The Spring 2014 issue of The Independent Review, the Independent Institute’s quarterly journal, has just been printed and is en route to subscribers. Here’s a quick look at the contents:

• Is the near extermination of the North American bison a clear example of “the tragedy of the commons”? No, not if, like Peter J. Hill, you keep in mind one crucial fact that nearly everyone has ignored.
 (Read a summary.)

• American higher education before the Civil War was not free of government intervention. Daniel L. Bennett shows why many writers misunderstand the problems that have long plagued academia. (
Read a summary.)

• Is the U.S. government moving toward default? According to David R. Henderson and Jeffrey Rogers Hummel, there’s one “iron law” of federal tax collection that makes national debt repudiation inevitable. (Read the article.)

• Historians who rank the U.S. presidents often seem biased in favor of presidents who promoted big government. Read our symposium featuring Robert Whaples, Brandon Dupont, Stefanie Haeffele-Balch, Virgil Henry Storr, and John A. Moore to discover why Andrew Jackson, Grover Cleveland, Warren Harding, and Calvin Coolidge deserve far more credit for their economic policies. (Read summaries here, here, here, here, and here.)

• How are government programs like a salmon trap? Robert Higgs offers a surprisingly apt analogy.
 (Read the column.)

• In what ways has smuggling shaped America? Mark Thornton reviews Peter Andreas’s book on the importance of illicit trade in U.S. history. (Read the book review.)

• How has a private, for-profit school chain managed to serve the poor and vulnerable in 15 countries on four continents? Kevin Currie-Knight reviews James Tooley’s book on the challenges, pedagogy, and business model of the SABIS school network. (Read the book review.)

Please be sure to take advantage of our special offer of your choice of a FREE book, such as The Terrible 10 by Burton Abrams, when you renew or order a new subscription online.

[This post first appeared in the March 25, 2014, issue of The Lighthouse. To subscribe to this weekly email newsletter and other bulletins from the Independent Institute, enter your email address here.]

Last Friday, the Obama administration quietly released 280 pages of rules that, among other things, increases Obamacare’s risk corridors (a.k.a. insurers’ bailout):

We propose to implement an adjustment to the risk corridors formula….. Such an adjustment could increase a QHP issuer’s risk corridors ratio if administrative expenses are unexpectedly high or claims costs are unexpectedly low, thereby increasing risk corridors payments or decreasing risk corridors charges. We propose to raise the administrative cost ceiling by 2 percentage points, from 20 percent to 22 percent. We also propose to increase the profit margin floor in the risk corridors formula (currently set at 3 percent, plus the adjustment percentage, of after-tax premiums). Such an adjustment could increase a QHP issuer’s risk corridors ratio if claims costs are unexpectedly high, thereby increasing risk corridors payments or decreasing risk corridors charges. We propose to raise the profit margin floor by 2 percentage points, from 3 percent to 5 percent. (p. 56)

An example reveals how much this change increases the “bailout.” The table below shows an insurance plan with $10 million cost target versus $11 million of allowable costs. Actual medical claims are $8.8 million. Using the formula for calculating its payout from the risk corridor, allowing 20 percent of administrative costs, the plan gets a $410,000 “bailout” (panel A). If it can add administrative costs up to 22 percent of allowable costs, the payout increases to $635,641 — an increase of 55 percent (panel B).

Health insurers continue to win with Obamacare.

Every year, the Independent Institute’s Challenge of Liberty Student Seminars become a forum for students to learn the foundations of a free and prosperous society. These seminars are inspiring, challenging, and fun—in large part because the speakers we invite are exceptionally devoted to teaching and mentoring students.

In 2014, three new speakers will join our already excellent faculty list.

• Christopher Coyne is professor of economics at George Mason University and co-editor of The Independent Review. Chris planned a career in finance before he took an economics class that inspired him to become an academic. His research interests are humanitarian aid, economic development, and Austrian economics.

• Michael Thomas teaches at Utah State University, where he specializes in economic history and public choice. He studies the unintended consequences of government regulations and how they affect consumer choices in the marketplace. John Stossel once interviewed Michael on the subject of “sin taxes,” a topic he examined in a paper co-authored with Adam Hoffer and Independent Institute Research Director Bill Shughart.

• Abigail Hall is completing her Ph.D. in economics at George Mason University, where she is also a research fellow at the Mercatus Center. Abby’s research interests focus on foreign aid and national defense. She is co-author with Chris Coyne of an important article on the militarization of U.S. domestic policing, which ran in the Spring 2013 issue of The Independent Review.

The deadline to apply to the Independent Institute’s 2014 Challenge of Liberty Student Seminars is March 31.

APPLY TODAY!

My local newspaper, The Tallahassee Democrat, ran a story on March 19 reporting on a talk given by former Florida Governor and former US Senator Bob Graham.  In his talk, Graham calls for more civic engagement.  His talk was a part of a larger program titled “Choosing to Participate: The Power of Civic Engagement.”

For most citizens, civic engagement is futile.  I’m speaking from my own experience.  The few times I have attempted to speak at city commission meetings or county commission meetings, I’ve been met with indifference.  I’ve been given a three minute time limit to speak (I can understand why they do that), and then when I’m speaking I’ve watched commissioners get up and leave in the middle of my three minutes, or talk among themselves as I’ve been talking to them.  For people like me, civic engagement is nothing but frustration.  Most people realize this, which is why they would rather use their time in other ways rather than waste it on civic engagement.

But what happens when people who really can make a difference choose to participate?  Two of those individuals are Charles and David Koch, who Senate Majority Leader Harry Reid called “un-American” for their civic engagement.  Reid said, “The Koch brothers and other moneyed interests are influencing the politics in a way not seen for generations. … Not only have Senate Republicans come to the floor to defend the Koch brothers personally, they have again and again defended the Koch brothers’ radical agenda — and it is radical, at least from the middle-class perspective.”

It is interesting that Senator Reid says, on the one hand, that the Koch brothers have a radical agenda, and on the other hand, that many of his colleagues in the Senate support that agenda.

I don’t want to draw a connection between the ideas of former Senator Graham and Senator Reid, who are two different individuals.  But it is worth a remark that while some politicians call for more civic engagement, others castigate people for their civic engagement, when those people (1) have ideas different from their own, and (2) are actually able to participate in a way that makes a difference.

Over the next 10 years, the Affordable Care Act (Obamacare) is scheduled to cut Medicare spending by $716 billion, primarily by reducing payments to doctors and hospitals. Further, those cuts in spending will continue indefinitely into the future. By 2060, one-fifth of Medicare will be gone. The Medicare actuaries and others have warned that these cuts will reduce access to care for seniors.

Fortunately, there is a better way ― proposed by Liqun Liu, Andrew J. Rettenmaier, Thomas R. Saving and Zijun Wang in a study for the National Center for Policy Analysis: The reform consists of two changes to current law: (1) raising the Medicare eligibility age to the same age as Social Security (and thereafter indexing it to increases in longevity), and (2) requiring higher-income seniors to pay a greater share of their medical costs (or so-called means testing). This reform ensures that low-income workers receive full benefits (defined as the average benefits retirees would receive if the ACA’s cost-cutting provisions are not realized) upon attaining the new eligibility age. Once seniors reach the new eligibility age:

• Individuals in the lowest 30 percent of the lifetime income distribution would receive 100 percent of full benefits (net of premiums).
• Medium income workers (at the 50th percentile of lifetime income) would receive 87 percent of full benefits — significantly higher than the benefits they would receive under the Affordable Care Act.
• However, individuals in the higher lifetime income groups would be required to pay a greater share of their health care costs and as a result receive a reduction in net benefits under current law.

* * *

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

[Cross-posted at Psychology Today and John Goodman’s Health Policy Blog]

“A nation that does not educate in liberty will not long preserve it and will not even know when it is lost.” —Alan Kors

Since my days as an undergraduate, I’ve been a major supporter of the Foundation for Individual Rights in Education (FIRE) and its tireless efforts in defending the academic freedom of students and faculty alike regardless of cause. In this day and age where illiberal attitudes on campuses are the norm and not the exception, FIRE president Greg Lukianoff’s new book Unlearning Liberty: Campus Censorship and the End of American Debate could not be more timely.

A self-described atheist and “lifelong Democrat,” Lukianoff has written an exposé that cannot be easily dismissed as a right-wing tirade against political correctness run amok. Anyone who spends the slightest amount of time in higher education these days could lament the sad state of discourse. Instead of a freewheeling environment where controversial ideas can be advocated and debated, students and faculty taking the “wrong” stance can expect to be punished. Lukianoff cites a disturbing 2010 study by the American Association of Colleges and Universities that surveyed 24,000 college students and 9,000 faculty, and found that 35.6 percent of students and only 16.7 percent of the faculty strongly agreed with the statement: “It is safe to hold unpopular positions on campus.” With this kind of hostile environment, it comes as no surprise that the nation’s colleges and universities are full stories of censorship, deprival of due process, politically motivated “investigations,” forced ideological indoctrination, and other shameful episodes that would shock people of all persuasions.

Unlearning Liberty reveals a wide range of incidents from the laughably absurd to the truly frightening:

How is the health care workforce changing under Obamacare? This month’s jobs report from the Bureau of Labor Statistics gives us a snapshot of employment in health care versus the rest of the economy. The table below shows the details.

Despite the widely touted notion that Obamacare is putting hospitals out of business, hospital employment barely budged from February 2013 through February 2014. There are still almost five million workers in hospitals, which are often the largest employer in any district. This makes them a political force to be reckoned with.

However, employment growth in health care has come from various ambulatory settings. This may be a good sign, if it indicates patients are using lower-cost outpatient care — especially convenient clinics in shopping centers and pharmacies — instead of overpriced hospital services. On the other hand, it could reflect increased demand for medical-office staff to deal with the unprecedented compliance requirements of Obamacare.

The Challenge of Liberty Student Seminars are returning for another exciting season!

Thanks to the generous support of donors, we will hold two seminars for college students — one at the University of Denver (June 16–20) and one at the University of California, Berkeley (July 7–11) — and one seminar for high-school students at the Independent Institute’s headquarters in Oakland, Calif. (July 14–18).

Our seminars offer an interdisciplinary approach to the study of liberty, with a focus on economics, history, the rule of law, property rights, free trade, environmentalism, and government regulation. But most importantly we emphasize the role of moral character and individual responsibility as the foundation of a free and prosperous society. Students will spend five intensive days with our top-notch faculty and enjoy making new friends from around the country and abroad.

This year we are happy to welcome as new faculty Christopher Coyne, Michael Thomas and Abby Hall, who will join returning faculty Robert Higgs, Ivan Pongracic, Ben Powell, Alex Padilla, Anthony Gregory, Fred Foldvary, José Yulo, Greg Rehmke, and Mike Winther.

Scholarships are available to cover books, lodging, and food. Students who qualify will be responsible only for their travel. Students may also attend after paying full tuition.

The deadline for applying, March 31, is approaching fast.

APPLY TODAY!

After the Obama administration bailed out General Motors by purchasing a 60.8% ownership share in the company for $49.5 billion, President Obama said, “We expect taxpayers will get back all the money my administration has invested in GM.”  (I do like the way the president takes responsibility for the investment.)  Now, the president’s administration has sold all of its ownership in GM and taken a $10 billion loss.

It is worth noting that what the president called an investment on behalf of the taxpayers lost 20% of its value, and that the president’s expectations on the investment his administration made did not pan out.

I don’t know whether the president actually believed the GM bailout would yield a profit or whether that was just political rhetoric he hoped people would forget over the years.  Either way, it turned out not to be true.

The loss on the GM investment did not attract much notice, especially compared to other investments the president has made on behalf of the taxpayers, such as the $500 million it lost on the Solyndra loan guarantees.  Interesting, considering that the GM loss was 20 times larger.

Normally, I don’t think Zeke Emanuel has much to say that is both true and interesting. But this insider’s view of the making of ObamaCare is fascinating. Apparently there were people inside the White House who wanted to adopt John McCain’s approach to health reform. We ended up with only a timid step in that direction ― mainly so the president could save face after all the demagogic ads he ran attacking McCain during the campaign:

In 1954, the Internal Revenue Service created a tax exclusion for health insurance premiums, which is why health benefits offered through an employer aren’t subject to income or payroll taxes. This makes an additional dollar of health insurance (which isn’t taxed) more valuable than an additional dollar of wages (which is).

Economists — liberal and conservative alike — overwhelmingly denounce the tax exclusion. It drives costs higher while keeping wages down, it is regressive, and it is a major drag on the federal budget — lowering revenue by a whopping $250 billion a year.

During the 2008 presidential campaign, Senator John McCain proposed eliminating the exclusion and replacing it with a $5,000 tax credit to help families buy health insurance. The Obama campaign ran more than $100 million worth of ads pounding McCain, accusing the GOP nominee of “taxing health benefits for the first time ever.”