New Study Links Patent Trolls to Decline in R&D Spending and Other Ills

patent_trolls_180x270A new paper (“Patent Trolls: Evidence from Targeted Firms”) written by researchers from Harvard University and the University of Texas offers more evidence of the harm that patent trolls cause to the American economy. The data show that (1) trolls target companies flush with cash, (2) seek targets likely to settle rather than litigate, and (3) that troll suits have a negative impact on the future innovative activity of targeted companies.

This is but further evidence that substantive reform of our broken patent litigation system should be a priority if Americans are serious about encouraging innovation.

Misplaced Outrage over the NCAA’s Decision to Reduce Sanctions on Penn State

NCAA CartelIn a USA Today column published on September 8, Nina Mandell is livid about the lessening of sanctions imposed on Penn State two years ago in connection with charges of child sexual abuse against assistant football coach Jerry Sandusky. Those sanctions, which included a $60 million fine, a reduction in football scholarships, and a four-year ban on post-season play, led to Sandusky’s resignation and subsequent conviction, the resignation of Penn State’s president, as well as to hounding and untimely death of “Joe Pa” (Joe Paterno), the Nittany Lions’ iconic head coach.

The NCAA should never have gotten involved in the Penn State affair in the first place. It is a rules’ enforcing institution, not a law enforcement body. The charges against Sandusky should have been handled as a criminal matter exclusively by Pennsylvania’s public prosecutors and Sandusky’s guilty plea should have ended the scandal. For what purpose was Penn State fined, football scholarships cut, and football players not involved in the actions of one assistant coach denied the privilege of participating in conference championships and post-season bowl games? By what authority did the NCAA intervene?

The late Gary Becker and other economists have called the NCAA America’s strongest cartel, sharply criticizing its policies limiting college athletes’ compensation to a “full-ride” scholarships, regulating recruiting practices and many other aspects of the college game under the laughable pretext of “preserving amateurism.” The rents generated by such regulations flow primarily to coaching staffs and to the central administrations of big-time college athletic programs, not to the athletes who are responsible for producing billions in revenue for athletic budgets nationwide from ticket sales and TV broadcasts.

In the Penn State matter, the cartel went far beyond its organizing principles and stated purposes, giving a new meaning to the term “bureaucratic mission creep.” The NCAA’s administrative staff has a hard enough time ferreting out rules violations. It is ill equipped for and therefore should not be in the business of enforcing criminal laws.

After $26 Billion Paid Out, Meaningful Use of Electronic Health Records Only 4 Percent of Target

EHR_stethoputerAt a September 3 meeting of the Obama administration’s Health IT Policy Committee, officials disclosed that only 3,154 eligible professionals (doctors, dentists, et cetera) had “attested” to so-called “meaningful use stage 2″ to get their bounties from the federal government for installing electronic health records. Only 143 hospitals had attested.

One healthcare leader, who was at the meeting, was disappointed:

“The numbers are very low, particularly for Stage 2 attestation. I mean they are like 4 percent of [providers] that should be currently going for Stage 2,” HITPC member and Intermountain Healthcare CIO Marc Probst commented during the meeting.

This new data reinforces the case made here in March: The billions of taxpayer dollars paid to doctors and hospitals to install electronic health records was wasted. The cost-benefit analysis of federal subsidies to this effort just doesn’t add up.

“Hunger” Games

Screen Shot 2014-09-08 at 10.46.10 AMAs with their measurement of “poverty,” federal officials not surprisingly similarly play creatively with their definition of “hunger”—that is, “food insecurity.”

As James Bovard explains in The Wall Street Journal, in releasing figures showing nearly 15% of the U.S. population as “food insecure,” the USDA has in fact polled Americans on their feeling that the “quality and variety” of available food isn’t what we’d prefer:

The USDA defines a “food insecure” household in the U.S. as one that is “uncertain of having, or unable to acquire, enough food to meet the needs of all their members because they had insufficient money or other resources for food” at times during the year. The USDA notes: “For most food-insecure households, the inadequacies were in the form of reduced quality and variety rather than insufficient quantity.”

Unfortunately, the media doesn’t appreciate this distinction, and when they report on the USDA’s findings, they have a tendency to substitute the word “hunger” for “food insecurity,” resulting in scare headlines such as the Washington Post’s:

Hunger a growing problem in America, USDA reports

and, from the New York Times:

Hunger in U.S. at a 14-Year High

President Obama is similarly in the dark about the distinction, announcing in 2009 that “hunger rose significantly last year” and promising to reverse “the trend of rising hunger.”

The President and others in political power, of course, have good reason to play fast and loose with how they label such statistics, since, as Robert Higgs has brilliantly documented, crises make for great job security, resulting in increasing budgets and more power.

Lies, damn lies, and statistics, indeed.

There are of course many people in need in this country and others, and a multitude of selfless non-profits and others working diligently to help move those in need from dependency to self-sufficiency whenever possible. Unfortunately, government programs are not among these efforts:

A 2013 Harvard School of Public Health study also found that enrolling in the food-stamp program failed to significantly boost participants’ food security or dietary quality.

No government employee, bureaucrat, or politician has the least incentive to reduce dependency, and in fact is rewarded for producing the opposite results that they are achieving.

If any of our do-gooders in the public sector wanted to actually reverse food insecurity trends, there are any number of simple immediate solutions: end marketing orders that make food less abundant and more expensive, remove fuel taxes that drive up transportation costs—the single highest component of food’s cost, end any of the thousands of regulations that impede sellers from entering the marketplace, end the war on drugs that has made inner cities war zones and driven food retailers out. Or, to best achieve food security: abolish the USDA.

And if Mrs. Obama really wants to end childhood obesity, she would do well to quote the USDA’s own survey in lobbying her husband to end the food stamp program:

The most recent survey (2009-10) revealed that children ages 2 to 11 in households with less than $25,000 in annual income consume significantly more calories than children in households with incomes above $75,000.

Such households need home ec, not food stamps.

Obama: The Unbearable Lightness of Being on Immigration

global_crossings_180x270President Obama’s decision to postpone executive action on immigration is probably the nail in the coffin for comprehensive reform under the current government—regardless of whether the president has the constitutional authority to bypass Congress or not, which is not the topic of this post. Whatever reform comes after the midterm elections, if any, will not overhaul a system that places major obstacles on the forces of supply and demand pushing millions into the shadows.

It was almost a miracle that the Senate’s comprehensive bill (which, despite many flaws, constituted progress) was passed on June 27, 2013. Three things have conspired to overturn that partial success: Obama’s style of leadership, the relative strength of the warring ideological camps, and the electoral system. History is not short of examples of presidents who were able to do things in defiance of the existing array of hostile forces at the risk of electoral defeat. But one will be hard-pressed to find many cases of weak leadership overcoming and turning to its advantage a hostile environment.

When the bill passed in the Senate, a majority of Americans supported comprehensive reform. According to Gallup, 83 percent of white conservatives were in favor of “allowing illegal immigrants to become citizens.” At the time, there were several very active Republican members of Congress pushing for change. Other Republicans, including former Governor of Florida Jeb Bush, were rooting from the sidelines. A visionary leader willing to take risks could have created an environment in which the House of Representatives found it extremely difficult to avoid real reform. To judge by the way in which he distanced himself from vocal Tea Party critics, even Republican Speaker John Boehner feared this might be the case. House majority leader Eric Cantor later dared make a few pro-immigration statements.

Everything changed in the following months. The failure to build a coalition in favor of reform allowed critics within the Republican Party to bully pro-immigration conservatives. Gradually the perception that a huge majority of the GOP base was against reform silenced the most active conservatives. Soon even Democrats began to feel that the approaching midterm elections made it unwise to persist. Eventually the president made noises about executive action but postponed it.

Then the summer of 2014 happened—i.e., the news that in May and June of this year there had been a surge in the number of unaccompanied Central American children trying to cross illegally into the United States. The predictable brouhaha triggered by this temporary humanitarian crisis, which had little connection with the issues at the heart of immigration reform, paralyzed the Obama administration. The president dithered—a perfect scenario for scared Democrats to begin to voice concerns about executive action prior to the midterm elections. As races tightened in Arkansas, North Carolina, Alaska, New Hampshire, and other places, the relative strength of the warring ideological camps on immigration increasingly favored the path of no reform despite evidence that a majority of Americans continued to support a path to citizenship for illegal immigrants (they outnumber those who are opposed by 27 percentage points).

Ironically, confirmation soon came that the number of children trying to cross the border was dropping dramatically. By August, the number of kids trying to sneak in was down to one-third the level of May and June.

It was too late. Fearing the loss of the Senate in November, the president had decided he would not act. Regardless of the delicate constitutional aspects involved, the decision was the end of any possible substantive reform.

It has often been said that Obama’s tortuous decision-making process is due to a conscience in constant debate with itself and a legal formation that pushes him to scrutinize every argument and counterargument. As far as immigration reform goes, it really hasn’t looked that way. It has simply come down to a failure of leadership or, in Milan Kundera’s eternal words, an unbearable lightness of being.

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For more on immigration policy, see Alvaro Vargas Llosa’s award-winning book, Global Crossings: Immigration, Civilization, and America (The Independent Institute, 2013).

Costs of Government Administration of Health Care to Almost Double in Ten Years

21908269_SThis week’s report by staff of the Office of the Actuary of the Centers for Medicare and Medicaid Services concluded that the last few years of muted increases in health spending will soon be ending. Health spending will resume its upward march:

The combined effects of the Affordable Care Act’s coverage expansions, faster economic growth, and population aging are expected to fuel health spending growth this year and thereafter (5.6 percent in 2014 and 6.0 percent per year for 2015–23). However, the average rate of increase through 2023 is projected to be slower than the 7.2 percent average growth experienced during 1990–2008. Because health spending is projected to grow 1.1 percentage points faster than the average economic growth during 2013–23, the health share of the gross domestic product is expected to rise from 17.2 percent in 2012 to 19.3 percent in 2023.

While there was nothing very surprising in the report, there was at least one thing that was underreported by the media: The astonishing increase in “government administration” of health care.

Government administration cost $35.1 billion in 2013 and will cost $66.7 billion in 2023—an increase of 90 percent overall and a compound annual growth rate of 6.63 percent. To put that in perspective, those costs were $29 billion in 2008, so they grew at a compound annual rate of only 3.61 percent in the subsequent five years. That is: The increase in bureaucratic costs associated with the introduction of Obamacare will pale in comparison with their future costs. Government spending on actual public health will increase by a significantly smaller compound annual rate of 4.84 percent, or 47 percent overall.

The cost of private bureaucracy will also increase. “Net cost of health insurance” will increase from $174.5 billion to $341.0 billion, a compound annual growth rate of 6.93 percent. The rate from 2008 through 2013 was only 4.62 percent. As for spending on actual medical care, that will grow at a slower rate over the next ten years. Spending on physicians and hospitals will grow at compound annual rates of 5.78 percent and 5.95 percent.

Supporters of centralized federal control of health care tout its supposed efficiencies. For that to happen, the costs of administration would have to grow at a slower rate than spending on actual health care. The opposite is happening. Government control of health care has grown well beyond its optimal span and scope.

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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.

Politics and Inequality

30174586_SThe Federal Reserve has just released a survey indicating that income and wealth inequality has been growing in the United States since 2007. Meanwhile, President Obama has called for government action to reduce inequality. So, it is worth a remark that the growth in inequality reported by the Fed pretty much coincides with the Obama presidency.

One can debate how much government can actually do to affect inequality, but because the president has called for government action to reduce it, that is an indication that President Obama believes government policy has an effect. If so, Obama’s government would have to be responsible for at least a part of the growing inequality the Fed has reported.

Imagine if this news on growing inequality had been announced during the Bush administration. Much of the reporting would have been on how much inequality has grown because of President Bush’s policies. Nobody is saying this today, about President Obama’s policies.

Is the recent increase in inequality really a result of the president’s policies?

The president’s own statements indicate he thinks inequality is enough a product of government policy that those policies could be changed to reduce it. Using the president’s own words, we could find him responsible.

If the president’s policies have had any effect on inequality, there are good arguments to suggest that they have increased it. The president’s regulatory policies, the huge budget deficits, and his low interest rate policies, have slowed economic growth, which disproportionately affects those at the bottom, and clearly, small savers, who tend to rely on interest income more than on appreciation of financial assets, have been hurt by the president’s policies even as upper-income investors have been helped by the stock market boom fueled by the Fed’s policies.

So, I’ll agree with the president part-way on this. Not only can government have some effect on inequality, as the president suggests, the policies he has supported have increased inequality. Despite the president’s rhetoric, his policies have not been good for those at the bottom end of the income distribution.

Obamacare Tax Merry-Go-Round

11816719_SGet a load of how Obamacare health-insurance premium taxes work. According to Medicaid Health Plans of America: “This situation results in the federal government taxing itself and taxing state governments to fund the higher Medicaid managed care payments required to fund the ACA health insurer fee.”

It look me a few times to get my head around that. What it means is that Obamacare levies a premium tax on private health plans—including those to contract to provide Medicaid coverage. So, the federal and state governments, which are Medicaid’s payers, pay those taxes. USA Today has summarized what the taxes will cost in some large states:

  • Florida anticipates the tax will cost $100 million, with the state picking up $40 million and the federal government, $60 million.
  • Texas estimates the tax at $220 million, with the state paying $90 million and the federal government, $130 million.
  • Tennessee anticipates it will owe $160 million, with the state paying $50 million and the federal government, $110 million.
  • California budgeted $88 million, with the state paying $40 million and the federal government, $48 million.
  • Georgia estimates the tax on its plans at $90 million, with the state paying $29 million and the federal government, $61 million.
  • Pennsylvania predicts the tax will cost $139 million, with the state paying $64 million and the federal government, $75 million.
  • Louisiana estimates the tax will cost $27 million, with the state paying $10 million and the federal government, $17 million.

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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.

Oklahoma: Losing Federal Waiver, Winning Back Rightful Control over Education

Classroom_150By this school year all American students were supposed to be proficient in reading and math according to the federal No Child Left Behind Act (NCLB), the latest iteration of the 1965 Elementary and Secondary Education Act (ESEA). By 2011 it was clear that no state was even close, so the US Department of Education made states an offer far too many thought they couldn’t refuse: in exchange for waivers from federal NCLB/ESEA proficiency and other mandates, states had to agree to adopt “college- and career-ready standards,” aka Common Core. (See also here and here).

Of the 46 states (including the District of Columbia) that have applied for waivers from federal NCLB/ESEA mandates, 43 have been approved as of August 21 according to the US Department of Education’s website.

That number’s likely to start plunging as the feds revoke more states’ waivers in response (or retaliation) to their decision to dump the “voluntary” Common Core national standards and other federal education mandates.

Washington lost its waiver in April because it did not tie student achievement results to teacher evaluations. Kansas was put on notice last year that it is at high risk of losing its waiver, too, for failing to meet teacher evaluation mandates.

Thus far, Indiana, Missouri, Oklahoma, and South Carolina, have rejected Common Core. Louisiana Gov. Bobby Jindal is suing the feds over Common Core now, arguing that federal control over education will cause “irreparable harm.

In May, the US Department of Education responded to Indiana’s decision to dump Common Core and implement its own state standards instead with a letter threatening to revoke the state’s waiver and related funding. However, the feds granted Indiana a one-year extension.

Oklahoma wasn’t so fortunate because it stood up to the feds with one of the strongest anti-Common Core laws on the books for expressly banning any aligning of its tests with national standards.

Yesterday, Oklahoma education officials received a letter from the US Department of Education revoking its waiver altogether, meaning it must start complying with all NCLB/ESEA mandates this year. According to Politico:

The move marks the latest battle between states and the Obama administration over what has been perceived to be heavy-handed federal education policy that will continue for the next few years. ...

“It is outrageous that President [Barack] Obama and Washington bureaucrats are trying to dictate how Oklahoma schools spend education dollars,” Oklahoma Gov. Mary Fallin said in a statement. “Because of overwhelming opposition from Oklahoma parents and voters to Common Core, Washington is now acting to punish us. This is one more example of an out-of-control presidency that places a politicized Washington agenda over the well-being of Oklahoma students.”

Some $20 to $30 million in federal education funding intended to help some of Oklahoma’s poorest schools will now have a lot more strings attached to them, but at least one state lawmaker says that’s a small price to pay for regaining rightful authority over education, as Oklahoma Watch’s Nate Robson reports:

Rep. Jason Nelson, R-Oklahoma City, who helped draft the bill repealing Common Core, downplayed the impact Thursday.

Nelson said diverting federal funds for tutoring or transportation is a small price to pay to protect Oklahoma’s education standards from the federal government.

Nelson added that U.S. Secretary of Education Arne Duncan has admitted No Child Left Behind has failed as a law, which is why waivers were granted.

He added throwing Oklahoma back under broken standards will not make Oklahoma students better, and is instead meant to punish the state.

“Because (the U.S. Department of Education) is upset that we’re trying to take back control of our education system, they have taken a punitive action that ought to make it crystal clear we made the right decision,” Nelson said.

It’s likely more state citizens and lawmakers will reach a similar conclusion as the federal government’s unconstitutional overreach into education continues.

Can Taxpayers Recover Hundreds of Millions of Dollars from Obamacare Exchanges?

Money-Spiral-Image-for-PostThe Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services has just released a report on the contracts issued to private vendors to set up the federal pieces of Obamacare’s disastrous health-insurance exchanges. This is only the first of a series of reports, and it limits itself to describing the extent of the problem, not recommending solutions.

The OIG identified 60 contracts that started between January 2009 and January 2014. (That start date is a little mysterious, because Obamacare was not signed into law until March 2010.) The total estimated value of the contracts, when they were signed, was $1.7 billion.

However, only $800 million has been obligated, and $500 million spent. This reckoning goes up only to February 2014, so much more money has surely been spent. What is also shocking is how much money the Obama administration committed after the exchanges were known to be failing. Accenture, for example, won a contract for $90 million in January 2014. As of the end of February, $45 million was “obligated.” In April it was reported as spent.

How can taxpayers recover this money? Obamacare needs to be repealed. Nevertheless, even with Obamacare, no taxpayer funding whatsoever had to be spent on customer-facing government websites. That’s right: Zero, nada, nicht.

“Web-based entities” (as the regulations call them), such as and are online health-insurance marketplaces that have existed for years. They were allowed to enroll people in Obamacare and were eager to do so. They were more successful than government websites at enrolling young and healthy beneficiaries.

Bipartisan reform to Obamacare would simply shut down, seek to recover unspent obligations to private vendors, and hand the whole thing over to online health-insurance marketplaces.

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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.