Privatize the Marriage Market

marriageDecember is one of the most popular months to get engaged. It seems that every time I get on social media, one of my girlfriends is posting a photo of her left hand and new engagement ring. After getting engaged, and even before, many couples have already combined their lives. They share bills, checking accounts, other financial and life decisions, and live together.

Depending on where they live, that could make them criminals.

Yes, you read that correctly. In some states, like Florida, such couples could be fined $500 or spend 60 days in jail. Why? They are living together before they’re married. Under current Florida statutes, more than half a million people in the state could be convicted for the crime of “living in sin.”

To be clear, I’ve never heard of this law actually being enforced and I doubt confessing one’s living situation will cause any trouble. Given the fact that some two-thirds of American couples walking down the isle live together before marriage, many are calling for the law to be removed from the books. Other states have recently repealed their mandates against premarital cohabitation and a bill in Florida has passed in the Senate.


The Stock Market Reacts to the Fed’s Interest Rate Hike

interest rate 1After the Fed’s November meeting, when the Fed decided not to hike interest rates, the stock market fell, indicating the disappointment of market participants. As I noted at the time, because lower interest rates tend to raise asset prices, the market decline was an indication of disapproval from market participants.

At the Fed’s December 16th meeting, in keeping with expectations, they announced they will increase interest rates for the first time in nearly a decade. After the announcement, the stock market surged.

While I am always reluctant to associate movements in the stock market with specific causes, this one looks pretty clear. The surge in the stock market came right after the announcement.


Obamacare Crushes Working Class Job Opportunities

employmentThe Congressional Budget Office recently confirmed its estimate that Obamacare will shrink the workforce by 2 million full-time equivalent (FTE) jobs in 2025. When the CBO first published its (initially somewhat larger) estimate, in February 2014, it felt compelled to wriggle around the headline, claiming that it did not really mean what it said.

It is strictly true that some of this job loss will be “voluntary,” in that Obamacare’s subsidies will cause them to seek less work than otherwise. Those individuals will probably feel better off than if they had been laid off or fired. However, cutting back working hours because government subsidies encourage it is not the same as cutting back because you have changed your priorities – either economically or morally.

The new analysis allows us to see where the burden on employment lies – mostly on those eligible for tax credits in Obamacare’s exchanges. These are people who earn between 100 percent (or 138 percent, depending on the state) and 400 percent of the Federal Poverty Level. For a family of four this ranges from $24,250 to $97,000 in 2016.


Serpent in the Supreme Court: The Folly of “Strict Scrutiny,” from Japanese Internment to Affirmative Action

diversityThe U.S. Supreme Court heard arguments this week in The Fisher II case involving the use of race in admissions to the University of Texas at Austin. This case, like other college admission decisions dating to Bakke (1978), hinges on how the Supreme Court applies a “strict scrutiny” standard that originated with a decision upholding Japanese internment (Korematsu v. United States, 1944). Now heralded as an advanced yardstick in civil rights jurisprudence, this contrived standard did Japanese Americans little good: the Court deferred to the government’s wisdom in interning citizens based on their race or national origin. If internment can pass “strict scrutiny,” small wonder that the Court defers to the serpentine arguments of university officials who state that, by doling out race preferences, they are “really” searching for the educational benefits of “diversity”–another legal concept invented by the Supreme Court in the Bakke case (1978)! The Fisher II debate over diversity preferences is simply more of the same.

(Readers interested in the particulars of the affirmative action cases involving the University of Texas can read this analysis).

Here is how the process works: The Court arrogates to itself the right to decide what level of scrutiny to apply to our constitutional civil rights, then invents criteria to uphold state violations of those rights (to be fair, the Court sometimes strikes down violations it does not like). Strict scrutiny states that racial discrimination must be “narrowly tailored” to serve a “compelling governmental interest.” This level of judicial activism has not served the Court or the country well. What we need is simple adherence to the Equal Protection Clause of the Constitution and to the absolute nondiscrimination yardstick set forth in the Civil Rights Act of 1964.


Venezuela’s “New” Government: Don’t Get Too Excited

venezuelaIn their most recent elections, the people of Venezuela voted to oust many of their elected officials. Just hours after the polls closed, the National Electoral Council reported that the opposition party had won 99 seats in the Venezuelan government.

These results generated much excitement, not just in Venezuela, but internationally. Many pointed to the election results as a blow to the socialist government of Venezuela and the policies of President Nicolas Maduro. People have hailed the results as a breakthrough for the country, claiming the elections are the beginning of a new era in the South American country. There is hope, they say, that the country has finally turned an important corner in losing its socialist past.

This history of socialism in Venezuela is a complex one, but the origins of the current Venezuelan state go back to right before the new millennium. In 1999, the “chavista revolution” put Hugo Chavez in power. In the words of a Venezuelan family member, “Chavez could sell ice to an Eskimo.” He was undoubtedly charismatic and incredibly popular. Under his promises of wealth, improved living conditions, and assistance for many of the country’s poorest residents, many were seduced by his political rhetoric.


“Free They Must Remain”: John Milton’s Enduring Wisdom

MiltonJohn Milton is one of history’s foremost English poets, and according to the Encyclopedia Britannica, “the most significant English author after William Shakespeare.” He is most famous for Paradise Lost, considered the finest epic poem in the English language. That makes the date of his birth, December 9, 1608, worth commemorating.

Milton also advanced liberty, and his advocacy had a major influence on the American Revolution. That influence came about because he was a fully convicted and forthright defender of religious rights, civil liberties, and the English Commonwealth during a tumultuous period of religious and political change. His argument in Areopagitica for the freedoms of speech and the press, and against government censorship, was also widely influential.

Milton’s political philosophy, which led him to oppose tyranny, and his theology, which advanced freedom of conscience and religious toleration, powerfully resonated with America’s founders, and its influence is most evident in the First Amendment to the U.S. Constitution.


Why Are Prescription Prices Higher in the United States?

prescriptionJeanne Whalen of the Wall Street Journal has written a feature article comparing U.S. prescription drug prices to those overseas. Unsurprisingly, she find prices in other developed countries lower, and credits government price controls in other countries with (pretty much) all the difference.

A vial of the cancer drug Rituxan cost Norway’s taxpayer-funded health system $1,527 in the third quarter of 2015, while the U.S. Medicare program paid $3,678. An injection of the asthma drug Xolair cost Norway $463, which was 46% less than Medicare paid for it.

Drug prices in the U.S. are shrouded in mystery, obscured by confidential rebates, multiple middlemen and the strict guarding of trade secrets.

The state-run health systems in Norway and many other developed countries drive hard bargains with drug companies: setting price caps, demanding proof of new drugs’ value in comparison to existing ones and sometimes refusing to cover medicines they doubt are worth the cost.

(Jeanne Whalen, “Why the U.S. Pays More Than Other Countries for Drugs,” Wall Street Journal, December 1, 2015)

I do not dispute the facts of the article. I take issue with the article’s misidentification of the primary reason why drug prices are different. The piece actually does a good job of differentiating between countries where the state exercises monopsony power over drug purchases (like Norway) and countries where the state does not exercise purchasing power but imposes price controls on all sales (like Canada).


Trading Votes in Congress to Get Everything Politicians Want


Any causal observer of the U.S. Congress and of state legislatures knows the definition of logrolling or vote trading: members of the House (and Senate) exchange votes with one another to secure passage of a spending program that benefits one of them, but not the other.

So, for example, Senator H agrees to support Senator J’s pet project (such as federal subsidies for building or expanding a harbor on the Atlantic seaboard) in return for Senator J’s vote on a NSA data warehouse somewhere in Senator H’s mountain west state. Neither spending program would pass if voted on in isolation because each’s benefits are concentrated on one state only. Why would Senator J vote for something that delivers federal funds to Senator H’s constituents and thus helps him or her to get reelected? After all, Senator J’s constituents may well rise up to punish him in the next election cycle because they will be forced to pay for Senator H’s project, but receive nothing in return.

But, if Senator H agrees to vote for Senator J’s harbor in return for Senator J’s support for the data warehouse, a mutually beneficial bargain can be struck. If enough such pairwise deals are agreed to, getting at least 51 senators and, in the House, 218 representatives on board, both chambers will approve spending money on the data warehouse, the harbor and any other “pork barrel” project requiring funding to assemble a working legislative majority.

Does all that pairwise deal making sound too complicated actually to work in practice? Another way of reaching the same goal is to put lots of pork into a single spending bill. With “sweeteners” for, at a minimum, half the members of the Senate and House, the bill will pass. Even fiscally responsible legislators will hold their collective nose and vote “Aye” because voting “Nay” risks losing the pork chops carved out for their own districts and states. Omnibus spending bills thus can be thought of as “implicit logrolling” or more commonly as Christmas trees (with ornaments hung for almost every politician).

The upshot is excessive federal spending on projects and programs that fail cost-benefit tests but elevate the reelection prospects of sitting members of the House and Senate. The president supposedly serves a broader constituency than any politician on Capitol Hill and might be expected to veto a spending bill that makes the nation as a whole worse off (total costs exceed total benefits), but will not if he or she favors bigger government.

The foregoing scenario played out during passage and signing of the five-year extension of the federal highway program in the first week of December 2015. Spending money to build and repair the nations’ roads and bridge network has been a poster child of pork barrel since time immemorial. Remember Alaska’s infamous “bridge to nowhere”?

This time around, though, taxpayers got more than they might have wanted. The Surface Transportation Act of 2015 revived the Export-Import (EX-IM) Bank – an institution that Don Boudreaux has called a “great geyser of crony capitalism”, and that I have railed against periodically over the past year, most recently with USU graduate student Michael Jensen here, and restored a federal crop subsidy program.

Those two provisions could have been excluded as not germane to the highway bill, but were inserted in a bit of legislative “compromise” to get support from opponents of EX-IM and crop subsidies who didn’t want to explain to constituents why they voted against money for local highway and public transportation projects.

Look no further for reasons why the federal budget is bloated and chronically in the red. It’s nothing more than public choice theory in action.

Marcus Welby, Where Are You? The Decline and Fall of House Calls

I saw an interesting Tweet on Friday from Jay Parkinson, MD, one of America’s new breed of entrepreneurial physicians: “There’s a reason why house calls went out of fashion. Grossly inefficient use of very expensive doctor time + extremely limited capability.”

The economist in me took umbrage at that remark, so I replied and we got into a short exchange:

20151204 House Calls

What I found remarkable was Dr. Parkinson’s complete focus on the costs to the doctor, not the costs to the patient, of the reduction in house calls. The almost complete elimination of house calls has not increased efficiency; it has only transferred the cost of travel from the doctor to the patient.


Asset Forfeiture and Police Corruption

policeThe Alabama Justice Project recently accused a state police department of systematic corruption. They claim around a dozen members of a police narcotics team planted drugs, weapons, and other evidence against black suspects. Moreover, it’s been alleged that the district attorney covered up these crimes.

The documents they published show that, beginning in 1996, the Dothan Police Department received its first complaints regarding false evidence. Complaints were filed by a group of officers in 1998. By late 1999, more than 12 officers had complaints lodged again them for planting evidence.

The case in Alabama is still unfolding. It’s been suggested that the motivation behind the alleged criminal activity of law enforcement officials was racially motivated.

But the issue of planting evidence, and corruption more generally, is likely much more pervasive. The relevant question is why this is the case. Why is it that individuals tasked to “protect and serve” the public would look to falsely arrest innocent suspects?