The economic data on health spending has been bouncing around like crazy in the age of Obamacare, so we must not read too much into one report. Nevertheless, the January 30 report on Gross Domestic Product (GDP) issued by the Bureau of Economic Analysis indicates that health spending has begun to race up again, despite moderate economic growth.

Last week’s report contains the final estimate of 3^rd quarter GDP and the advance estimate of 4^th quarter GDP for 2014. As noted in my comment on the December release, real GDP growth in the 3^rd quarter was strong: 5.0 percent annualized, and this was confirmed in the January report. However, growth for the 4^th quarter was significantly slower, just 2.6 percent annualized.

I pledge allegiance to the Flag of the United States of America and to the Republic for which it stands, one nation, under God, indivisible, with liberty and justice for all.

Many of us will recognize these words as the “Pledge of Allegiance.” As a child in elementary and middle school, I remember saying the Pledge—every single day—mumbling the words, hand over my heart, facing the flag placed at the front of the classroom. As a twelve year old, there was no greater honor than being the student allowed to read the Pledge over the school intercom.

I am not alone in this experience. The Pledge is a hallmark of the American educational system. Every day across the country students state their loyalty and dedication to the flag and the U.S. government. As of 2003, the majority of states actually require the pledge to be said in schools. A few states make the pledge optional, and a few have no laws.

Although the pledge contains the words, “with liberty and justice for all,” the pledge is anything but freedom preserving. For those of us who value individual liberties, the recitation of the Pledge should induce immediate feelings of duress and an uncomfortable tightening in our stomachs.

In fact, the origins of the pledge date back to 1892. The original version was written by Francis Bellamy, a Baptist minister and fervent socialist. Bellamy published the Pledge in The Youth’s Companion in September of that year. He hoped the Pledge would promote egalitarianism and undermine the “capitalistic greed” of the country. By reciting the words daily, it was hoped that the Pledge would unite school children in loyalty to the state and a collective society.

The Pledge was altered several times from Bellamy’s original words. The words “under God” were added in 1954 in an attempt to emphasize the distinctions between the U.S. and the atheistic Soviet Union.

The Pledge has been the center of controversy over the years. For the most part, those opposed to Pledge have done so on religious grounds. In 1943, the Supreme Court ruled that requiring a person to say the Pledge violates the First and Fourteenth amendments.

Issues of religion aside, the Pledge of Allegiance is disturbing.

Schools are supposed to be a place of learning, a place where students learn to think critically. Schooling is supposed to prepare students to function in society. It is supposed to make them responsible citizens.

The cultivation of devotion to the flag and the U.S. government creates anything but responsible citizens. In fact, the Pledge is a complete slap in the face to the principles it supposedly espouses. It encourages, not a love of liberty and justice, but blind obedience to an “indivisible” government.

If you’re skeptical of this, consider what happens to those who disagree with the Pledge and ask that their children be “opted out.” Not only do they see their children socially ostracized as “that kid,” but they are often viewed as “unpatriotic” or “un-American.” Heaven forbid we question authority!

It’s time to rethink the Pledge of Allegiance. As opposed to teaching our children to blindly follow a piece of cloth and the government behind it, let’s teach them to think critically, value liberty, and truly appreciate the need to protect personal freedoms.

The sweet smell of success for the medical-device industry is wafting over Capitol Hill. News from Senator Orrin Hatch (R-UT) is that the Senate will take up repeal of the medical-device excise tax. This is a tax of 2.3 percent on most medical devices that was passed as part of the Affordable Care Act to fund Obamacare.

AdvaMed, a trade association representing the medical-device industry, has just published another survey of its members, which reports on the tax’s impact on jobs:

According to the survey, the tax has led to employment reductions of approximately 18,500 industry workers and will lead to forgone hiring of 20,500 additional employees over the next five years. The total impact of the tax on medical technology industry employment is approximately 39,000 jobs. Additional jobs will be lost in companies providing supplies or services to the industry. Forty-six percent of respondents said they would consider further employment reductions if the tax is not repealed. On the positive side, 71 percent of respondents said they would reinstate forgone hiring if the tax were repealed.

The Food and Drug Administration has just issued draft guidance saying that it will not regulate products that help with “general wellness” and “promote a healthy lifestyle,” but pose low risk to peoples’ safety.

The guidance specifies “exercise equipment, audio recordings, video games, software programs and other products” (although I suppose “other products” is not really very specific). The inclusion of exercise equipment is especially alarming. Exercise equipment has been around for generations. The term includes baseball bats, snowboards, and running shoes. Why, in 2015, has it become necessary for the FDA to clarify that it will not regulate these items?

Given the buzz from conservatives touting the film American Sniper‘s homage to Christopher Kyle as a war hero, libertarians may be tempted to sit this movie out. I think they should resist that temptation. This is not a typical “war movie.” In fact, I would argue it’s not a war movie at all: it’s a character study of the corrupting influence of systemic violence on idealism, especially when that violence is socially and politically justified, and even when those ideals are noble by most conventional measures. Herein lies the lesson (and threat) to liberty, and I believe this theme is told masterfully through the story of Chris Kyle under the direction of Clint Eastwood.

People tend to think about big government in terms of taxes and government spending.  Big governments are the ones that have high taxes and big expenditure programs.  Government regulations are a major component of big government, and the regulatory state often leads to more oppressive and more corrupt government than big spending.  Consider, for example, the Scandinavian countries that have a reputation for big government–that is, big spending–but that are less oppressive and less corrupt than governments that spend less, but regulate more.

The regulatory state in the United States is rapidly growing, in financial regulation, in health care, in environmental regulation, and really, in all areas of life.  Too often, executive agencies (the EPA is a prime example) will write their own regulations that appear to go well beyond any legislative intent that the agencies cite as the legal basis for those regulations.  Executive agencies have taken on the legislative powers that are supposed to reside with Congress.

One proposal to do something about out-of-control regulation is a recently-proposed Regulation Freedom Amendment to the US Constitution.

Ordinary people, and sometimes experts as well, tend to overreact to short-term economic changes. The current economic malaise in the United States and Europe has brought forth a bevy of commentators convinced that this time the economy has taken a permanent turn for the worse. Never again, they declare, will we enjoy growing prosperity as we did in days of yore. Some of these Chicken Littles do see a possible means of escape from the impending doom, but only if the government carries out an extraordinarily bold economic rescue program, flush with such Keynesian measures as unprecedented monetary “quantitative easing” and large ongoing deficits in the government budget. Anything else, they insist, condemns us to languish indefinitely in a “liquidity trap” characterized by diminished rates of employment and slow, if any, economic growth. Economic historians know, however, that such declarations are hardly new and that the economy’s long-run trend has continued to tilt upward for two centuries despite the short-run ups and downs around the trend line.

Nevertheless, even the experts perceive some ominous longer-term changes and appreciate that people, in the conduct of their economic affairs, may have limits to how many burdens they can bear.

Peter Thiel speaking at Independent Institute event on January 27

On January 27, legendary entrepreneur Peter Thiel told a packed house at an Independent Institute luncheon, at the Olympic Club in San Francisco, that to blaze new trails ask: “What important truth do very few people agree with me on?” One of mine is that California will not be the epicenter of the tech industry someday. But why would this happen and how long will it take?

Two tech titans, Peter Thiel and Steve Jobs have supplied answers. In a 1995 Wired article, Jobs said:

Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new things. And the reason they were able to do that was that they’ve had more experiences or they have thought more about their experiences than other people.

Unfortunately, that’s too rare a commodity. A lot of people in our industry haven’t had very diverse experiences. . . . The broader one’s understanding of the human experience, the better design we will have.

Steve Jobs’ diverse experiences included tinkering with machinery as a boy, dropping out of college and attending calligraphy classes, exploring India and studying Buddhism, living on an apple farm, pursuing electronics in a home-based computer club, and being a pot-smoking lifelong Beatles and John Lennon aficionado.

Free-spirited product gurus like Steve Jobs, who are driven by experience, curiosity, exploration, and synthesis, are not drawn to insular and regimented environments. They are drawn to Silicon Valley because, in the words of Peter Thiel, it is the “center of the counterculture in our society today.” But this crucible of innovation could be destroyed.

In his talk for the Independent Institute, based on his bestselling book Zero to One, Thiel said that we have lived recently in “a period of globalization with somewhat more limited technological progress — a lot [of innovation] in computers and the world of bits, not so much in the world of atoms.”

The reason for this is government regulation: “[F]or the last 40 years, we’ve lived in a world where bits were relatively unregulated, atoms were more or less regulated to death. And that’s a political explanation for why we’ve had this strange dichotomy.”

But as bits and bytes become integrated into the world of atoms, i.e., into physical products such as smartphones, automobiles, and “the internet of things,” there will be growing pressure by threatened interests to regulate these physical things “to death,” thereby killing the creative environment that gives rise to tech innovations. We are already seeing this in California and elsewhere, and it threatens the long-term survival of Silicon Valley.

To protect taxi companies, California lawmakers are imposing ever-more expensive and clunky regulations on ride-sharing companies such as Lyft, Uber, and Sidecar. Home-sharing services, such as Airbnb and HomeAway, are also in the crosshairs. Many local governments, worried about losing hotel and tourism taxes, are imposing increasingly burdensome rules on home-sharing services, which threaten their business models and tie them up with expensive litigation. And the Federal Aviation Administration recently shut down the flight-sharing service Flytenow. Bits tied to atoms are starting to be regulated to death.

As this continues, Silicon Valley will eventually resemble K Street in Washington, D.C., where lobbyists and lawyers fight over how to divide industry profits. Company CEOs, with sales and marketing backgrounds not product backgrounds, will focus on increasing market shares by 1 percent, instead of inventing the next insanely great thing.

Nothing is revolutionary or countercultural about the K Street model, and it will drive away creative talent, leaving behind an insular and stagnant Silicon Valley and perhaps entire U.S. tech industry. Other nations can rush in to fill the void.

If you think this doomsday scenario cannot happen in Silicon Valley, all you have to do is look to Detroit. As Thiel noted:

General Motors was a technology company in the 1920s–the car companies were all super innovative–it probably was still sort of a tech company in the ‘50s, by the ‘80s investment in GM was a bet against German and Japanese innovation. So there is an arc were these things change.

Detroit was a booming, innovative city with a vast network of automobile manufacturers, parts suppliers, and shippers. Scale and network economies were the glue that held it together. But a combination of excessive costs, foreign competition, and bloated local government caused the car companies and the city of Detroit to collapse spectacularly.

Thiel noted that there is incredible value to being part of a heavily networked location such as Silicon Valley, but it comes with a huge risk:

Disturbingly, California is able to get away with putting quite a significant regulatory burden on its industries. . . . [T]he state was able to dramatically increase marginal tax rates in 2012 and it did not actually lead to any exodus whatsoever. People are sort of stuck . . . stuck in these network-effect-like industries [tech in northern California and entertainment in southern California] where people can’t leave.

The part that is dangerous about the California dynamic: that when you have super networked industries it’s possible that policy can go incredibly far wrong before anybody notices [such as in Detroit]. . . . The risk in California is not that we have some gradual decline, but that it gets pushed and it goes over the cliff completely. But I think we are still a ways away from that.

Perhaps, but maybe the tipping point is closer than anyone thinks as the policy attacks on applied technology escalate. It is not too late to reverse course with new policies so that California can continue “building the future” and hopefully prove my “truth” wrong.

Sixty years ago Milton Friedman made the case in “The Role of Government in Education” that since individuals reap the benefits of college degrees, whether personally, professionally, or both, they should pay for them.

By 1979 Friedman noted that higher education subsidies had become such an Ivory Tower boondoggle, higher education should be taxed to help offset the negative effects.  Were Friedman alive today, he’d likely be more convinced than ever. Consider a recent example from Arizona.

This month the Grand Canyon State became the first state to require that high school students must pass the same citizenship test immigrants must pass to become naturalized. Meanwhile over at Arizona State University’s Tempe campus, the English department is offering such classes as “the problem of whiteness.” As Campus Reform’s Lauren Clark reports:

At Arizona State University (ASU), students can now learn about the “problem of whiteness” in America.

The public university is offering an English class to its students this semester called “Studies in American Literature/Culture: U.S. Race Theory & the Problem of Whiteness.”

According to the class description on ASU’s website, students will be reading The Possessive Investment in Whiteness, Critical Race Theory, Everyday Language of White Racism, Playing in the Dark, and The Alchemy of Race and Rights. …

The course, first reported by the Pundit Press, is taught by Lee Bebout, an assistant professor of English at ASU. According to his faculty page, critical race theory is one of his research interests.

Bebout, who is white, has previously taught classes titled “Transborder Chicano Literature,” “Adv Studies Theory/Criticism,” and “American Ethnic Literature,” among others.

Keep in mind that as of fiscal year 2013, ASU (Tempe) received more than $24,000 in core revenue per full-time student—largely subsidized by taxpayers in the form of government appropriations, grants, and financial aid. Rather than use those funds to enrich undergraduates’ understanding of our core Founding principles, we have what one ASU student aptly describes as:

“… the significant double standard of higher education institutions,” James Malone, a junior economics major, told Campus Reform. “They would never allow a class talking about the problem of ‘blackness.’ And if they did, there would be uproar about it. But you can certainly harass people for their apparent whiteness.”

Our colleges and universities should be places of higher learning that help prepare graduates for life outside of the Ivory Tower—not taxpayer subsidized incubators of narrow, partisan agendas.

But if President Obama’s America’s College Promise of “free” college takes hold (thankfully, at this point it’s unlikely—here and here), that’s exactly what we’re likely to get.

In the January 2015 Budget and Economic Outlook, the Congressional Budget Office (CBO) pronounced that Obamacare’s future costs will be one-fifth lower than had been originally estimated:

In March 2010, CBO and JCT projected that the provisions of the ACA related to health insurance coverage would cost the federal government $710 billion during fiscal years 2015 through 2019 (the last year of the 10-year projection period used in that estimate). The newest projections indicate that those provisions will cost $571 billion over that same period, a reduction of 20 percent (p. 129).

What explains this windfall?