s few certainties. A new study helps shed light on the latter.

As the Washington Post’s Danielle Douglas-Gabriel reports:

Using Department of Education data, Seton Hall University professor Robert Kelchen found that inflation-adjusted fees grew faster than tuition at state schools between the 1999-2000 and 2012-2013 academic years. During that time, fees at community colleges soared 104 percent, while tuition climbed by 50 percent. Fees at four-year public colleges skyrocketed 95 percent over that period, eclipsing the 66 percent hike in tuition at the same time.

A common excuse for rising prices is that colleges and universities had to raise prices to offset state budget cuts.

The Cato’s Institute’s Neal McCluskey has shown previously that this excuse doesn’t hold water since college tuition price hikes either matched or more often exceeded budget cuts in most years he studied. More recent data from the US Department of Education confirms this trend.

Using constant 2015 dollars, overall state appropriations decreased 18 percent, almost $14 billion, from 2007-08 through 2013-14 (the latest year available). Combined tuition and fees, however, increased far more, 31 percent, almost $17 billion.

What’s more, those tuition and fees increases outpaced the 10 percent full-time equivalent student enrollment increase over the same period. They’re also more than double the 15 percent growth in overall public postsecondary revenue, which includes grants, gifts, self-generated funds, and other funds in addition to government appropriations, tuition, and fees.

Brexit’s Opponents Echo the Arguments of Loyalists Fearful of American Independence

57897412_MLVoters in today’s slimmed-down United Kingdom (comprised mainly of England, Northern Ireland, Scotland and Wales) approved on June 23, by a margin of 52 percent to 48 percent, a referendum obligating London to leave the European Union. David Cameron, the nation’s prime minister and a staunch supporter of “remain” in the prequel to Election Day, has resigned from office, triggering an upheaval within his Conservative Party over selecting his successor.

Doomsayers, both before and after the vote, have predicted dire consequences for the UK’s economy. As a matter of fact, stock markets in London and many of the UK’s trading partners fell precipitously immediately following the “leave” vote. Officials of the EU’s government in Brussels and members of the European Parliament have threatened to retaliate against withdrawal unless its terms are negotiated quickly. Even President Obama has stated that the UK will be relegated to “the back of the queue” when it comes to negotiating future international trade deals with an EU-independent British nation.

Stock market losses recovered over the next two trading days.

Students of America’s founding era, circa 1763–1787, should be struck by the similarities between the arguments rehearsed by the opponents of a compete break with George III then and those of anti-Brexiters nowadays. Uncertainties about the political and economic consequences of separating from a puissant British Empire, the consequences of expected disruptions to international trade, especially if London retaliated by cutting off access to its Caribbean ports, and the loss of the Royal Navy’s protection of American maritime commerce – all such arguments have been trotted out again recently and energized some opponents of Brexit to call for another vote on June 23rd’s ballot question.

Hospitals and Insurers Are Dropping the Ball

6620467 - a motion blur of an ambulance driving down a street.An advocate of consumer-driven health care, who makes the case that individuals should control most of our health spending directly, will not get very far before hearing the rebuttal: “When you have a heart attack or get hit by a bus, you won’t be in any condition to negotiate which hospital you go to.”

Fair enough, which is why we advocate insurance for catastrophic events, just like for houses or automobiles. However, in the current system, insurers and hospitals are dropping the ball on even that:

Blue Cross and Blue Shield of Georgia faces separate lawsuits accusing it of sending reimbursement money for emergency room care directly to patients—and not to the hospital because it isn’t part of the insurer’s network.

That’s costing the hospitals money since patients don’t always turn over the funds, according to the lawsuits.

By sending money directly to patients, Polk Medical Center says the insurer forces the hospital to find ways to collect it. Even though patients are obligated to pay the facility the amount sent to them by Blue Cross, in some cases they have spent the money, according to the lawsuit.

The Polk lawsuit said that Blue Cross, in its new payment process, was pursuing “retaliation’’ for the Cedartown, Ga., hospital’s not agreeing to “unreasonable and unfair” terms in order to be part of the insurer’s network. Hospital officials said the payment shift has hurt the hospital financially.

(Andy Miller, “Ga., Calif. Hospitals Sue Blue Cross Plan for Sending Reimbursements to Patients,” Georgia Health News, June 30, 2016.)

Emergency departments patch people up first and ask for payment later. Nevertheless, Obamacare drove more patients into emergency departments, and hospitals are profiting from the shift.

Further, hospitals and emergency-department doctors have lobbied states to make insurers pay them whatever they charge, without negotiations. It is understandable that insurers are using this tactic to bring hospitals back to the negotiating table.

Health insurers and providers cannot even agree on prices for catastrophically expensive care. Yet we allow them to fix prices for every good and service in our health system. Why?

* * *

For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed books A Better Choice: Healthcare Solutions for America and Priceless: Curing the Healthcare Crisis, both by John C. Goodman.

Decisive Brexit Referendum: What Happens Next? Part 2: The Disunited Kingdom

[See Part 1 Here]

Besides handing down the vote to Leave the EU, the June 23rd Brexit referendum also demonstrated that the UK is a house divided. The vote itself was fairly narrow: 52% vs. 48%. Northern Ireland (NI), Scotland and London had clear majorities for Remain, but much of the rest of England were strongly for Leave. There was also a notable generational gap, with younger people broadly in favor of Remain and older people broadly in favor of Leave.

It is interesting too that the Leave vote was strong in much of the North of England, which is a traditional Labour heartland.[1] The strength of the Leave vote in such staunch Labour areas illustrates how much senior Labourites were out of touch with their own people. The same can be said to a lesser extent about many senior Conservatives too: they too misjudged the strength of anti-EU sentiment in their own ranks. Political leaders were so busy lecturing their supporters that they failed to listen to them. This theme of an out-of-touch political elite will, I believe, be the key factor across the continent as movements gather pace to follow the Brits and the EU now unravels. One thing though is for sure: it will not be pleasant.

The financial fallout was shattering. The day after the referendum, sterling fell by over 10%, the FTSE by 7.2%, the DAX by 7%, the CAC by 10% and the Nikkei 225 by 7.9%. It was reported that the 400 richest investors (who had all bet on Remain, including George Soros) lost over $127 billion, and that total market losses were almost $4 trillion. European bank stocks were positively hammered: they fell by over 15%. The VIX, the Chicago Board Options Exchange Volatility Index—usually known as the “Fear Index”—jumped by 49%. The next trading day, Monday 27 June, the S&P rating agency downgraded the UK’s credit rating by two notches from “AAA” to “AA”.[2]

The political fallout was also spectacular. On the Friday immediately after the vote, the Prime Minister announced that he would be stepping down, thereby triggering a leadership election campaign that will paralyze the government until a new leader is elected. That same day, Sinn Fein announced that the pro-Remain result in Northern Ireland meant that Ireland now had to be reunited. For her part, Scottish First Minister Nicola Sturgeon was demanding another Scottish independence referendum so that Scotland could stay in the EU and was darkly threatening to veto the EU referendum result herself. The pixies were out in full play. There were calls for a new referendum and within a week, more than four million people had signed an online petition for one. There were calls for MPs—75% of whom had campaigned for Remain—to refuse to ratify the referendum result, and there were calls for a general election if they failed to do so. Brexiteers were being attacked in the media and there were angry demonstrations—many of the young in particular feeling that the result would rob them of their rights, e.g., as regards their working rights[3] and their pensions,[4] but who had also been wound up by Project Fear, i.e., the unscrupulous campaign to persuade them that they would have no future worth having under Leave. The Labour Party went into meltdown as the daggers came out for Labour Leader Jeremy Corbyn, who was accused of having lost the referendum by not having campaigned enthusiastically enough for Remain.[5] Within days, most of his shadow cabinet had resigned, his Parliamentary party had passed an unprecedented 172 to 40 vote of no confidence in his leadership and a formal campaign was announced to replace him as leader.[6] UKIP also fell apart: its leader Nigel Farage has just resigned and the obvious replacements—such as UKIP MP Douglas Carswell—have ruled themselves out as leadership candidates. There had been no contingency planning for a Leave vote because no-one in authority in the UK or the EU had ever thought it would happen, and there was pressure from Brussels to start formal separation talks immediately, which would then set in motion a two-year deadline for which no-one was remotely ready. The political class is in disarray.

Rock Music, Censorship, and Zimbabwe’s War of Independence

10648701 - map flag zimbabweIndependence Day in the United States is a good time to reflect on independence movements elsewhere. Before there was Zimbabwe, there was Rhodesia, where a white minority government oppressed blacks and “colored” (mixed race) people using force and apartheid-style policies. In the 1970’s, the last decade of the country’s War of Independence, rock music blasted from the black townships in Rhodesia, and one band, Wells Fargo, became a leading voice for music and independence in the face of an oppressive regime. Here’s the forgotten story of the band’s courage, perseverance, and entrepreneurship.

Ebba Chitambo founded Wells Fargo in 1973—he came up with the band’s name from a stagecoach in a cowboy comic book. Ebba and Josi Ndlovu co-wrote the revolutionary anthem of the time, a song titled “Have Gun Will Travel,” which included the provocative line: “Watch out/freedom is coming/have gun will travel/you better hold on.”

The song accomplished what the racist Rhodesian government feared most: it brought together young whites, blacks, and mixed-race supporters of the independence movement. Wells Fargo concerts attracted fans from all walks of life. The song became an anthem on the front lines in the bush and at home in the townships. The government decided it had seen enough interracial unity. As told by Ebba to Snap Judgment, police repeatedly raided Wells Fargo concerts and music festivals, beating concert goers and band members. Josi was eventually arrested by government agents for playing “Have Gun Will Travel” with his new band Eye of Liberty.

The Special Branch, Rhodesia’s internal security force, recognized the song’s influence, too. They began placing informants at Wells Fargo concerts to spy on the crowd and to ask questions about the politics of Ebba and other band members.

The Business Case for Health Insurance Is Weakening

12923956 - airplane flying above the cloudsBoeing, the giant aerospace concern, has been cutting out the middle-man for health benefits:

In another sign of growing frustration with rising health costs, aerospace giant Boeing Co. has agreed to contract directly for employee benefits with a major health system in Southern California, bypassing the conventional insurance model.

The move, announced Tuesday, marks the expansion of Boeing’s direct-contracting approach, which it has already implemented in recent years in Seattle, St. Louis and Charleston, S.C.

In other examples, Intel Corp. contracted directly with a major health system in New Mexico, where it has several thousand employees.

Retailers Wal-Mart and Lowe’s took a different approach, striking deals with select hospitals across the country for bundled prices on specific surgeries. The companies steer workers to those hospitals.

(Chad Terhune, “Boeing Contracts Directly With California Health System for Employee Benefits,” Kaiser Health News, June 21, 2016)

I recently discussed evidence that insurers inflate rather than decrease prices for medical goods and services. Large employers appear to be figuring this out, too. Large employers have traditionally signed Administrative Services Only (ASO) contracts with insurers for processing medical claims. However the insurers do not bear actuarial risk. The companies are large enough to bear the risk of catastrophic health costs for some of their employees.

Signing ASO contracts allowed large employers to benefit from health insurers’ networks of providers. However, they are now learning there is not much value in this. A company like Boeing, which has large concentrations of employees in a few places, can disintermediate insurers and negotiate directly with health systems.

This is a little more difficult for companies with workers distributed around the country. One would think Wal-Mart or Lowe’s would find value in contracting with a large health plan to get access to a national network. However, that value proposition appears to be deteriorating, too.

I think this is a great development because these employers have no interest in adding administrative costs to the system, like insurers do. What I hope evolves is a system whereby large employers negotiate for expensive procedures with the best hospital systems, and just let people pay for primary and inexpensive care directly, using their Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs), or Flexible Spending Accounts (FSAs).

Spain Defeats the Extreme-Left Populists

17409869 - street traffic in night madrid, spain ( hdr image )Spain, the Eurozone’s fourth largest economy, has been without a real government since October, when the campaign for a general election kicked off. After an inconclusive result, the country was left in political limbo. That status will change soon due to last week’s elections, which produced a clearer outcome.

Without an effective government, Spain has been doing quite well: the economy has been growing at a faster pace (3.2% annualized) than before, well ahead of Germany, France, et al. Unemployment has been coming down at a faster rate than in neighboring countries (from 25% to 22%, and falling). The less that politicians meddle, the better society goes about its business. It helps that Mariano Rajoy’s center-right government, which engaged in limited reform, had the guts to get rid of industry- and sector-wide collective bargaining in favor of company-specific arrangements and thereby lower the colossal cost of firing.

But, hélas, good things have to end—there will now be a government. Not that any party won an absolute majority in this second attempt, but there is both a clear winner and insurmountable pressure on those who lost to not prevent the leading party from forming a government.

The polls produced two big surprises. One was the victory, with 32 percent and 137 seats in the chamber of deputies, of the center-right Popular Party, led by caretaker president Mariano Rajoy, the most vilified guy in the kingdom, who was thought to be on his way out.

PBS Debate: Why We Should Embrace Human Organ Sales

57155167 - illustration of a shopping label icon with a healthy human stomach icon

A couple weeks ago, I had the distinct pleasure of being part of a debate as part of the PBS late night show, Point Taken with Carlos Watson (you can get more details on the episode here). Filmed in front of a live audience who is not only polled at the beginning and end of the show, but can ask questions after the debate, I have to say it was an experience I really enjoyed. Rarely does one get to enjoy such immediate feedback!

The discussion was lively to say the least. Between an economist, a lawyer, a medical doctor, and a political analyst, you can imagine that opinions were strong, especially given our topic.

So what were we debating?

We were talking about the idea of allowing individuals to sell human organs, particularly kidneys.

The initial poll of the audience found that 25 percent favored having a more open market for organs while 75 percent thought such markets should not exist. While not quite that skewed toward a ban on organ sales, the majority of Americans agree with the audience. There are a lot of things people don’t like about the idea of selling organs.