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The Policy and Commentary Blog of The Heartland Institute
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Policy Positions: Free Trade vs. Political Ignorance

June 20, 2016, 1:53 PM

The current political campaign for the U.S. presidency has brought out the worst in both the personalities and the policy positions among many of those running for that high political office, and this has been especially the case with international trade and the global economy.

Listening to the presumptive Republican and Democratic candidates for the White House, the average voter would think that international trade and investment is a zero sum game in which there is a “winner” and a “loser.” Their economic policy assumption is that other countries are gaining at the international trade game at the expense of the United States.

The fact is America is economically interconnected and interdependent with the rest of the world. About 20 percent of the American work force is employed in foreign trade and investment related jobs, and represents more than 25 percent of the U.S. Gross Domestic Product.

American Global Trade Policy Positions

In its latest update released on June 3, 2016 on America’s import-export trade with the rest of the world, the U.S. Bureau of Economic Analysis reports that for calendar year 2015, the total market value of imports and exports came to over $5 trillion. The U.S. exported over $2.26 trillion of goods and services to other countries, while America imported more than $2.76 trillion in goods and services from the rest of the world.

For a point of comparison, total U.S. Gross Domestic Product for calendar year 2015 was about $18.5 trillion. So the total trade in imports and exports between the America and the rest of the world was equal to more than 25 percent of the total market value of all finished goods and services produced in the United States last year. International trade, clearly, represents a huge part of the economic well-being of the United States.

American Jobs Interconnected With Global Trade

In its May 31, 2016 report, the U.S. International Trade Administration (ITA) estimated that in 2015, exported-related employments accounted for 11.5 million jobs in the U.S., about 6.7 million jobs connected with exporting goods to the rest of the world, and 4.8 million jobs relating to selling services to other countries. At the same time direct and indirect foreign investment in the United States supported 12 million more jobs, according to an ITA report in February 2016.

With over 150 million Americans employed in 2015, this means that over 15 percent of all jobs in the United States were dependent on export trade with and investment from other nations around the world.

But this underestimates the employment affect from trade. Due to the wrong-headed belief that the primary benefits from international trade come from exporting to the rest of the world, while imports are somehow a “drag” on the country’s economic betterment, it is far more difficult to readily get the numbers for imported-related employments in the U.S.

But it should be kept in mind that every good manufactured in another country requires a business selling it to potential American consumers, with supply-chain related jobs having to be filled from the dockworkers unloading the ships bringing those goods to an American port to the sales people selling them in retail outlets in cities or towns all across the United States.

Thus, it would not be too unreasonable to presume that nearly as many jobs have been created selling imported goods to American consumers and enterprises as estimated to exist because of America’s export trade in goods. Then, the total number of jobs in the U.S. that are related to both exports and imports as well as foreign investment might well come to almost 20 percent of all employment in the American economy, or one out of every five jobs in the country.

America is interconnected and interdependent with the rest of the world. Anything that impedes or breaks these global connections, therefore, would inevitably have devastating affects on enterprises and employments here at home in America.

But what the Republican and Democratic candidates for the presidency are offering are policies that would make the maintenance and growth of international trade more difficult for the U.S.

Trade Benefits All Those Who Peacefully Participate

Let us remember why people trade. The fact is that none of us has the ability to produce for ourselves all the necessities and conveniences to make our life as livable and comfortable as we would like it to be. Our knowledge and knowhow is limited. The resources at our personal disposal to produce these desirable things are insufficient in their quantities and qualities. And our own human labor is incapable of doing all that would need to be done.

But human beings have discovered and seen the opportunity in improving their circumstances by trading with their neighbors. Of course, you could try to rob from or even kill your neighbor to get what you want, but you run the risk of failing in your attempt and find yourself robbed or injured or even murdered by the person whom you assaulted.

It is far better and safer, in the long run, to appeal to your neighbor’s self-interest by offering to him something that he wants in trade for what he possesses that you desire to obtain. Reaching mutually agreeable terms of exchange, both you and your neighbor walk away from the trade viewing yourselves as equally better off.

Violence has been avoided, peaceful relations have been established between you and your neighbor, and each of you will have helped create a social environment of trust and confidence for future trading opportunities.

As more and more people enter into and successfully participate in these trading opportunities and benefits, the associating individuals begin to specialize in the production and sale of those goods and services in which they discover they have a comparative advantage over the growing number of trading partners.

Specialization Raises The Standards Of Living For All

Soon, these people find themselves linked with each other in an expanding social system of division of labor. One is the butcher, another is a baker, a third is the brewer, and a fourth is the candlestick maker. Historically, this all developed over thousands of years in different parts of the world, in different social circumstances. But the end result in the world in which we all live today is that we are increasingly active and mutually benefitting participants in the global division of labor of market exchange incorporating billions of human beings.

Almost 250 years ago, the famous Scottish moral philosopher and political economist, Adam Smith, already pointed out how a simple workman’s course wool coat was the product of a multitude of human efforts involving production processes in various parts of the world, all of which were integrated and coordinated by the market forces of the 1770s to make the modest outer garment that kept the unskilled laborer warm in the winter months.

Today, the complexity and integrated interdependency of those billions of human beings is light years advanced from what seem to us the primitive production methods of more than two centuries ago, in Adam Smith’s time. Communication and trade has gone from the horse drawn wagon and the sailing ship to near instantaneous written, audio and video interactions between people on opposite ends of the planet.

And the ideas, technologies and innovative capital at our disposal has enabled a growing portion of humanity to attain standards of living unimaginable by even the most wealthy of past ages. All of this has been made possible through that simple but essential system of division of labor through which each of mankind’s members finds his niche to earn a living and then enjoying the cornucopia of improved and new goods and services that the rest of humanity offers to him in trade for what he specializes in and offers to everyone else.

What has sometimes confused a better appreciation of all this is that an understanding of how we all fit into this global network of human association is not always easily grasped by many of our fellow economic citizens of the world. As a result, fallacies and fables are too readily accepted. Let us review some of them.

The Fallacy That “Exports” Are Good And “Imports” Are Bad

For centuries, the fact that what you sell earns you money, while what you buy costs you money, led many to say that exports are the source of riches, but imports drain away part of a person’s or a country’s wealth.

However, the only reason we, ultimately, produce is to consume. The only reason we specialize in some trade, profession or occupation in the division of labor is to earn the financial wherewithal to, then, use our earnings to buy what others can offer to us that we cannot make for ourselves, or not at as low a cost as they can offer it to us, or in types and qualities beyond our own abilities. In other words, we produce and “export” our own good or service as the means to “import” those things that others offer to us.

As a professor of economics, I “export” my teaching services in the classroom to the institution of higher learning that has hired me, and I use the salary that institution pays me to “import” into my own household the goods I desires to use and consume. My teaching services “exports” are the means to acquiring the “imports” of all the goods I want to buy.

Therefore, the gains from trade for any individual are the desired goods they buy from others – the imports – and the goods sold to acquire the money income to buy them – the individual’s exports – are the means to that end.

The money earned from selling a good is merely the necessary and essential intermediary step or stage to attaining the end goal, that being the goods that money can buy. What we ultimately want in trade is not money, but what that money can buy once it has been earned.

This is no less true for a nation, which in a free market economy is merely the cumulative trade of all the individual members of that country among each other and with those individuals who may be a buyer or seller in another country.

The Fallacy That Imported Goods Cost American Jobs

But, the doubter or critic may ask, do not imports cost the jobs of those American workers who are employed in industries that cannot successfully match the foreign competitor’s price or quality advantages? Is this not a case in which the foreign producer’s gain of American consumer business is at the cost of American jobs and industry?

It is true that if a foreign rival can successfully sell a good in the U.S. at, say, a lower price that his domestic American competitor, the American producer can lose business and in the extreme be competed out of business. And employments in that American producer’s enterprise may be lost.

But that does not mean that alternative employments will not emerge to replace those lost. If, in fact, the foreign rival can seller his product for less than his American competitor, this will improve the financial circumstance of the consumers of that product. Suppose that the American producer had been selling his produce for $10 per unit. And now the foreign seller offers it in America for $5 per unit.

The American consumers now can buy a desired product at half the expense as before. This improves their real income, because they now have the wanted product for $5 and have $5 left in their pockets compared to what they used to pay the American suppler for this good. This enables each of them to increase their demands for other goods they previously could not afford to buy by the amount of $5.

This greater demand for other goods and services that consumers can now buy in the market offers part of the alternative employment opportunities for some of those who may have lost their positions in the business of the American producer who had cut back his enterprise or gone out of business in the face of the more cost-efficient foreign competitor.

Also, those foreign suppliers of goods do not give them away to American consumers. They, too, are interested in selling their products to earn the income that enables them to buy other goods that they want to buy. The dollars they may earn in the U.S. normally cannot be used to buy goods in their home country. They wish to earn those dollars precisely, in most instances, to have the financial means to buy goods they are interested in purchasing in the United States.

Thus, foreign sellers’ demands for American goods open employment opportunities in the U.S. exporting sectors of the economy. Since, as was explained, American exports are the means by which Americans are able, ultimately, to buy the imports they want to acquire. If the foreign earner of those dollars does not, himself, wish to buy American goods or investment in American industry, he will sell his unwanted dollars on the foreign exchange market to those who do wish to have the dollars to make desired purchases in the U.S. or investment directly or indirectly in the American economy.

Thus, the composition and types of jobs in the U.S. economy may change over time due to the changing buying and selling opportunities in the global economy, but the total number of jobs need not be negatively affected in the long run. Plus, all will have gained as consumers by having more, better, and less expensive goods and services available from participation in the global market.

Finally, it may be asked, don’t other countries sometimes play by “unfair” international trading rules? Don’t governments subsidize some products to artificially sell their goods in America below “real” costs of production? And don’t those same governments try to protect their domestic industries and jobs from American competition through import restrictions or regulations that limit the ability of American companies to compete in those foreign lands?

“Punishing” Foreign Countries Harms American Consumers

The answers to all these questions are: Yes, foreign governments sometimes do such things. But if a foreign government is, in fact, subsidizing one of their national industries to sell its goods in America below their actual costs of production, it is the taxpayers in that foreign country who should be complaining, because it is their taxed pockets that are being picked by their own government to transfer the amount of the subsidy from the hardworking income-earners in that nation to the privileged businesses receiving the government handout. Their the ones being plundered to benefit a special interest group.

Who benefits from this subsidy? The American consumers who find it attractive to buy that good at that subsidized price. Again, they are able to purchase a less expensive (foreign) version of the desired good. Again, they save on the cost of buying it, meaning there are dollars left in their pockets that were not there before. And alternative jobs and export opportunities emerge, just as if the foreign import had been selling for less due to market-based cost-efficiencies on the part of the foreign rival rather than a subsidy from its government.

American consumers are given a “gift” of a higher standard of living at the expense of the taxpayers and consumers in that foreign country from which the subsidized import is coming.

It is also the case that foreign governments guided by some of the same economic fallacies that have been heard this year on the American presidential campaign trails have imposed trade barriers or import restrictions on goods coming from the United States. But there is nothing that any administration in Washington, D.C. can do about this that would not entail harming American consumers and producers here at home.

If a retaliatory import barrier is imposed against some goods imported from that foreign country, this makes some goods more expense or less available for members of the American consuming public. They are made the victims by their own government due to some foreign government trying to protect one of their industries from American competition. The sins of a foreign government fall upon innocent American consumers, when the U.S. government follows such retaliatory trade policies.

The benefits from international trade and global competition are too great, even when some governments attempt to intervene and regulate trade within their countries to advantage some domestic special interest group, to fall into the types of economic fallacies discussed.

Regardless of the misguided and wrong-headed policies that other countries may follow in the arena of international trade, commerce and investment, Americans will most gain from whatever trading opportunities that may offer themselves around the globe if the U.S. government follows a strict and principled policy of unrestrained and unrestricted free trade with any and all nations of the world.

[Originally published at EpicTimes]

Categories: On the Blog

Models Miss Another Factor Impacting Climate

June 19, 2016, 11:14 AM

Hardly a month or even a week goes by without a new study

Colored stalactites and stalagmites in the cave.

coming out examining another natural factor scientists have found that provably affects temperature or climate — a factor neither the climate models, nor the Intergovernmental Panel on Climate Change have or, perhaps even can, account for.

The most recent of these climate drivers brought to my attention was brought to light in a study in Nature Communications.

In it, researchers at the Australian National University Research School of Earth Sciences measured trace elements and stable isotopes in stalagmites from the Indonesian island of Flores, comparing ancient rainfall patterns to records from East Asia and the central-eastern equatorial Pacific. They found alternating multi-century-long El Niño/La Niña-like patterns have affected global climate for at least the past 2,000 years. Climate models do not reproduce those patterns.

Note these are not the familiar El Niño/La Niña patterns that occur off the coasts of North and South America in the Eastern Pacific (which are also not reproduced in climate models) but rather periodic, repeated ocean oscillations in the tropical, South Central and Western portion of the Pacific

Alena Kimbrough, a member of the research team, said, “We’ve shown [Pacific El Niño/La Niña oscillations are] an important part of the climate system that has influenced global temperatures and rainfall over the past millennium.”

The paper states:

Our results highlight significant discrepancies between the proxy records and model simulations for the past millennium. … We cannot rule out the possibility that some of the low-frequency Pacific variability was a forced response to variable solar intensity and changing teleconnections to higher latitudes that are not simulated by the models, … or that unforced, low-frequency internal climate variability (that is difficult for models to simulate) was responsible for at least some of the global temperature change of the past millennium.

According to the researchers the tropical Pacific La Niña -like pattern is thought to be a contributing factor to the recent hiatus in warming temperatures and also affected temperature shifts earlier in the twentieth century. Their analysis suggests projections of tropical rainfall patterns, global temperature extremes, and other climate phenomena will remain uncertain until paleoclimate records and models consistently capture the climate impact of natural El Nino/La Niña-type patterns in the tropical Pacific.

To quote the lead author of the study, Michael Griffiths, Ph.D. from William Paterson University in the United States, “Until we can model this lower-frequency behavior in the tropical Pacific, one can only speculate on how the warming will play out over the next few decades.”

With the addition each new factor discovered to impact climate change, or a better understanding of natural factors already understood, though not well, to affect the climate, the role human greenhouse gas can have played in the recent modest warming of the latter 20th century diminishes. There is only so much warming to account for and if natural factors have played a larger role than climate models project, then the impact of human greenhouse gas emissions must necessarily play a smaller role.

Categories: On the Blog

Article V Constitutional Amendments, Part 1

June 17, 2016, 4:39 PM

Like a lot of Americans, I have been thinking for a long time that our nation is on the wrong track. Not only do things seem to be getting worse rather than better, but it seems the system itself is broken so it is no longer possible to get it back on track.  People are disgusted but don’t know what to do.  The two presumptive presidential nominees of the major political parties show that both parties are out of touch with the American people.  I don’t think we have ever seen the two leading candidates have such high disapproval ratings from the public as those of Hillary Clinton and Donald Trump.  And the public has an even worse opinion of Congress.  The latest poll shows only 11 percent of the public approves of Congress. That’s only two points above the lowest number every recorded, in 2013 also under the Obama administration.

The economy is sputtering.  Growth averaged 3 percent between 1980 and 2007.  Since then it has averaged 1.2 percent.  In the first quarter 2016, the economy grew only 0.8 percent, even less than the disappointing 4th quarter of 2015 at 1.4 percent.  In April 2016, employment grew a paltry 160,000 jobs while the adult population grew by 200,000 people.  In May only 38,000 new jobs were created, far below the 162,000 expected.  That was the worst monthly jobs report in five years. At the same time, downward revisions to the previous numbers for April and March subtracted 59,000 jobs.

David Stockman, former head of the Office of Management and Budget, calculates 2.3 million jobs paying an average of $58,000 per year have been lost in manufacturing, mining/energy and construction since 2008 and have been replaced by 1.9 million jobs is leisure and hospitality paying less than $20,000 per year.  In May 2016, manufacturing lost 18,000 jobs; mining lost 10,000; construction lost 5,000; and even temporary workers backtracked, losing 21,000 jobs.   Meanwhile a half million more people quit looking for work that month, bringing the number of Americans of working age who aren’t working to 94.7 million.  There are now fewer full-time, full-pay jobs than in December 2007.

According to the Conference Board, productivity in the U.S. is now MINUS 0.2 percent.

For the first time in more than three decades, we produced less GDP per hour worked.  We got poorer.

Figure 1

Wages are flat. The stock market looks vulnerable.  It, along with the rest of the economy, looks more like it is rolling over, ready to topple, rather than perking up.  Business sales have been declining for two years and are now 5 percent below their peak in 2014; meanwhile inventories have been building up—not a good sign for the economy.  Corporate debt is now $6.7 trillion, more than double what is was prior to the last crisis. Most of that increase has gone into stock buybacks, mergers and acquisitions, and various leveraged-buyout recapitalizations rather than productive investments. Last year buybacks and mergers and acquisitions were $2 trillion while    all R&D and office equipment spending was $1.8 trillion.

Household debt has now climbed to $13 trillion, comparable to its peak before the recession.  Our national debt has now ballooned to $19 trillion.  It just keeps on growing, and government is doing nothing about it even though everyone recognizes it is a time bomb that could blow up the whole economy, impoverish us and destroy our future.

The Obama administration and the Federal Reserve have been attempting to stimulate the economy with “quantitative easing” (a scholarly-sounding term for printing money) to increase spending in accordance with Keynesian theory. This is the same idea that was employed early in the Obama administration with its $770 billion (later adjusted to $831 billion) stimulus program, the American Recovery and Reinvestment Act of 2009.  That program failed:

Adminstration’s Projected Unemployment Rate With/without Obama’s Stimulus Program Source: Bureau of Labor Statistics: “The Job Impact of the American Recovery and Reinvestment Act” [Stimulus Act] Figure 2

The red line in the above graph is the Obama administration’s projection that the stimulus program would hold unemployment under 8 percent, compared to the administration’s projection without the stimulus program (middle line on the chart).  Instead, unemployment actually rose higher than it would have been without the stimulus, and it remained above 8 percent for four years.  The stimulus program was far worse than doing nothing!

Influential economist John Maynard Keynes claimed spending—for anything—was the driver of the economy and that government spending produced a multiplier effect as the dollars were, in turn, spent again and again throughout the economy.  He had no evidence to support this.  Keynes’ biographer Hunter Lewis says, “There is no evidence” that spending ever cured a recession, and Keynes “wasn’t particularly interested in evidence.”

Keynes theory provided the rationale for Franklin Roosevelt’s New Deal program of massive spending to try to pull the country out of the Great Depression. It failed.  On May 9, 1939, FDR’s treasury secretary and good friend Henry Morgenthau testified before the House Ways and Means Committee: “We have tried spending money. We are spending more than we have ever spent before and it does not work….After eight years of this administration we have just as much unemployment as when we started….And an enormous debt to boot.”

The Keynesian rationale, which failed with Obama’s 2009 stimulus bill just as it had with FDR’s program in the 1930s, was based on a multiplier of 1.5.  That meant the GDP would increase by $1.50 for every additional dollar spent by government.  If the multiplier were really larger than 1.0, the GDP would rise even more than the rise in government spending.  The U.S., Greece, and other spendthrift nations wouldn’t be going broke—they’d be getting richer the more they spent! The reality is that the multiplier is always less than 1.0. In my book The Impending Monetary Revolution, the Dollar and Gold, Second Edition, I cite several research studies which document this.

“Quantitative easing” is now the favored term for making more money available, supposedly leading to more spending, which would create economic growth. If more money was available for, say, housing or construction or alternative energy development etc., it was thought this would stimulate growth in other sectors of the economy and lo and behold we would have vibrant economic growth.  But it didn’t work out that way.

Creating more money has simply created more debt. The world is being swamped by a flood of money and credit.  Since 2007, global debt has increased by $57 trillion—three times faster than global GDP. This includes all categories of debt: household, corporate, government, and financial. All the major central banks are now engaging in quantitative easing.  The Fed has been spending trillions of dollars buying government bonds to increase the money supply to stimulate the economy, but the U.S. statistics I’ve cited above show it hasn’t worked.

Japan, which has tried stimulus programs for more than two decades, has gone even further. Its central bank now buys not only government bonds but corporate bonds, common stocks, real estate, and ETFs to increase the money supply. In fact, the central bank owns 52% of the entire Japanese market in exchange traded funds. None of this has worked.  In spite of all this spending, Japan has had two “lost decades” of virtually no economic growth and is now more concerned about deflation than inflation.

Japan is the last of the major central banks to reach its “Havenstein moment.”  Rudolph Havenstein was the head of the German Central Bank during the great hyperinflation in Germany.  A “Havenstein moment” is when the person in charge of the money supply decides that massive printing of money is better than the alternative, that it is preferable to deflation.  In November 2015 Japan entered its fifth recession since 2008, and the recoveries have been so weak it’s hard to distinguish them from the recessions.  The nation is mired in a third “lost decade.”

Shinzo Abe was elected prime minister of Japan largely on a campaign of monetary easing. The Abe government said in May 2013 it aimed to improve the economy with two percent inflation by doubling the money supply.  It said it would engage in “unlimited” or “open ended” printing of money to achieve that goal.  Almost three years later, in April 2016, the inflation rate was 0.10 percent.  And the nation’s debt-to-GDP ratio ballooned to 250 percent—the highest in the world—compared to 65 percent in 1990, when the stimulus programs began.

Why can’t governments create wealth?  Laws and regulations are all enforced by the police power of government to inflict losses on people by fines or jail sentences if they don’t comply.  But people make economic transactions because of the prospect of gain, not because of the threat of loss.  There is no way the government’s power to inflict losses can bring the same results as a free market that allows people to choose gains.

In a free market every transaction benefits both sides, according to their judgment, or they would not participate.  It is a win-win situation.  A government transaction is always win-lose, because government benefits one side by imposing a loss on the other (or the taxpayers) that would not be accepted but for the prospect of even greater loss through fines or jail sentences. Instead of the win-win transactions of free markets, we have the win-lose transactions of a government “managed” economy.  The more these win-lose transactions proliferate, the more the economy falls behind what would have been achieved by the win-win transactions of free markets.  Government’s only power in managing the economy is to make things worse; whatever it does will be worse than if it did nothing.  Some individuals or sectors of the economy may benefit from government policies, but those gains are always more than offset by losses elsewhere. The advance of society is achieved by the economic gains of people acting for their own self-interest in the context of their natural rights to life, liberty and the pursuit of happiness.  In short, by the actions in a free market.

The Obama administration has added 80,000 pages of regulations annually and is preparing to issue another 3,000 regulations before the end of the year. This is not a way to grow the economy. Regulations force uneconomic actions dictated by government’s power to inflict losses.  Businesses face the time-consuming, costly and often futile task of keeping up with regulations to avoid penalties for requirements they didn’t know existed. James Madison wrote in Federalist 62:

“It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man who knows what the law is today can guess what is will be tomorrow.”

The number of federal crimes has grown to 4,889, mostly from regulations, even though the Constitution lists only three: treason, piracy and counterfeiting.  Government grows and freedom shrinks. And what can people do about it? Decades of effort to elect new people to office in Washington have failed to reverse the expansion of the federal government.

For more than 40 years I have been intrigued with amending our Constitution by a method that has never been used.  It is the provision in Article V of the Constitution whereby the states themselves can amend the Constitution rather than going through Congress, as was done with previous amendments in our history.  I have discussed this unused method—and made recommendations for new amendments—in three books I have written over the years, the most recent one being The Impending Monetary Revolution, the Dollar and Gold, Second EditionI have come to the conclusion that constitutional amendments are the only way to right the wrongs that have developed in our political system.  For decades we’ve been deviating from the Constitution and principles of economic freedom and individual rights that made this country, but Obama’s “transformational change” has made things so much worse as to culminate in a monetary revolution now before us.

Since our economy has been performing poorly for years and government has been unable to stimulate it, we face an insurmountable obstacle in the form of entitlements growing at 9 percent annually—far beyond our economic growth rate.  We are not going to be able to fund what we are already legally obligated to spend.  Since 2000, entitlements have been growing almost twice as fast as wages and salaries (6.3 percent compared to 3.3 percent).  That alone should tell you this cannot continue much longer.  There must be an end to it—not years from now but very soon.

Capital investment is critical to productivity growth, and productivity growth in turn is the crucial issue in economic growth in a wider sense. As productivity and economic activity slow down, entitlements will loom as an even larger problem.  Meanwhile, near-zero interest rates—even negative rates in major foreign countries—punish savers and leave less capital for investment. The economic slowdown is not limited to the United States.

U.S. monetary problems are world problems.  Our problems from abandonment of the gold standard, excessive federal spending and debasement of the dollar become problems for other nations’ economies because of the dollar’s reserve currency status.  The dollar is the basis of the  international monetary system—meaning that system is based on the debt of the U.S. government.  Well, not quite, or at least not entirely, because the international monetary system contains another asset, gold.

Under the monetary system established at the Bretton Woods conference in 1944, only the U.S. agreed to link its currency to gold at a fixed rate ($35 per ounce), and other nations agreed to maintain fixed exchange rates of their currencies to the dollar.  The International Monetary Fund was established to operate this gold-exchange standard with the dollar as a reserve currency along with gold.  Although U.S. citizens in the 1930s  lost the right to redeem their dollars in gold, foreign central banks could still do so until 1971 when the U.S. defrauded those banks just as it had its own citizens in 1933.  On August 15, 1971, President Nixon ended redemption by foreign central banks of dollars for gold.  He did so because U.S. inflation had made the $35 gold price unrealistic.  Too many dollars were being accumulated by foreign central banks, and too  many were being converted into gold at the bargain price.  Gold was being drained from the U.S. Treasury at a rate that could not be sustained.

When the dollar’s last link to gold was severed in 1971, there was nothing to limit the increasing number of depreciating dollars the U.S. sent abroad to pay for the increasing importation of goods.  The U.S. consumed more than it has produced (measured by international trade balance) every year since 1976.   In 1982 the U.S. was still the world’s largest creditor.  In 1985 it became a net debtor for the first time in 71 years, with an investment deficit of $110.7 billion.  It became the worlds’ largest debtor only three years later, and ever since, it has continued to pile more debt upon debt just like Greece.

Abolishing the last link of the dollar to gold led to the collapse in 1973 of the system of fixed exchange rates, but the dollar was still considered the reserve currency although it had lost the basis for its becoming so in the first place.  This meant not only that this restraint on inflating the U.S. money supply was eliminated but that the U.S. could export inflation to other countries, which would convert increasing dollar reserves into their own currencies.  The entire world’s monetary system no longer had any anchor.  The world’s currencies all became fiat paper.

From 1976 to 1980 the International Monetary fund eliminated the use of gold as a common denominator, abolished the official price of gold, and ended the obligatory use of gold between the IMF and its member countries.  Also, it sold approximately one-third (50 million ounces) of its gold holdings “following an agreement by its member countries to reduce the role of gold in the international monetary system,” says an IMF fact sheet.

For years then the IMF and others tried to phase out gold in the monetary system. The IMF even carried out several auctions of its gold to further this effort and demonstrate that gold wasn’t really important and a paper reserve currency could take its place.  That was to be the trend of the future. But the U.S. policies of excessive spending and running large deficits worked against that trend, because foreign countries resented those policies having adverse effects on their own economic interests.  Indeed, the founding of the European Union—with its own currency—was partly the result of trying to escape the domination of the dollar in European commerce because of U.S. abuse of its privileged role of the dollar in the monetary system.

Finally, in 2009 the French President Nicolas Sarkozy joined Russia, China and other emerging countries in calling for an end to the dollar’s reign as the primary international currency.  And the United Nations Conference on Trade and Development endorsed moving away from the central role of the dollar in the world monetary system.  The IMF held its last auction of gold (403 metric tons) in September 2009, and China began removing its restrictions on gold ownership by its citizens. The metal that was supposed to be phased out by fiat paper currency was now phasing out that fiat paper. This was to be the trend for the future, regardless of the Keynesian theories held by monetary policy makers in or out of government.

Deng Xiaoping was a reformer who abandoned many communist doctrines and introduced elements of the free-enterprise system into the Chinese economy.  He reformed many aspects of China’s political, social and economic life, but insisted it remain a socialist nation. He quickly opened China to trade and investment, and by the mid 1980s he had instituted reforms in agriculture and industry that made China an economic powerhouse.

China’s efficiency in manufacturing led to huge trade surpluses—and the accumulation of trillions of dollars.  Those dollars were recycled back to the U.S. by buying U.S. Treasury securities: that is, the U.S. was borrowing back the dollars, which were then used for more spending and increasing the federal debt.  The U.S. acted like this cycle could go on forever, but two factors indicate that “forever” is coming sooner than expected.  Both are related to the dollar’s preeminent status as the world’s reserve currency.

First, it was often stated that both the U.S. and foreign nations—particularly China, the largest buyer of U.S. treasuries—were “trapped” by the trading pattern: both sides were benefiting and would be hurt by changing the relationship.  Importing cheap manufactured goods was advantageous to the U.S., while China obtained export markets and an influx of dollars for jobs and economic growth.  It seemed like China could do nothing with its dollars except buy more U.S. treasury debt.  But China, increasingly worried about the long-term value of U.S. fiat money, began using its dollars to buy gold and other hard assets.

Other countries, particularly in Asia, began buying increasing quantities of gold, too.  Every year India buys four times as much gold as all of North America. China has been encouraging its people to buy gold under its policy of “storing wealth with the people.” It even runs television ads urging them to buy.  The Shanghai Gold Exchange leads the world in delivery of physical gold.

Figure 3

When there have been occasional large price declines that scared American and European investors into selling gold, much of that gold, particularly from ETFs, went to Switzerland—which has four of the largest gold refineries in the world—where bars and coins were recast into smaller sizes for export to Hong Kong, which services demand from China, Thailand, Taiwan and other Asian countries. There has been a massive transfer of gold from the West to the Far East.  Central banks, which not many years ago were selling their gold, have been buying it in increasing quantities.  In 2010 they bought 77 metric tons; in 2015 they bought 477.2 metric tons.  Overall, global demand in the first quarter 2016 reached 1,290 metric tons, a 21 percent increase year-on-year, making it the second largest quarter on record.

Second, in 1973 the U.S. offered to sell Saudi Arabia, then the world’s leading oil exporter, weapons and provide military protection to the ruling family and the government.  All the U.S. asked in return was that Saudi Arabia’s oil be sold only for dollars and that surplus revenue available for investment by the Saudis from oil sales, after deducting for the needs of government, would be invested in U.S. Treasury securities.  Such a deal!  By 1975 all of OPEC (Organization of Petroleum Exporting Countries) members agreed to the same deal.

Since every country in the world was either buying or selling oil, they were all dealing in dollars because oil was priced in dollars.  These “petrodollars” gave support to the American currency, but that is all but gone.  As a result of fracking, horizontal drilling, deep-water drilling, and the discovery of new oil fields all over the world, neither Saudi Arabia, nor the United States nor any other nation can set the price of oil irrespective of what is happening in the industry all over the globe. Japan is buying oil from Iran priced in Japanese yen. India buys oil from Iran in rupees.  Russia agreed to the sale of $400 billion of natural gas to China over the next 30 years with the gas priced in Chinese yuan, not dollars.  China also has agreements with at least 22 other countries for bilateral trade agreements in currencies other than the dollar.  The BRICs (the large developing nations of Brazil, Russia, India and China) have agreed to trade in each others currencies rather than using the dollar as an intermediary. Australia, South Korea, Turkey and Kazakhstan have agreed to conduct trade in currency swaps of their own respective currencies. Our longtime ally Germany has agreed to trade with China in yuan and euros.

Meanwhile, what has happened to those oil revenues the oil-producing countries were recycling back to the U.S. by purchasing U.S treasury securities?  Since dollars are no longer needed to buy oil, and since the treasuries pay extremely low interest, central banks have been dumping them at the fastest pace of a U.S. debt sell-off since at least 1978.  Sales hit a record $57 billion in January 2016.  In March all central banks sold net $17 billion in U.S. Treasury bonds with China, Russia and Brazil each selling at least $1 billion.  The following chart shows how central banks have been dumping U.S. treasuries.  Please note that the chart does NOT indicate less severe selling in 2016 than the previous year because the 2016 bar is incomplete; it represents only the first four months of the year. If the trend continues for the rest of 2016, the sell-off will be much larger than in 2015.

Figure 4

If central banks continue dumping U.S. treasuries, the U.S. will need to monetize some of the debt to fill the gap between the treasuries it offers and what other countries are willing to buy.  In this monetizing process, government finances its spending by its central bank buying and holding debt, which increases the money supply.  This essentially “turns the debt into money This does not happen when gold—not debt—is money.

When the Fed buys bonds for its portfolio, it purchases them from a bank with an account at the Fed and pays for them by simply creating a credit on that bank’s Fed account.  Kevin Hassett, a former senior economist at the Fed, notes “with money and gold connected, [this process] was simply not an option.”  The U.S. was on the gold standard when the Fed was created.

“The Constitution never had a balanced-budget amendment,” wrote Lewis Lehrman and John D. Mueller, “because the constitutional metallic standard was a perfectly written balanced budget amendment.”  Now we have an unconstitutional agency, the Fed, creating unconstitutional money, fiat paper dollars.  Our Constitution grants no authority for either a central bank or paper money, and we need not only a balanced budget amendment but amendments that abolish the Fed and restore gold convertibility to our currency.

Those amendments, and others, might be pursued by states that have passed or favor a multiple-amendment proposal for a convention.  For states and organizations pursuing single-subject amendments, I would hope they might see my suggestions worthy of their support and not in conflict with their chosen objective but perhaps helpful to it.  Hopefully, then, they might pass a resolution adding their approval, though perhaps this would not occur before 34 states approve their chosen amendment.  It may be, too, that as an Article V convention gains popularity, the number of participating states will substantially exceed the required 34, meaning additional states might compensate for some states remaining confined to single-subject amendments and thus enable 34 states for new amendments.

The need for various amendments has never been more dire as the course of our government has brought us to the edge of a monetary disaster with worse consequence for Americans than the recent Great Recession.  Some of my proposed amendments are similar to those proposed by others, but in my book I offer some I don’t think anyone else has proposed.  Some may seem unlikely at this point, but as economic conditions in this country unravel, they may be viewed in a more favorable light. In any case, they are steps America should take, whether now or later.

I shall discuss other of my proposed amendments in future postings of this series on this blog.

[First published at American Liberty.]

Categories: On the Blog

Liberals, Your Shibboleth is Showing

June 17, 2016, 4:16 PM

Radical Islamic terrorism raised its ugly head again this weekend when 49 individuals were killed in Orlando, Florida, by a gunman’s rampage that represents the worst mass shooting in U.S. history. According to a Rasmussen Report, most Americans saw the horror in Orlando coming nearly three months ago.

What if the gunman would have had a pint of gasoline?  Instead of killing 49 people out of 300, he could have killed them all.  There was one exit, which would have been quickly blocked in the resulting stampede. Such a situation is not without precedent. 87 people were killed in a single exit social club by a disgruntled customer at the Bronx Happy Land social club fire in 1990. 

Listening to various talking heads on Fox News (and others) regarding the atrocity committed in Orlando, FL on Sunday morning, June 12, it took a surprisingly short time to discern the political background of the speakers. Democrats invariably returned to the themes of LGBT hatred and “gun control,” disregarding all other aspects of the incident. It would save a lot of time if there were a more concise way to reveal their outlook on events.

A shibboleth is an example of a linguistic password: used to identify another person as a member, or a non-member, of a particular group.

Shibboleth refers to a story in the Old Testament, the Book of Judges. Two Semitic tribes, the Ephraimites and the Gileadites, have a great battle. The Gileadites defeat the Ephraimites, and set up a blockade across the Jordan River to catch the fleeing Ephraimites who were trying to get back to their territory. The sentries asked each person who wanted to cross the river to say the word shibboleth. The Ephraimites, who had no sh sound in their language, pronounced the word with an s and were thereby unmasked as the enemy and slaughtered.

As applied to the talking heads on television concerning Orlando’s shooting, the shibboleth would be “Islamic Terrorism.” That term has yet to cross the lips of President Obama, his heir-apparent, Hillary, nor any of their acolytes. President Obama, in his televised speech to the nation, called the gay jihad mass murder an “act of hate” and an “act of terror”, carefully avoiding the more concise term. This notwithstanding the fact that the shooter, Omar Mateen, screamed “Allahu Akbar!” during the shooting and his 911 call pledging allegiance to ISIS.  This was ignored by Barack Obama as he went after guns.

If the so-called “experts” can’t or won’t pronounce that phrase, they should be instantly dismissed as having nothing to contribute. It would be educational to ask Obama, in public, what the letters in “ISIS” (or “ISIL”, which includes the state of Israel) stand for, and watch him stand tongue-tied or walk off the stage in disgust.

The Pulse Club atrocity was not a tragedy. A puppy falling into a drainpipe is a tragedy. The happening was deliberate and cruel to the extreme, having nothing to do about the availability of guns.  It is about:

  • A target of opportunity with many potential victims
  • A soft target, unlikely to present an armed defense
  • All exits and entrances except one were chained and locked.
  • A target which would get the immediate attention of the Administration, since it involved the LGBT community
  • Easily and widely publicized, to the benefit of Islamic Terrorists everywhere

There were no “red flags” raised when the shooter purchased two guns shortly before the assault. The FBI admits they had questioned Omar Mateen twice in the last three years, but purged their records of those encounters out of political correctness, mandated by Obama and the DOJ. The same policy allowed Ft. Hood, Boston Marathon, the North Charleston church and San Bernardino to develop unnoticed.

The “Terror Watch List” should not be a prohibition against exercising a constitutional right since it derives from a faceless bureaucratic decision, but it could sound a wake-up call to Homeland Security. Not all smoke means a fire, but it’s a pretty good idea when to start looking. If the President were to get his way and establish a new prohibited class, it would not be long before everyone who criticized the administration would find themselves on the list.

Although long guns figured prominently in San Bernardino, CA and Aurora, CO, long guns of any sort account for only 1% of homicides. Most are committed with hand guns of various sorts, and 10 percent using hands, fists and feet. In fact, Obama and Hillary don’t want guns of any sort in the hands of ordinary citizens. They decry so-called “assault rifles” simply for starters as low-hanging fruit, despite their enormous popularity. Real military “assault” rifles are fully automatic, and only a handful are in the possession of civilians. By “automatic”, progressives mean “semi-automatic”, which require a separate trigger pull for each round. Semi-automatic firearms, long or short, constitute over 85% of all civilian firearms. Progressives in New York and California include pump and lever action guns in the “assault” category. Where does it end? 

As in the great Australian confiscation of guns, John Wayne would twirl his ubiquitous Winchester 1902 by the lever and say “Let’s dance!” or something like that. 

Australia’s 1996 gun confiscation didn’t work – and it wouldn’t work in America.

It’s time we started looking for solutions, not just a way to transfer blame to others as a way to promote a failed Liberal ideology.

[Originally published at Illinois Review]

Categories: On the Blog

In The Tank Podcast (ep43): Rhode Island Center, Natural Gas, and Unconditional Basic Income

June 17, 2016, 3:37 PM

John and Donny continue their exploration of think tanks in episode #43 of the In The Tank Podcast. This weekly podcast features (as always) interviews, debates, and roundtable discussions that explore the work of think tanks across the country. The show is available for download as part of the Heartland Daily Podcast every Friday. Today’s podcast features work from the Rhode Island Center for Freedom and Prosperity, the John Locke Foundation, and the American Enterprise Institute.

Better Know a Think Tank

In today’s Better Know a Think Tank Segment, Donny and John welcome to the podcast Mike Stenhouse, CEO of the Rhode Island Center for Freedom and Prosperity. Stenhouse joins the podcast to talk about his organization as well several topics they have been working on. Donny, John, and Mike talk about the  “The Jobs & Opportunity Index” – a topic discussed in a past episode. Mike explains how this economic measure is far more telling than the commonly used unemployment rate. Mike also discusses a few other topics relating to Rhode Island including Renewable Portfolio Mandates.

Featured Work of the Week

Featured this week is a policy brief from the John Locke Foundation titled “Natural Gas – Low-Cost Energy Source That Curbs Emissions and Land Impacts.” This policy brief gives a great look at this now-abundant energy source, giving a background of natural gas, and comparing it to wind and solar. As the policy brief shows, natural gas is responsible for a massive reduction in carbon dioxide emissions.

In the World of Think Tankery

In this week’s “think tankery” segment, Donny and John talk about welfare. Recently Paul Ryan and the rest of the House Republicans released a roadmap showing how to better structure the welfare system to ensure money is going to the people who need it most. The plan outlines more than a dozen recommendations that will help reduce redundancies, waste, fraud, and abuse.

Adding to this conversation is work by Charles Murray from the American Enterprise Institute. A recent press release, and article published in the Wall Street Journal titled “A guaranteed income for every American.” The premise consists of an unconditional basic income of roughly $13,000 to every citizen over the age of 21. The hope is that this plan would replace the complex web of roughly 120 different welfare programs and their associated bureaucracies. While the plan in broad and drastic, Donny and John talk about what they like about the plan and what makes them skeptical of the plan.


  • Heartland Institute – (Monday, June 20) Fueling Freedom: Exposing the Mad War on Energy w/ Stephen Moore. @ The Union League Club in Chicago, Illinois
  • Pioneer Institute – (Monday, June 20) 2016 Better Government Competition Awards Gala @ the Hyattt Regency in Boston, Massachusetts
  • The Heritage Foundation – (Thursday, June 23) The Intimidation Game: How the Left is Silencing Free Speech @ The Heritage Foundation in Washington D.C.

I hope you’ll listen in, subscribe, and leave a review for our podcast on iTunes. We welcome your feedback in our new show’s inbox at or follow us on twitter @InTheTankPod.

[Please subscribe to the Heartland Daily Podcast for free at this link.]

Categories: On the Blog

FCC’s Competition Policy Blind Spot for Dominant “Edge” Incumbents – GAFA

June 17, 2016, 1:56 PM

The evidence increasingly proves that Google, Apple, Facebook, and Amazon, companies collectively known as “GAFA,” are the dominant consumer-technology, “edge” platforms/incumbents in their respective communication sector markets of: information, smartphones, social media, and ecommerce.

The evidence below shows Google, Apple, Facebook, and Amazon to clearly be the emerging dominant communications incumbents of the 21st century communications sector ecosystem and that an apparent FCC assumption that “edge” companies cannot be a competition problem is both naïve and erroneous.

Despite the FCC’s “competition, competition, competition” policy mantra, this GAFA dominance reality has not kept the FCC from slavishly favoring the dominant GAFAincumbents, as “insurgent” upstarts deserving of special FCC treatment and protection, in all of the FCC’s current major communications policy revamps it is making without Congress: i.e. its Title II Open Internet Order; its Title II ISP-only privacy rules; its AllVid set-top box rules; and its implicit wireless policy of favoring spectrum sharing and unlicensed spectrum over spectrum auctions and licensing.

Consider this Top Ten List of evidence that the dominant GAFA incumbents are not needy “insurgents” deserving of FCC protection from competition or de facto regulatory subsidies worth many tens of billions of dollars.

  1. In 2011, Google Chairman Eric Schmidt was the first to publicly identify the four companies dominating consumer technology platforms as: Google, Apple, Facebook and Amazon, interestingly calling them the “Gang of Four.”
  2. Then the EU coined the term “Gafa” to describe the same four companies that the EU viewed most dominant: Google, Apple, Facebook, and Amazon.
  3. Note the top-visited sites in the U.S. as ranked by Alexa (owned by Amazon) are: #1 Google; #2 Facebook; #3 YouTube (Google); and #4 Amazon. Apple is #37.
  4. Note that by market capitalization these four companies are four of the top seven most valuable companies in the U.S. with: #1 Apple worth $541b; #2 Alphabet-Google worth $503b; #6 Amazon worth $339b; and #7 Facebook worth $334b.
  5. Note that of the top 15 smartphone apps per Comscore, 11 of the top 15 are from Facebook, Google, Amazon and Apple, with: Facebook #1  Google #3, #4, #5, #6, #7, & #14; Amazon #10; and Apple #11 & #13.
  6. Note that Google and Facebook are two of the world’s top five largest media companiesper Zenith Optimedia’s annual ranking, with Google #1 and Facebook # 5.
  7. Note that recently, the inventor of the World Wide Web, Sir Tim Berners-Lee warnedthe NYT that: “The web is already decentralized. The problem is the dominance of one search engine, one big social network, one Twitter for microblogging. We don’t have a technology problem, we have a social problem.”
  8. Note that also recently, a top theme to emerge from Mary Meeker’s influential annual Internet Trends report (p. 44), was that “Google + Facebook = 76% (& rising) share of Internet Advertising Growth, USA.”  (If one straight-lined that relative growth, then Google and Facebook would command ~80% growth share in 2016, and ~83% growth share in 2017.) Ms. Meeker’s analysis also shows that Google alone commanded ~50% of the U.S. Internet advertising business in 2015.
  9. Note that earlier this year, Om Malik’s candid analysis in his influential New Yorker op-ed entitled: “In Silicon Valley Now, its Almost Always Winner Takes All,” concluded “most competition in Silicon Valley now heads toward there being one monopolistic winner.” He also said: “Google is a winner that has taken it all.”  “Facebook has created a near monopoly in social networking.” “Amazon has run away with online retail, leaving everyone else to fight for scraps.” “Google’s Android and Apple’s iOS are the two dominant players.” “There are two companies that dominate the public cloud – Amazon, followed by Microsoft’s Azure.”
  10. The New York Times technology columnist, Farhad Manjoo, strongly agrees with Mr. Malik’s overall competitive assessment in his column, “Tech’s Frightful Five Will Dominate Digital Life for Forseeable Future,” in which he concludes the five “inescapable” technology platforms are Google, Apple, Facebook, Amazon and Microsoft, which represent “the basic building blocks on which every other business, even would be competitors, depend.

In sum, the evidence is overwhelming that Google, Apple, Facebook and Amazon are dominant 21st century incumbents in their respective communications sector markets of information, smartphones, social media and ecommerce.

To the extent that the FCC is claiming lack of competition as its rationale and justification for vastly more FCC regulation, the FCC can’t be consistent or credible if the FCC ignores the proverbial elephant in the FCC’s room — that Google, Apple, Facebook, and Amazon are vastly more dominant and have more potential for anticompetitive behavior than any traditionally regulated communications company.

Simply, if the FCC is sincere about wanting to “modernize” communications policy for the 21stcentury, it needs a more modern and accurate assessment of 21st century competition realities throughout the ever-expanding 21st century communications sector.

[Originally published at the Precursor Blog] 

Categories: On the Blog

How to Utterly Destroy a Place – Socialism in Venezuela

June 17, 2016, 12:58 PM

During WWII, the U.S. dropped conventional explosives, fire bombs and atomic bombs on Japan. The U.S. and the U.K. together conducted massive bombing attacks on Germany, destroying cities, factories, oil refineries and transportation infrastructure. Yet, soon after the war, both Japan and the western portion of Germany rebounded. They quickly joined the most advanced economies of the world in terms of standard of living. In the case of western Germany, their turn-around was called a miracle. Yet, today, Venezuela joins Detroit, Puerto Rico and Greece, a basketcase, its government bankrupt, and its economy collapsed. Not being sustained by transfer payments from a larger entity, the people of Venezuela, weakened by years of deprivation, now face very bleak prospects. The most vulnerable among them – infants, the elderly and the sick – are dying. And, on the horizon, loom the four horsemen of the apocalypse: starvation, plague, anarchy and death. What is it that can utterly destroy a place, even more so than bombing? In one word, socialism.

In a free-market economy, people have healthy incentives to work and save, to form businesses and invest, to explore, innovate and invent, in these and other ways “to truck and barter.” The incessant desire of man to do better, whether through profit or achievement or goodness, when governed by the rule of law, leads to a progressive society. To be sure, not everyone directly benefits. Children, those enfeebled by old age or physical, mental or emotional conditions, will need help from others through family, private charity and social welfare programs. But, a free-market economy tends to induce compassion as well as the market virtue of hard work, honest-dealing, thrift and prudential management. Therefore, the description of the turn-around in Germany as a miracle was incorrect. The turn-around should have been expected. A miracle would be for a socialist economy to work.

Socialist Venezuela did not have a miracle. It simply proceeded downhill, like water. The workings of the laws of economics are merely slower and more complicated than those of the law of gravity. The specifics of this country’s experiment in socialism aren’t unique, but deserve some mention. Venezuela used to have a vibrant economy in terms of food production and other industries, as well as oil production. Then, when Hugo Chavez was elected president, he famously directed a portion of the profits of oil production be used to subsidize food for the poor and neighborhood health clinics.

What is not so well known is that he used price controls to minimize the cost of providing food to the poor, and near slave-labor from Cuba to staff the health clinics. For the past several decades, Cuba has been exporting health care professionals to Venezuela and other countries, that they pay less than $100 a month, in barter-like exchanges for oil or other considerations. In the case of food, price controls made it unprofitable for farmers to grow food. Over time, less and less food was produced within the country. So, instead of being self-sufficient in food, and actually exporting certain kinds of food, Venezuela became an importer of food. This “worked” for a time, as revenue from oil sales enabled the government to import the difference between domestic consumption and domestic production. But, over time, as more and more people left the farms and joined the unemployed urban poor subsisting on give-away programs, the cost of the program grew. In the mean time, in subsequent elections, Chavez promised an expanding list of free and subsidized goods for the poor who constituted the base of his political party. Then came the collapse of oil prices, and the government could no longer import much.

For many of the people of Venezuela, life nowadays consists of searching for food, their ration coupons in hand, so to speak. This takes up so time, there actually is no time to work. Even while there is a desperate food shortage, many of the fields and pasturelands of the country lay fallow. Chavez’ successor, a bus driver named Ralph Cramden or Nicolas Madura or whatever, along with his entourage, live in the Presidential palace, scrapping by on $3 million a day. And, every time the people demand change, he says “to the moon, people, to the moon.” The rich and powerful always come out ahead. That’s one thing capitalism and socialism have in common.

Categories: On the Blog

How Good Is John Goodman’s “World’s Greatest Health Care Plan?”

June 17, 2016, 10:34 AM

An approach to health care reform that has no new taxes, no new spending, and unprecedented deregulation, according to plan co-architect John Goodman? One can almost hear the echoes of finally reverberating off the Capitol dome.

Or so Goodman probably hopes. A senior fellow at the Independent Institute and policy advisor at The Heartland Institute, Goodman helped craft legislation, currently being considered by congressional Republicans, to repeal and replace Obamacare. It’s called “The World’s Greatest Healthcare Plan Act of 2016.”

Health Care News has covered Goodman’s plan alongside other Republican plans, most recently in the forthcoming July issue print issue (already accessible online at

Republican leaders in the US House of Representatives will release a conference-wide plan to repeal and replace Obamacare by mid-July, Majority Leader Kevin McCarthy’s (R-CA) office told Health Care News days after Rep. Pete Sessions (R-TX) and Sen. Bill Cassidy (R-LA) introduced House Resolution 5284, titled the World’s Greatest Healthcare Plan Act of 2016.

HR 5284, introduced on May 19, would establish a universal health insurance tax credit (UHITC) and other free-market health care policy reforms. Sessions said he spent the past 18 months discussing ways to reform the Affordable Care Act (ACA) with “Dr. John Goodman, doctors and healthcare providers, and hundreds of business owners in North Texas and across the country,” according to a May 19 press release.

Health Care News reached out to the House majority leader’s office directly for comment:

Mike Long, communications director for House Majority Leader Kevin McCarthy, says Republican leaders intend to publish a plan this summer crafted by the committee chairmen leading the Health Care Reform Task Force.

“The chairmen’s task force is hard at work on our ‘replace’ bill with the goal of releasing it by mid-July,” Long said.

The Health Care Reform Task Force comprises four House committee chairmen: Representatives Tom Price (R-GA), John Kline (R-MN), Fred Upton (R-MI), and Kevin Brady (R-TX). The task force’s goal is to “repeal and replace Obamacare with a patient-centered system that gives patients more choice and control, increases quality, and reduces costs,” according to a February 4 press release from House Speaker Paul Ryan’s office. Ryan has asked the committee to release its plan before the Republican presidential convention in Cleveland on July 18.

Tax credits and deductions are common to Republican plans, but not all are created equal. Here’s how they differ among the proposed plans:

The Sessions-Cassidy legislation would provide a universal health insurance tax credit (UHITC) of $2,500 for individuals and $5,000 for married couples filing jointly, plus $1,500 per qualifying dependent.

A plan Price released in May 2015 would award tax credits for health insurance based on the ages of taxpayers and their dependents, ranging from $900 per year for individuals under age 18 to $3,000 for individuals aged 50 and older, according to the text of the Empowering Patients First Act of 2015.

Instead of a credit, the Republican Study Committee (RSC) has recommended a standard federal income tax deduction for health insurance of $7,500 per individual and $20,500 per family, as proposed in the American Health Care Reform Act of 2015 (AHCRA), sponsored by Rep. David Roe (R-TN) and 98 cosponsors.

All three plans also promote the use of health savings accounts and include provisions for giving states block grants to fund and reform their Medicaid programs according to their particular needs.

We asked RSC Communications Director Caitlin Carroll about the RSC plan, AHCRA. She said it will (at least!) help shape the Health Care Reform Task Force’s plan.

“The Republican Study Committee’s American Health Care Reform Act was introduced with more cosponsors than any other Republican health care plan last year,” Carroll said. “We have submitted many of the ideas from AHCRA to Speaker Ryan’s task force, and we believe our proposal will help the House develop a robust health care reform alternative. … Any plan that dismantles Obamacare and moves toward patient-centered reforms should be considered as part of the House’s ongoing discussion about what a conservative health care reform plan should look like.”

Peter Ferrara, author of Power to the People: The New Road to Freedom and Prosperity for the Poor, Seniors, and Those Most in Need of the World’s Best Health Care and Heartland Institute senior fellow, likes the Goodman plan.

He says in contrast to an unlimited deduction, which “encourages you to buy to buy as much health insurance as you can possibly consume,” the UHITC would incentivize patients to shop for the best value and motivate insurers to provide it.

“The government is paying for the first $2,500 of the bill,” Ferrara said. “After that, it’s up to you to pay for it. You decide how much you want to devote to health insurance and how much you want to take in wages.”


Criticism that $2,500 won’t cover 100 percent of a person’s health insurance plan misses the point of living in a free society, Ferrara says.

“The government should not be responsible for buying health insurance for everybody,” Ferrara said. “That is an earmark of an unfree society where people do not have control over choice, government has control over everything, the government tells you what your money’s going to pay for, and the government tells you what you get.”

Read the full Health Care News article and listen to our podcast with Peter Ferrara on John Goodman’s World’s Greatest Healthcare Plan, the Sessions-Cassidy bill to repeal and replace Obamacare.

Here’s John Goodman in Forbes on “The World’s Greatest Healthcare Plan.”

Here’s more info on the plan at the Goodman Institute for Public Policy Research.

Image via Thinkstock

Categories: On the Blog

Heartland Daily Podcast – Dr. Mike Koriwchak: CMS’s Arbitrary Doctor Rating System

June 16, 2016, 1:13 PM

In today’s Health Care News podcast, returning guest Dr. Mike Koriwchak, vice president of Docs4PatientCare Foundation and co-host of The Doctor’s Lounge Radio Show, urged listeners to take advantage of the comment period, open through June 27, 2016 at 11:59 PM ET, for a new rule proposed for implementing the Medicare Access and CHIP Reauthorization Act (MACRA) and the Merit-Based Incentive Payment System (MIPS).

Koriwchak tells Health Care News Managing Editor Michael Hamilton how the rule, proposed by the Centers for Medicare and Medicaid Services (CMS) would arbitrarily rate doctors based on, how well they use electronic medical records (which the government will improperly assess), how doctors report on hundreds of quality measures (which don’t accurately gauge quality).

The proposed rule would also give CMS legal authority to access patients’ medical records at any time. You can easily leave a comment expressing your concerns by clicking here–now, while CMS is listening!

Koriwchak summarizes his interview with CMS Acting Administrator Andy Slavitt, who joined him on The Doctor’s Lounge for a 37-minute conversation on June 9.

[Please subscribe to the Heartland Daily Podcast for free at this link.]

[Please subscribe to the Health Care News Podcast for free at this link.]

Categories: On the Blog

Research Shows School Choice Benefits More Than Just Conservatives

June 16, 2016, 1:00 AM

Two recently released studies, both analyzing research from impartial sources, have come to the same conclusion education reformers have been pronouncing for years: School choice benefits not only children but society as a whole.

It’s not surprising the Friedman Foundation for Education Choice (FFEC)—an organization whose mission it is to promote “school choice as the most effective and equitable way to improve the quality of K–12 education in America”—would release a study showing school choice is beneficial, but the data used by FFEC in its fourth edition of A Win-Win Solution: The Empirical Evidence on School Choice come from a variety sources, including many that are not tied to or in favor of the school choice movement.

The FFEC study’s author, Greg Forster, writes that he used all publicly available, “empirical, quantitative studies of U.S. private school choice programs” in his analysis. Forster’s report, released in May, includes a staggering 100 studies.

Fourteen of 18 studies examining how school choice affects the academic outcomes of participants reveal education choice improves student outcomes. Thirty-one of the 33 studies examining the effect choice has on academic outcomes at public schools found a positive impact on public school students. More studies in the report conclude overwhelmingly school choice saves taxpayers money, breaks down ethnic segregation, and improves democracy by giving parents freedom.

FFEC’s findings are further substantiated by a recent study by the University of Arkansas’ Department of Education Reform, which was also released in May. It analyzed “19 ‘gold standard’ experimental evaluations of the test-score effects of private school choice programs around the world.” The University of Arkansas study found, on average, private school choice increases the reading and math scores of those who take advantage of the programs. Patrick J. Wolf, one of the study’s authors, called the findings “highly significant, educationally meaningful achievement gains of several months of additional learning from school choice.”

None of this should come as a surprise. The facts speak for themselves, and so do the parents who continue to exercise their freedom to choose in states allowing some choice in government-subsidized education. reports charter schools enroll nearly three million children across the country. More than 100,000 students are using private school vouchers, and 190,000 others are using tax-credit scholarships to help pay tuition.

Most of these programs are aimed at children with special needs or those otherwise trapped in the worst-performing public schools, the groups of children the public school system fails most miserably. Expanding such programs to cover more children will spread those benefits to every part of a community, with the ultimate goal being to make comprehensive choice available to all children by having the money follow the child to the education mode or modes of choice. This would incentivize all schools to compete by offering a better education—the product—to bring in as many students—the customers—as possible.

The expansion of school choice programs, along with an increasing amount of evidence pointing to their success, is iron-clad evidence they are working effectively. Unfortunately, powerful teachers unions’ ongoing attacks against school choice are standing in the way of progress, as politicians fear their financial and political clout. If the creation of charter schools, increased access to private schools, and homeschooling are bad for children, why do unions feel so threatened by them? Given a choice, parents will naturally avoid bad providers, and they know that means trouble for their failing model.

Ah, yes—maybe that’s why the unions and public school administrators oppose choice.

[Originally published at Townhall] 

Categories: On the Blog

Restoring the Constitution would Repay a Debt to Veterans

June 16, 2016, 1:00 AM

In addition to commemorating the 651,031 Americans who lost their lives in wars, Memorial Day and other soon-to-be-celebrated patriotic commemorations — such as Flag Day and Independence Day — should inspire elected officials to act as soon as possible to hold an Article V convention to restore essential political safeguards that helped to make this nation great in the past.

Mismanagement and waste in government agencies, exemplified by the disastrous conditions at hospitals run by the U.S. Department of Veterans Affairs (VA), show the need for serious reforms at the national level, changes that can’t be made through normal legislative processes.

The airmen, Marines, and soldiers who lost their lives in our nation’s armed conflicts would be ashamed of the current state of politics in America. Our national government faces an annual budget deficit of $511 billion and a national debt of $19.2 trillion. Although the Republican-controlled Congress has been working on a balanced budget amendment, a two-thirds vote in both houses of Congress is necessary to approve a constitutional amendment, and the lack of Democrat co-sponsorship makes it all but impossible to achieve the needed reform.

This should not be a partisan issue. Americans of all political stripes are acknowledging their disgust with the current political gridlock. According to a poll released on May 19 by CBS News and The New York Times, 77 percent of people say they disapprove of the job performance of Congress.

The Department of Veterans Affairs alone has a budget of $163 billion for the 2016 fiscal year, a 10 percent increase over the 2015 fiscal year. However, only 31 percent of the $71.4 billion categorized as discretionary spending is going towards veterans’ care and only $4.9 billion for mental health care of Afghanistan and Iraqi war veterans. The 2016 budget shows the VA is not setting sensible priorities for our surviving veterans, many of whom will need years of care for the wounds they have suffered on the battlefield. A balanced budget amendment would force agencies to spend more wisely. In the VA’s case, the priority should be on veterans’ care, not financing a vast and grossly inept army of overpaid government bureaucrats.

The Obama administration’s Department of Veterans Affairs has already established a sad legacy of abusing the taxpayers’ trust and operating a culture of mismanagement. The U.S. Senate Committee on Armed Services hearings in 2014 revealed VA officials had covered up long wait times to make their records look better. The problem was widespread in cities such as Phoenix, Arizona, where veterans waited up to a year for a doctor and where 40 veterans died while waiting for lifesaving care.

Congress allocated $700 million for fiscal year 2016 to remedy the problem, but no amount of spending can fix the problem if government agencies are not forced to obey fiscal constraints that require them to maximize efficiency and effectiveness. That is why forcing government agencies such as the VA to live within their fiscal limits ensures better government services.

State governments across the nation that are fed up with mismanagement of the national government are now moving forward to call for an Article V convention in an effort to create a balanced budget amendment requirement. Article V of the U.S. Constitution provides two ways for proposal of amendments: initiation by Congress or by the states. Thus far in American history, the states have never managed to propose an amendment, but that may be about to change.

At present, 28 states have enacted applications calling for a balanced budget amendment, and seven states have enacted applications calling for additional amendments to rein in the national government. One state, Alaska, has already enacted an application to give states the authority to override unconstitutional laws and regulations from the national government. State legislators are doing the job the Congress is not doing.

Six more states are needed to require Congress to call a convention. State legislators in Arizona, Idaho, Kentucky, Montana, South Carolina, Washington, Wisconsin, and Wyoming can ensure veterans and all citizens have a national government that is fiscally sound. The Article V process is a part of our constitution and creates no danger of radical change. It is designed to enable moderate changes to our Constitution to prevent disastrous policies from undermining the legitimacy and public acceptance of the national government. We’re dangerously close to such a situation, and we need moderate change now to avert a government implosion in the near future.

The amendments the Article V movement is proposing are our best hope to preserve the liberties and constitutional order for which our veterans have devoted — and, in many cases, sacrificed — their lives.

[Originally published at the Washington Times]

Categories: On the Blog

American Docs Need to Learn From Royal College of Physicians

June 15, 2016, 4:07 PM

Author’s Note: On June 2nd, the New England Journal of Medicine published a case vignette, “A man considering the use of E-cigarettes.”  the following piece, which was written earlier, provides valuable guidance to physicians seeking to answer the NEJM’s question.

England’s Royal College of Physicians (RCP) recommended on April 28th that doctors “promote the use of e-cigarettes, NRT and other non-tobacco nicotine products as widely as possible as a substitute for smoking in the UK.”

This comes less than a year after a review of the scientific literature by Public Health England found that e-cigarettes are 95 percent less harmful than smoking.

Yet in the U.S., new FDA regulations will obliterate chances of smokers using e-cigarettes to quit. At the same time, leading public health groups including the American Heart Association, the American Lung Association and the American Cancer Society are actively lobbying against e-cigarettes and distorting the science about both the safety of e-cigarettes and how they can help cigarette smokers dramatically reduce their risk, as the RCP put it by providing, “nicotine without the smoke.”

It’s no wonder that American doctors are doing a poor job helping their addicted patients make better decisions about how to get nicotine if they can’t or aren’t ready to get off of it completely.  The thorough RCP report provides a stark contrast to the (at best) directionless guidance Americans receive from their doctors. This is a devastating dereliction of the medical profession’s core responsibility of providing scientifically valid life-saving information to their patients who could use such advice to make informed choices about how to reduce their risk.

A conversation I recently had with a successful ophthalmologist illustrates the problem, but also suggest an opportunity to lay out a vision for how to provide better care for patients .

In a social setting, I asked the ophthalmologist how he counsels his patients about  smoking, which, among other things, increases risk for cataracts and age-related macular degeneration. He told me he simply advises them to quit, because “the tar and the nicotine” are harmful. He’s correct about the tar, a product of combustion, but the nicotine is not the culprit for smoking related eye-disease.  I gently suggested that his patients have a right to more accurate information so they could make more fully informed decisions about their behavior.

This scenario suggests an urgent need for the American Board of Ophthalmology, the organization responsible for keeping their members current on science, to follow the RCP’s lead. First, it needs to better educate ophthalmologists about how smoking does in fact damage eye-health, then it should provide standardized advice to provide patients based on the latest science, including the fact that e-cigarettes are 95 percent less harmful than smoking and can help smokers quit, thus reducing their risk.

Similarly, other physician speciality groups must immediately do a better job of educating their members and standardizing harm reduction advice. There’s barely a body part or function which isn’t compromised by smoking. In each practice area, doctors need to do a better job of educating their patients about the role e-cigarettes can play in helping them quit smoking. Physicians groups in each specialty area are uniquely positioned to serve their members when it comes to providing harm reduction advice.

Consider the field of mental health, where patients smoke at a much higher rate than the general population. Mental health providers must come clean with their patients and end the taboo on acknowledging the fact that nicotine does in fact provide benefits. There’s no debate that nicotine is a stimulant, and that those who use it enjoy a range of feelings, from relaxation, sharpness, alertness, and a sense of calm.

For many, especially those with mental health challenges, those benefits help them get through the day. And the nicotine isn’t making them sick, it’s the delivery system that’s the problem. The compassionate and science-based approach is to help patients understand why they smoke, and to discuss options, including risks and benefits of alternatives to smoking. Advising patients to use the nicotine gum or patch together with counseling is appropriate, even though for many, the delivery mechanism is ineffective because it doesn’t even closely mimic smoking’s nicotine delivery.  E-cigarettes do.

From medical schools, to credentialing organizations, the entire American medical establishment needs to kick the habit of providing politically correct quit-smoking advice, and replace it with up-to-date medically validated harm reduction advice which includes e-cigarettes. They should do so as if their patients’ lives depend on it, as the Royal College of Physicians has now made clear it does.

 Jeff Stier is a Senior Fellow at the National Center for Public Policy Research in Washington, D.C., and heads its Risk Analysis Division.

[Orginally published at Pundicity]

Categories: On the Blog

Study Reports Health Benefits from E-cigarette Use

June 15, 2016, 10:32 AM

The British Medical Journal published a study in June that examined the “effectiveness and safety of electronic cigarettes at 24 months.” Measuring the “sustained abstinence from tobacco cigarettes”, the study found a nearly 40% disparity between the smokers that used e-cigarettes to combat traditional tobacco cigarette smoking, and those who tried to quit without the use of e-cigarettes and other smoking cessation aids.

61 percent of the 229 e-cigarette respondents reported remaining “abstinent from tobacco,” while only 23.1 percent of the 480 tobacco smokers reported abstinence. The report is providing needed evidence in favor of the general perception of e-cigarettes and vaporized nicotine products (VNPs) as effective tobacco-harm-reduction products. According to the study’s authors, “[The study,] to date, is the only study to directly compare smokers of tobacco cigarettes only with users of e-cigarettes only.”

Speaking on behalf of the findings, the authors of the study concluded “e-cigarette use alone might support tobacco quitters remaining abstinent from tobacco.” Dual usage – using traditional tobacco cigarettes as well as e-cigarettes – did not have the same effect and “does not improve the likelihood of quitting tobacco … but may be helpful to reduce tobacco consumption.”

Numerous studies have produced evidence that legitimizes the value of e-cigarettes and VNPs as a smoking cessation tool. In 2015, Public Health England published a study that found e-cigarettes and VNPs are “95 percent less harmful than cigarettes and should be promoted as a tobacco-cessation method.” In April 2016, the Tobacco Advisory Group of the Royal College of Physicians published Nicotine without Smoke: Tobacco Harm Reduction which found a “relatively high quit rate” for users of tobacco cigarettes and that “long-term health risks associated with smoking … are unlikely to exceed 5% of those associated with smoke tobacco products.”

Despite these findings, and the lack of substantial evidence, the Food and Drug Administration (FDA) recently ordered e-cigarettes and VNPs to be classified and regulated in the same fashion as tobacco products. The new ruling, which takes effect in August, requires any e-cigarette and VNP product that was introduced to the market after 2007 to apply for a “premarket tobacco application.”

The process is expected to be costly and could—as Jeff Stier, a senior fellow at the National Center for Public Policy Research, says—limit health benefits by “the very need to have new products that are less harmful be held to a higher standard, than … the cigarette,” which Stier says “doesn’t make sense from a public health perspective.

FDA should reconsider its position to burden the e-cigarette industry with unnecessary and costly regulations. Instead, it should acknowledge the wealth of evidence showing the benefits of these products and find ways to promote them as part of an effective tobacco-harm-reduction strategy.

Categories: On the Blog

Heartland Daily Podcast – Leo Huang: Frac PAC, Educating People About Oil and Gas

June 15, 2016, 8:41 AM

Young people, perhaps more than any other age demographic, are skeptical of fracking, and the use of fossil fuels. This skepticism makes sense, because as children we were all taught that the world would soon be running out of fossil fuels, and that wind and solar provided must be pursued to provide the energy we need, and to improve the environment. However hydraulic fracturing has turned this paradigm on its head, and a need to educate the general public about the importance of the oil and gas industry has emerged.

In this edition of The Heartland Daily Podcast, Leo Huang, a student of petroleum engineering and a founding member of the Hydraulic Fracturing Public Awareness Committee (Frac PAC) and Heartland Institute Research Fellow Isaac Orr discuss what Frac PAC is, and how they are working to educate people about the oil and gas industry and make a positive impact on the surrounding community.

[Please subscribe to the Heartland Daily Podcast for free at this link.]

Categories: On the Blog

Google Is Rigging Searches For Hillary Clinton

June 15, 2016, 1:00 AM

This is huge news – but it is hardly surprising.

Google – President Barack Obama’s biggest crony in a sea full of armadas full of legions of Obama cronies – has been cozying up to the woman Obama just endorsed to succeed him: Hillary Clinton.

And by “cozying up” – we mean warping their search results to hide Clinton’s decades of scandals and scandalous behavior.

Last year, Wired magazine warned us about the election-manipulating power of Google:

Google’s Search Algorithm Could Steal the Presidency: “‘We estimate, based on win margins in national elections around the world,’ says Robert Epstein, a psychologist at the American Institute for Behavioral Research and Technology and one of the study’s authors, ‘that Google could determine the outcome of upwards of 25 percent of all national elections.’”

So the goods on Google delivered by SourceFed and their host/writer Matt Lieberman – are devastatingly awful. As chronicled in their recently released stand-up video with visual aides. We will lean heavily on excerpted transcripts therefrom – because what they’ve done is so beautiful and terrible. Here we go:

There’s an inherent trust that when you Google something, you are seeing the actual factual answer to your query or question. Based at least in part on the results of what other people are actually searching for.

In the case of Hillary Clinton – who clinched the Democratic nomination – we know for a fact that that is not the case….SourceFed has discovered that Google has been actively altering search recommendations in favor of Hillary Clinton’s campaign.

So quietly that we were unable to see it for what it was until today (SourceFed posted their video on June 9).

When we type – “Hillary Clinton cri” – into Google, the site’s auto-complete function shows three potential searches: “Hillary Clinton crime reform,” “Hillary Clinton crisis” and “Hillary Clinton Crime Bill 1994.”

However, when you type the same term – “Hillary Clinton cri” – into Google’s competitors Bing and Yahoo, you get very different results. Focusing on whether or not Hillary Clinton has ever committed a crime.

It’s like if you put three people into a room that’s on fire – and two out of the three people yell “Fire!” And the third person yells “I’m in a room.’”

That’s…odd. The video then demonstrates that there aren’t even enough Google user searches for “Hillary Clinton crime reform” for Google to graph – using Google’s own “Trends” function. So why is that their #1 auto-complete suggestion? There are plenty of Google “Hillary Clinton crime” searches on “Trends” – but Google doesn’t offer up that auto-possibility. Hmmmm….

When you type – “Hillary Clinton ind” – into Bing or Yahoo, there are plenty of indictment-based recommendations. When you type it into Google, the top two recommendations are “Hillary Clinton Indiana” and “Hillary Clinton India.”….

When we entered them both into “Trends,” people were searching for “Hillary Clinton indictment” eight times more often than “Hillary Clinton India.”

Yet Google auto-offers us “India” – and not “indictment.”

The intention is clear: Google is burying potential searches for terms that could have hurt Hillary Clinton in the primary elections over the past several months by limiting recommendations on their site.

For comparison, we searched for negative terms that have been associated in the media with Bernie Sanders and Donald Trump on all three sites. Specifically, – “Bernie Sanders soc” – for socialist and – “Donald Trump rac” – for racist or racism. This time, Google matched the recommendations of Bing and Yahoo. No visible tampering.

Google’s bias here is undeniable.

Indeed it is. Just as it is and has been with now-President Obama – since before he was President Obama.

Obama Gets Backing of Google CEO Eric Schmidt (October 20, 2008)

Getting in on the Democrat administration ground floor is a Google-Schmidt crony-business model.

There are a stunning number of links between Google and (Clinton’s) campaign, and they all stem to one person in particular. Eric Schmidt, the Executive Chairman of Google’s parent company Alphabet, Inc. and former CEO of Google – is also a major funder of “The Groundwork.”

Which is, according to sources acquired by Wired, an investment by Schmidt to ensure that Hillary Clinton has the technological and engineering prowess to win the election….They are one of the Clinton campaign’s priciest outside contractors….

So Eric Schmidt – the former head of Google who is chairman of their parent company – funds a data analysis company that works for the Hillary campaign. Whose chief technology officer Stephanie Hannon – is a former Google executive….

(These connections) showcase a man (Schmidt) who has a clear and vested interest in how our country is run – and is actively funding one candidate to run it, while the company he advises is warping search results in her favor.  

Why does that sort of preemptive investment sound familiar?

Google’s Eric Schmidt Invests in Obama’s Big Data Brains

Because it is familiar.

So Eric Schmidt and his Google are doing their very best to rig the election for Clinton – in the hopes of delivering themselves another crony president.

So as to continue to reap for another four (or eight) years the ridiculous regulatory favoritism they have been so generously delivered these last eight.

Big Government, Big Business – and scratch-my-back cronyism on steroids between the two.

Welcome to 21st Century America.

[Originally published at RedState]

Categories: On the Blog

Heartland Daily Podcast – Lennie Jarratt: Common Core and Homeschooling

June 14, 2016, 3:41 PM

In today’s edition of the Heartland Daily Podcast, we listen in as project manager for Lennie Jarratt speaks before the Illinois Christian Home Educators Conference in Naperville, Illinois. Jarratt was there to talk about Common Core and its effects on Homeschooling.

In the presentation, Jarratt discusses how Common Core drives the curriculum, how it involves excessive testing, and how the related data collection is invasive. He explains how Common Core originated and why it should be opposed. He covers the current efforts to repeal the program and the education bureaucracies efforts to simply rename and rebrand it.

[Please subscribe to the Heartland Daily Podcast for free at this link.]

Categories: On the Blog

Heartland Daily Podcast – Adam Millsap: Ranking the Financial Health of the States

June 13, 2016, 4:23 PM

In this episode of The Heartland Institute’s weekly Budget & Tax News podcast, managing editor and research fellow Jesse Hathaway talks with Mercatus Center at George Mason University’s State and Local Policy Project scholar Adam Millsap about a new study ranking each US state’s financial health, based on factors such as short- and long-term debt, fiscal obligations, unfunded pensions and entitlement spending.

According to Millsap, long-term obligations such as taxpayer-funded pensions and healthcare benefits strain state governments’ budgets in every state. Lawmakers must consider the consequences of their decisions, and understanding how each state is performing fiscally can help policymakers do this.

In the rankings, states such as Alaska and North Dakota are doing well, not because their lawmakers are being especially responsible, but because they have such large reserves of cash on hand, making it easier to be irresponsible. These states, however, are starting to struggle, as their finances are dependent on volatile revenue sources. Comparing state governments to a class full of “C” students, Millsap explains, almost all state governments are making irresponsible fiscal decisions, but some states are being slightly less irresponsible than others. States like Alaska and North Dakota may be the best in the class, but they’re still doing poorly, in absolute terms.

[Please subscribe to the Heartland Daily Podcast for free at this link.]

Categories: On the Blog

Who Wants Wind Turbines?

June 13, 2016, 2:23 PM

Last month’s wind-turbine fire near Palm Springs, CA, that dropped burning debris on the barren ground below, serves as a reminder of just one of the many reasons why people don’t want to live near the towering steel structures. In this case, no one was hurt as the motor fire was in a remote, unincorporated area of Palm Springs. But imagine if it was located just hundreds of feet from your back door—as they are in many locations—and the burning debris was raining down into your yard where your children were playing or onto your roof while you are sleeping.

Other reasons no one wants them nearby include the health impacts. Last month, Dave Langrud, of Alden, MN, sent a six-page, detailed complaint to the Minnesota Public Regulatory Commission. In it, he states: “Wisconsin Power and Light constructed the Bent Tree Wind Farm surrounding my home. There are 19 turbines within one mile and 5 within ½ mile. Both my wife and I have had difficulty sleeping in our home since the turbines started operating. If we leave the area, we don’t have this problem. The turbines have also caused severe headaches for my wife. She didn’t have this problem before the turbines, and this isn’t a problem for her when we spend time away from our home and away from the turbines. When we are home, the problems return.”

In response to another recent ongoing complaints at multiple Minnesota wind projects about the proximity of the turbines to residences, commissioners from the Minnesota Department of Health, Department of Commerce, and Pollution Control Agency acknowledged that regarding permitting and setbacks, “the noise standard was not promulgated with wind turbine-like noise in mind. It addresses audible noise, not infrasound. As such, it is not a perfect measure to use in determining noise-related set-backs between wind turbines and residences.” Yet, it is the “measure” that is used. The Commissioners also acknowledged: “At present there is no available funding to conduct such studies.”

Langrud’s letter addresses property values. He asks: “How do we get a fair price if we sell in order to save our health?” But recent studies prove that it isn’t just those forced to live in the shadows of the turbines whose property values are diminished. Waterfront properties that have offshore wind turbines in their viewshed would have a “big impact on coastal tourism,” according to a study from North Carolina State University. The April 2016 report in Science Daily states: “if turbines are built close to shore, most people said they would choose a different vacation location where they wouldn’t have to see turbines.” The economic impact to the coastal communities is estimated to be “$31 million dollars over 20 years.”

A similar study done in Henderson, NY, found a proposed wind project could have “a total loss in property value of up to about $40 million because of the view of turbines.” An interesting feature of the NY study, not addressed in the NC one is how the loss in property taxes, due to reduced values, will be made up. The Watertown Daily Times points out that most of the homes whose values “would fall sharply due to the view of turbines” are “assessed above $1 million.” It states: “homes in the $200,000 range without a view of turbines would probably see an increase in property taxes to make up for the overall drop in property values.” Robert E. Ashodian, a local resident is quoted as saying: “If property values go down and the town isn’t going to spend less money, the tax rate is going to go significantly up for all of the homeowners who aren’t impacted.” Henderson Supervisor John J. Calkin expressed concern over the “devastating impact” the wind project would have on the town and school district.

Offshore wind turbines were supposed to offer a visual benefit, but they, obviously, bring their own set of problems.

The Financial Times reports: “Building wind farms out at sea, rather than on land where critics say they are an eyesore, has made these power stations a less contentious form of clean energy … But it also makes them dearer than most other power stations and many EU governments face pressure to cut green subsidies that opponents say raise electricity prices and make some industries uncompetitive.” The higher cost argument is what has caused Denmark—known as the international poster child for green energy and the first to venture into offshore wind power—to abandon the policies that subsidized the turbines. Cancelling the coastal wind turbines is said to “save the country around 7 billion Krones ($1 billion).” According to Bloomberg: “The center-right government of [Prime Minister] Lars Loekke Rasmussen wants to scrap an electricity tax that has helped subsidize wind turbines since 1998.” The Danish People’s Party, the largest group in the ruling bloc, is part of the “policy about-face.” Party leader Kristian Thulesen Dahl says: “You have to remember this is a billion-figure cost that we’re passing on to the Danes.” She added: “We also have a responsibility to discuss the costs we impose on Danes over the next 10 years.”

Germany is facing similar problems with its green energy policies. Energy Digital magazine points out that Germany’s rapid expansion of green energy has “driven up electricity costs and placed a strain on the grid.” As a result, Germany has capped wind power expansion. In fact, subsidies—which drove the growth in renewable energy—are being cut throughout Europe. Bloomberg states: “Europe is falling out of love with renewables.”

Then, there are the U.S. utility companies who are forced to buy the more expensive wind-generated electricity due to an abused—but little known in the public—1978 law that was intended to help the U.S. renewable energy industry get on its feet. The Public Utility Regulatory Policies Act (PURPA) was designed to give smaller power players an entry into the market. If wind-turbine projects meet the guidelines, utilities must buy the electricity generated at “often above-market” costs. Instead, in many cases, big projects, owned by one company, get divided up into different parcels with unique project names, but are still owned by the major developer. Energy Biz magazine reports: “PacifiCorp, for one, estimates that such abuses will cost its customers up to $1.1 billion in the coming decade by locking the company into unneeded electricity contracts at rates up to 43-percent higher than market price.” It quotes John Rainbolt, federal affairs chief for Wisconsin-based Alliant Energy: “Our customers essentially pay for PURPA power at 20-percent higher-than-market-based wind prices.” Led by Senator Lisa Murkowski (R-AK), Rep. Fred Upton (R-MI) and Rep. Ed Whitfield (R-KY) a move is underway in Congress to review the nearly 40-year old legislation.

So, residents who live near wind turbines don’t want wind turbines. Nor do residents and renters who have them in the viewshed, governments looking to cut costs, utility companies, or ratepayers. And we haven’t even mentioned those who want to protect birds and bats. Scientific American just addressed the concern that “Bat killings by wind energy turbines continue.” It claims: “wind turbines are, by far, the largest cause of bat mortality around the world” and this includes three species of bats listed—or being considered for listing—under the Endangered Species Act. Bats are important because they eat insects and, therefore, save farmers billions of dollars in pest control each year. Scientific American reports that in addition to dead hawks and eagles found under the wind turbines are thousands of bats.

Who does want wind turbines?

Wind turbine manufacturers, the American Wind Energy Association, and the crony capitalists who benefit from the tax breaks and subsidies—which Robert Bryce, author of Power Hungry and Smaller Faster Lighter Denser Cheaper, reports total more than $176 billion “given to the biggest players in U.S. wind industry.” He states that the growth in wind energy capacity has “not been fueled by consumer demand, but by billions of dollars’ worth of taxpayer money.” To address those who defend rent-seeking wind turbines and squawk about the favorable tax treatment the oil and gas sector gets, Bryce points out: “on an energy equivalent basis, wind energy’s subsidy is nearly three times the current market prices of natural gas.” Even billionaire Warren Buffett acknowledged that the only reason his companies are in the wind business is: “We get a tax credit if we build a lot of wind farms.”

(Note: Each of these stories is from just the past several weeks. There are far more concerns that could be addressed, but that would require a length beyond the attention span of everyone but policy wonks.)

If no one but the rent-seeking crony capitalists want wind turbines, why must people like Minnesota’s Langrud have to endure them? Because the wind energy lobby is powerful and “green energy” sounded good decades ago when the pro green-energy policies like PURPA were enacted. However, as the Bloomberg story on Demark points out: wind power is “a mature industry that no longer needs state aid.” Unfortunately, in December 2015, Congress extended the wind energy tax credits through 2021. But tweaks, such as reforming PURPA, can take place and a new president could totally change the energy emphasis—which would be good, because, it seems, no one really wants wind turbines.

[Originally posted at OilPro]

Categories: On the Blog

What’s Really Driving Our Incarceration Boom

June 13, 2016, 2:10 PM

A new report published by the Congressional Budget Office, a nonpartisan federal government agency, estimates a bill awaiting a vote in the U.S. Senate, the Sentencing Reform and Corrections Act (SRCA), would reduce federal spending by $722 million over the next 10 years.

SRCA, sponsored by Sens. Chuck Grassley, R-Iowa, and Richard Durbin, D-Illinois, would revise federally mandated minimum sentences for individuals convicted of some non-violent federal crimes.

Revising sentencing requirements is one way lawmakers can address the growing problem of prison overcrowding and ballooning incarceration spending without compromising public safety, but lawmakers should also consider the role the expanding reach of government has had in driving spending on the U.S. prison system.

In 1986, when aggressive policies such as mandatory minimum sentencing laws began to come into vogue with lawmakers, total state government spending on imprisonment was $21.6 billion, adjusted for inflation. In 2010, state governments were spending about $53.2 billion on criminal justice in present-day dollars.

According to statistics from the U.S Department of Justice’s (DOJ) Uniform Crime Reporting Statistics tool, violent crime rates declined by about 16 percent and property crimes declined by about 22 percent from 1986 to 2010.

So, if the country became less violent and individuals were less likely to commit crimes, why did state spending on government prisons increase by 146 percent over the same period?

It may be somewhat counterintuitive, but the answer is not because governments were spending more money on catching and locking people up.

According to the Government Accountability Office (GAO), tough-on-crime laws, such as the Violent Crime Control and Law Enforcement Act of 1994, which doled out $7.6 billion in taxpayer money to state and local governments to put more police on the streets, could only be credited with reducing overall crime rates by 1.3 percent, over a seven-year period. Factors other than criminal justice spending “accounted for the majority of the decline in crime during this period.”

If crime rates are declining, why is criminal justice spending and incarceration rates going up?

In 1982, DOJ estimated that there were 3,000 actions that could land an individual in federal prison. In 2015, that number has expanded, as nearly 300,000 federal regulations and 4,500 federal criminal statutes are now on the books. When more things are “illegal,” more people get arrested and convicted of doing illegal things.

Another reason federal overregulation contributes to incarceration rates is many laws and regulations are simply poorly written.

One can literally be charged, convicted, and hauled off to the hoosegow without even intending to do wrong by society. In 1991, race car driver Bobby Unser was convicted of committing a federal crime and spent six months in prison. What was Unser’s crime against the people, which necessitated the spending of taxpayer money on housing, food, and clothing?

While driving a snowmobile in Colorado, Unser got lost in a blizzard and spent two days in the wild, building a snow cave to weather the elements. Unable to navigate in the whiteout conditions, Unser accidentally veered into a patch of land owned by the federal government, violating the Wilderness Act of 1964. He was convicted of illegally operating “a snowmobile within a National Forest Wilderness Area.”

As the size of government’s role in everyday people’s lives has grown over the years, so has the government’s ability to ruin people’s lives. Lawmakers across the nation and in Washington need to re-evaluate whether taxpayers are getting the criminal justice system they deserve and spend millions of dollars per year to support.

[Originally published at the Detroit News]

Categories: On the Blog

More Job-killing Rules from the EPA

June 12, 2016, 8:20 AM

Having already done yeoman’s work stifling economic growth and job creation, President Obama’s Environmental Protection Agency is doubling down again.

The United States created a paltry 38,000 new jobs in May: one for every 8,000 Americans. Its labor force participation rate is a miserable 63% – meaning 93 million Americans are not working, while 6.4 million more are trying to feed their families on involuntary part-time positions and a fraction of their previous salaries. Manufacturing lost another 20,000 jobs in May, as the economy grew at an almost stagnant 0.8% the first quarter of 2016. Middle class family incomes and net worth continue to slide.

Meanwhile, well-paid federal bureaucrats increasingly regulate our lives, livelihoods and living standards, hand down fines and jail terms for some 5,000 federal crimes and 300,000 criminal offenses, and inflict $1.9 trillion in annual regulatory compliance costs on families and businesses.

EPA’s war on coal has already cost thousands of jobs in mines, power plants and dependent businesses. Low oil prices amid a tepid, over-regulated, climate-fixated, crony-corporatist American, European and international economy have already killed thousands of US oil patch jobs.

On June 3 EPA issued more rules: methane emission standards for new and modified oil and natural gas drilling, fracking, pipeline and other operations. Under steady environmentalist pressure, it may be only a matter of time before the agency covers existing operations – and maybe even livestock, rice growing, landfills, sewage treatment plants and other methane-emitting activities.

The agency justifies these new job-killing rules by citing something it calls the “social cost of methane,” which is patterned after its equally arbitrary, speculative, infinitely malleable “social cost of carbon.” (Carbon, of course, actually means carbon dioxide – the miracle molecule that enables plant growth and makes all life on Earth possible.) Both the SCM and SCC are needed, EPA insists, to prevent dangerous manmade global warming and climate change, which it claims are driven by these two trace gases.

EPA’s methane claims are absurd. Methane emissions from US hydraulic fracturing operations have plummeted 79% and from the overall US natural gas sector by 11% since 2005.

Moreover, methane is a tiny 0.00017% of the atmosphere, the equivalent of $1.70 out of $1 million. According to the Intergovernmental Panel on Climate Change, 17% of that is from energy production and use; 26% comes from agriculture, landfills and sewage; and the remaining 57% is from natural sources. (Carbon dioxide, the other climate bogeyman, is 0.04% of the atmosphere – 400 ppm.)

The United States accounts for a mere 9% of the world’s total manmade methane – and just 29% of that is from oil and gas operations that provide 63% of all the energy that powers America. That means US oil and gas account for less than 3% of global manmade methane emissions – and thus just 0.000004% of all the methane in Earth’s atmosphere. That’s equivalent to 4 cents out of $1 million!

EPA insists that this undetectable amount will cause a global climate catastrophe, and forcing the oil industry to spend billions of dollars to reduce its already minimal methane emissions will bring billions in health and environmental benefits via climate change prevention. It says methane is 23 (or 28 or 35) times more potent than carbon dioxide as a greenhouse gas, and the USA must lead the way. What nonsense.

The atmosphere contains 235 times more carbon dioxide than methane – so this “ultra-potent” greenhouse gas will have only 10-15% of CO2’s supposed global warming power. The US petroleum industry’s contribution is utterly meaningless, especially compared to the solar, oceanic, cosmic and other powerful natural forces that have driven climate change throughout Earth and human history.

Of course, EPA’s shenanigans don’t end there.

The agency’s “social cost of methane” calculations rely on arbitrary 2.5, 3 and 5 percent “discount rates” that supposedly quantify the present value of future regulatory benefits, derived from preventing climate chaos 20, 50 or 100 years from now. The rates yield miraculous compounded benefits up to $1,700 per ton of methane emissions prevented by 2020 to $3,300 per ton by 2050. They could bring up to $550 million in alleged health benefits by 2025 – for “only” $330 million in oil industry costs.

But if EPA had used the 7% discount rate required under Office of Management and Budget guidelines, the supposed benefits would plummet to only $259 per ton by 2020. Naturally, EPA didn’t use that rate.

Even more dishonest, as it did for its “social cost of carbon,” EPA’s analysis incorporates virtually every conceivable “cost” of methane emissions and thus alleged “dangerous climate change” – to agriculture, forestry, water resources, “forced migration” of people and wildlife, human health and disease, rising sea levels, flooded coastal cities, ecosystems and wetlands harmed by too much or too little rain, et cetera.

But it completely ignores every obvious and enormous benefit of using oil and natural gas: generating reliable, affordable electricity for lights, heat, air conditioning, computers, electric vehicles and countless other applications; manufacturing fertilizers, plastics, paints and pharmaceuticals; and even reducing CO2 emissions by replacing coal in electricity generation. EPA also ignores the real, obvious and enormous health impairment from millions more people rendered unemployed, poor and unable to heat their homes.

That is the critical point. But almost as important, the alleged, exaggerated, computer-conjured and illusory benefits from these SCM regulations accrue to the world as a whole – while the very real costs are incurred solely by American companies, consumers and taxpayers. EPA doesn’t mention that.

And to top it off, the mandated reductions in US methane emissions will be imperceptible amid the world’s enormous and rapidly increasing oil, natural gas and coal production and use. In fact, 59 nations are already planning to build more than 1,200 new coal-fired power plants – on top of what they and developed nations are already building.

China, India, Russia and Europe together emit more than five times the methane that the USA does, and the world just set new oil and natural gas consumption records. In fact, the net increase in petroleum consumption was 2.6 times the overall increase in renewable energy use.

Indeed, fossil fuels now account for 79% of total global energy consumption – compared to 0.7% for wind and solar energy combined. The much-touted figure of 19% global renewable energy cleverly hides the fact that 68% of that consumption total is wood, animal dung and hydroelectric energy. Even more astounding, wood and dung account for 13 times more energy worldwide than wind and solar combined!

India has said it will not ratify the Paris treaty anytime soon, and will continue using fossil fuels to bring electricity to people and businesses and improve living standards. Meanwhile, renewable energy spending fell 46% in Germany and 21% overall in Europe in 2015 from the previous year.

EPA’s SCC and SCM scam underscores the religious dogma that drives the Obama Administration’s climate change agenda and ideological determination to end hydrocarbon use in America. Perhaps worse, presidential candidate Hillary Clinton has bragged about putting still more coal miners out of work. She has also said she would ban drilling on all onshore and offshore public lands, and regulate fracking into oblivion on state and private lands. Senator Bernie Sanders will almost assuredly push her and the Democratic Party even further to the Left on energy policies.

These policies would put even more Americans out of work, landing them on welfare rolls and forcing them to depend on unsustainable government handouts that rely on taking more money from an ever-shrinking workforce. Americans would have to get used to the idea of having lights, AC and computers when increasingly expensive electricity is available – instead of when we need it. What a depressing future that would be for our children and grandchildren.

Categories: On the Blog