WSJ.com - The Mistaken Attack on Outsourcing

WSJ.com - Opinion: The Mistaken Attack on Outsourcing

 

Since his presidential campaign, Mr. Obama has repeatedly said that the global operations of U.S. companies harm the country because they drain the American economy of jobs. His rhetoric about "tax breaks for companies that ship our jobs overseas" has populist resonance at a time of economic uncertainty, but it is also at odds with the available evidence about how globalizing firms affect the American economy. Moreover, it harms the popular understanding of our opportunities and challenges.

When American firms grow abroad, they also grow domestically…

The data do not support the crude, fixed-pie intuition that firms either invest abroad or at home. Ten percent growth in American firms' foreign investment is associated with 3% growth in their domestic investment. And when firms grow abroad, their domestic exports and R&D activities grow especially, contrary to Mr. Obama's rhetoric.

Vilifying or penalizing American businesses for their global operations will only lead them to consider leaving the U.S.—or consider being bought by foreign companies. Such moves would hurt America by removing valuable headquarter jobs. Instead, Mr. Obama should emphasize how Americans succeed when our firms succeed world-wide. That formulation better captures reality and offers a more sensible way to engage businesses in a new spirit of cooperation.

 

 

 

 

 

WSJ.com - Tea Partiers and the Spirit of Giving

WSJ.com - Opinion: Tea Partiers and the Spirit of Giving

It is common to hear that the popular uprising against the growth of the welfare state, with rising taxes and deficits, is based on a lack of caring toward those who are suffering the most in the current crisis.

Few would disagree that free enterprise is grounded in one's self-interest. But self-interest is not the same thing as selfishness in the sense of unbounded consumption or disregard for the less fortunate. In fact, the millions of Americans who advocate for private entrepreneurship and limited government—whether they are rich or poor—may be stingy when it comes to giving away other people's money through state redistribution, but they are surprisingly generous when it comes to giving away their own money privately.

Americans in general are very charitable, by international standards. Study after study shows that we privately give multiples of what our Social Democratic friends in Europe donate, per capita. But not all Americans are equally generous. One characteristic of givers is especially important in the current debate: the opinion that the government should not redistribute income to achieve greater economic equality.

Contrary to the liberal stereotype of the hard-hearted right-winger, opposition to income-leveling is not evidence that one does not care about others. Quite the contrary. The millions of Americans who believe in limited government give disproportionately to others. This is in addition to—not instead of—their defense of our free-enterprise system, which gives the most people the most opportunities to earn their own success.

WSJ.com - Not Really 'Made in China'

WSJ.com - Not Really 'Made in China'

The iPhone's Complex Supply Chain Highlights Problems With Trade Statistics

 

"What we call 'Made in China' is indeed assembled in China, but what makes up the commercial value of the product comes from the numerous countries," Pascal Lamy, the director-general of the World Trade Organization. "The concept of country of origin for manufactured goods has gradually become obsolete."

Mr. Lamy said if trade statistics were adjusted to reflect the actual value contributed to a product by different countries, the size of the U.S. trade deficit with China—$226.88 billion, according to U.S. figures—would be cut in half.

The value-added approach, in fact, shows that sales of the iPhone are adding to the U.S. economy—rather than subtracting from it, as the traditional approach would imply.

Based on U.S. sales of 11.3 million iPhones in 2009, the researchers estimate Chinese iPhone exports at $2.02 billion. After deducting $121.5 million in Chinese imports for parts produced by U.S. firms such as chip maker Broadcom Corp., they arrive at the figure of the $1.9 billion Chinese trade surplus—and U.S. trade deficit—in iPhones.

If China was credited with producing only its portion of the value of an iPhone, its exports to the U.S. for the same amount of iPhones would be a U.S. trade surplus of $48.1 million, after accounting for the parts U.S. firms contribute.

 

 

 

Al Gore's Ethanol Epiphany - WSJ.com

http://online.wsj.com/article/SB10001424052748703572404575634753486416076.html#mod=djempersonal

 

Anyone who opposes ethanol subsidies, as these columns have for decades, comes to appreciate the wisdom of St. Jude. But now that a modern-day patron saint—St. Al of Green—has come out against the fuel made from corn and your tax dollars, maybe this isn't such a lost cause.

Welcome to the college of converts, Mr. Vice President. "It is not a good policy to have these massive subsidies for first-generation ethanol," Al Gore told a gathering of clean energy financiers in Greece this week. The benefits of ethanol are "trivial," he added, but "It's hard once such a program is put in place to deal with the lobbies that keep it going."

At least on corn subsidies, we now have the makings of a left-right anti-boondoggle coalition. Major corn energy subsidies such as the 54-cent-per-gallon blenders credit expire at the end of the year, and Republican Senators Jim DeMint and Tom Coburn are encouraging the new Congress to prove its fiscal bona fides by letting them die.

 

 

 

 

 

This Lame Duck Session Should Be the Last - WSJ.com

Betsy McCaughey: This Lame Duck Session Should Be the Last - WSJ.com

Americans ought to make this lame duck session of Congress the last in history. Members who lose re-election have no moral authority to continue governing: They were fired by the voters, who should demand that they clean out their desks and go home.

 

On Nov. 2, the voters replaced the Democratic majority in the House of Representatives with at least 61 new Republican members who campaigned on lower spending and less government power. Allowing members who were not re-elected to legislate national policy or set the 2011 federal budget is like allowing a fired employee to run the office another two months, or letting your ex-spouse continue managing your checkbook.

 

Lame duck sessions were unavoidable before jet planes. The framers of the U.S. Constitution provided 17 weeks for newly elected members to travel to the capital and take their seats on March 3. That was the 18th century.

 

In 1933, Americans ratified the 20th Amendment to eliminate lame duck sessions. It set Jan. 3 as the day newly elected members would take their seats. That still left seven weeks after the election, but no one imagined that the old Congress would return to the capital during that time.

 

For a half-century, the 20th amendment worked. Except during World War II and the Korean War, Congress did not reconvene after November elections. But for the last two decades, lawmakers have hurried back to the capital after Election Day to deal with spending bills and controversial legislation they deliberately had avoided before the election.

 

The unrepresentative lame duck Congress should do as little as possible.

How Medicare Killed the Family Doctor - WSJ.com

Richard Hannon: How Medicare Killed the Family Doctor - WSJ.com

Remember Marcus Welby, M.D.? He defined the family doctor on TV in the 1970s, exemplifying the four Cs: caring, competent, confidant and counselor. In the mid-'60s, I remember my father-in-law, a real-life Dr. Welby, telling me the exciting news that the federal government was going to start paying him to see seniors—patients who before he had seen for the proverbial chicken (or nothing at all). That fabulous deal was Medicare.

Medicare introduced a whole new dynamic in the delivery of health care. Gone were the days when physicians were paid based on the value of their services. With payment coming directly from Medicare and the federal government, patients who used to pay the bill themselves no longer cared about the cost of services.

Eventually, that disconnect (and subsequent program expansions) resulted in significant strain on the federal budget. In 1966, the House Ways and Means Committee estimated that by 1990 the Medicare budget would quadruple to $12 billion from $3 billion. In fact, by 1990 it was $107 billion.

To fix the cost problem, Medicare in 1992 began using the "resource based relative value system" (RBRVS), a way of evaluating doctors based on factors such as education, effort and specialized training. But the system didn't consider factors such as outcomes, quality of service, severity or demand.

Today most insurance companies use the Medicare RBRVS because it is perceived as objective. As a result of RBRVS, specialists—especially those who perform a lot of procedures—do extremely well. Primary-care doctors do not.

The primary-care doctor has become a piece-rate worker focused on the volume of patients seen every day. As Medicare and insurers focused on trimming the costs of the most common procedures, the income and job satisfaction of primary-care doctors eroded. So these doctors left, sold or changed their practices.

So who really killed primary care? The idea that a centrally planned system with the right formulas and lots of data could replace the art of practicing medicine; that the human dynamics of market demand and the patient-physician relationship could be ignored. Politicians and mathematicians in ivory towers have placed primary care last in line for respect, resources and prestige—and we all paid an enormous price.

A Vote Against Dems, Not for the GOP - WSJ.com

Even though I’d personally love it if the majority of Americans were on board with a true limited government philosophy, I recognize that many of tomorrow’s GOP voters are not, but are instead reacting to over-reach by the liberals who misread their 2008 electoral success.  I worry the GOP may make a similar mistake and over-reach on conservative policy issues not related to spending reductions, which could hurt the GOP in 2 years.

 

http://online.wsj.com/article/SB10001424052748703708404575586063725870380.html?mod=djemEditorialPage_h

 

Democrats face massive losses in tomorrow's midterm election. Based upon our generic ballot polling and an analysis of individual races, we project that Nancy Pelosi's party will likely lose 55 or more seats in the House, putting the GOP firmly in the majority. Republicans will also win at least 25 of the 37 Senate elections. While the most likely outcome is that Republicans end up with 48 or 49 Senate seats…

 

But none of this means that Republicans are winning. The reality is that voters in 2010 are doing the same thing they did in 2006 and 2008: They are voting against the party in power.

 

More precisely, it is a rejection of a bipartisan political elite that's lost touch with the people they are supposed to serve. Based on our polling, 51% now see Democrats as the party of big government and nearly as many see Republicans as the party of big business. That leaves no party left to represent the American people.

 

Voters today want hope and change every bit as much as in 2008. But most have come to recognize that if we have to rely on politicians for the change, there is no hope. At the same time, Americans instinctively understand that if we can unleash the collective wisdom and entrepreneurial spirit of the American people, there are no limits to what we can accomplish.

 

In this environment, it would be wise for all Republicans to remember that their team didn't win, the other team lost. Heading into 2012, voters will remain ready to vote against the party in power unless they are given a reason not to do so.

 

Elected politicians also should leave their ideological baggage behind because voters don't want to be governed from the left, the right, or even the center. They want someone in Washington who understands that the American people want to govern themselves.

 

 

 

 

Private Social Security Accounts Are Still a Good Idea - WSJ.com

In addition to the math explained in this article, Social Security is a Ponzi (pyramid) scheme that collapses when the bottom doesn't grow fast enough.  It really is that simple.

Shipman and Ferrara: Private Social Security Accounts Are Still a Good Idea - WSJ.com

Suppose a senior citizen who retired at the end of 2009, at age 66, had been able to set up a personal account when he entered the work force in 1965, at the age of 21. Suppose that, paying into his personal account what he and his employer would have paid into Social Security... ...their account, having earned a 6.75% return annually from 1965 to 2009, would still pay them about 75% more than Social Security would have.

It is a mathematical fact that the least expensive way to provide for an almost certain future liability is to save and invest in capital markets prior to the onset of the liability. That's why state and local pension funds, corporate pension plans, federal employee retirement plans and Chile's successful Social Security personal accounts (since copied by other countries) do so. It is sound practice.

And it's why Mr. Obama is wrong to assert that personal Social Security accounts are "ill-conceived," and why each of us should have the liberty to opt into one.

Licensing to Kill - WSJ.com

Review & Outlook: Licensing to Kill - WSJ.com

When most people think of occupations requiring fingerprints and police reports, corner bookshop owners don't spring to mind. Try telling that to Los Angeles, where many used booksellers are required by law to get a police permit and take a thumbprint from every 40-something trying to offload his collection of French poetry.

That's one scene from a study to be released this week by the Institute for Justice, which has collected dozens of examples of regulations choking economic growth by taxing and over-licensing small businesses. In a survey of eight major cities, the study found that entrepreneurs routinely face obstacles of bureaucracy and red tape that deter them from otherwise promising opportunities.

In addition to the economic cost of such inanity, the regulations take a personal toll on many aspiring small business owners, often immigrants who thought America was still a land of opportunity. Consider the case of Muhammed Nasir Khan, who lost most of his family's savings thanks to Milwaukee's messy regulations and the whim of a local alderman.

Despite following all the rules, his food license was retracted at the request of Alderman Robert Bauman, who suggested he would rather see a place "with a little class" in the location, instead of Mr. Khan's restaurant. Reopening Judy's Red Hots, he argued, would somehow encourage crime and disorder and stall the redevelopment of the community. The real crime is how easily an entrepreneur's dream was destroyed by the caprice of a politician and the regulations that empower him.

Politicians of all stripes like to celebrate "small business" while running for office, but the reality is that they often strangle entrepreneurs once they get in power. Read the Institute for Justice study and you'll better understand why the business of America is no longer business. It's bureaucracy.

Why Liberals Don't Get the Tea Party Movement - WSJ.com

Peter Berkowitz: Why Liberals Don't Get the Tea Party Movement - WSJ.com

Highly educated people say the darndest things, these days particularly about the tea party movement. University educations and advanced degrees notwithstanding, they lack a basic understanding of the contours of American constitutional government.

Born in response to President Obama's self-declared desire to fundamentally change America, the tea party movement has made its central goals abundantly clear. Activists and the sizeable swath of voters who sympathize with them want to reduce the massively ballooning national debt, cut runaway federal spending, keep taxes in check, reinvigorate the economy, and block the expansion of the state into citizens' lives.

In other words, the tea party movement is inspired above all by a commitment to limited government. And that does distinguish it from the competition.

But far from reflecting a recurring pathology in our politics or the losing side in the debate over the Constitution, the devotion to limited government lies at the heart of the American experiment in liberal democracy. The Federalists who won ratification of the Constitution—most notably Alexander Hamilton, James Madison and John Jay—shared with their Anti-Federalist opponents the view that centralized power presented a formidable and abiding threat to the individual liberty that it was government's primary task to secure. They differed over how to deal with the threat.

Whether members have read much or little of The Federalist, the tea party movement's focus on keeping government within bounds and answerable to the people reflects the devotion to limited government embodied in the Constitution. One reason this is poorly understood among our best educated citizens is that American politics is poorly taught at the universities that credentialed them. Indeed, even as the tea party calls for the return to constitutional basics, our universities neglect The Federalist and its classic exposition of constitutional principles.

Neither professors of political science nor of history have made a priority of instructing students in the founding principles of American constitutional government. Nor have they taught about the contest between the progressive vision and the conservative vision that has characterized American politics since Woodrow Wilson (then a political scientist at Princeton) helped launch the progressive movement in the late 19th century by arguing that the Constitution had become obsolete and hindered democratic reform.

Those who doubt that the failings of higher education in America have political consequences need only reflect on the quality of progressive commentary on the tea party movement. Our universities have produced two generations of highly educated people who seem unable to recognize the spirited defense of fundamental American principles, even when it takes place for more than a year and a half right in front of their noses.

If Schools Were Like 'American Idol' . . . - WSJ.com

Rupert Murdoch: If Schools Were Like 'American Idol' . . . - WSJ.com

There is, however, another hidebound American institution that is also finding it difficult to respond to new challenges: our big-city schools.

Today, for example, the United States is home to more than 2,000 dysfunctional high schools. They represent less than 15% of American high schools yet account for about half of our dropouts. When you break this down, you find that these institutions produce 81% of all Native American dropouts, 73% of all African-American dropouts, and 66% of all Hispanic dropouts.

At our grade schools, two-thirds of all eighth-graders score below proficient in math and reading. The average African-American or Latino 9-year-old is three grades behind in these subjects. Behind the grim statistics is the real story: lost opportunities, crushed dreams, and shattered lives. In plain English, we trap the children who need an education most in failure factories.

Clearly it's not for any lack of money. Over the past three decades, we've nearly doubled spending on K-12 education in real terms. So President Obama was absolutely right to declare the other day that "we can't spend our way out of this problem." Which begs the question: How can we spend so much with so little to show for it?

The answer is that while the system is failing our children, it works very well for some adults. These adults include the leaders of the teachers unions. They include the politicians whom the unions reward with their cash and political support. They include the vast education bureaucracies. In business terms, we have a system that rewards the providers and punishes the customers.

We all know that good schools begin with good teachers. We also know there are many heroic teachers. Unfortunately, our system is set up to protect bad teachers rather than reward good teachers.

In the existing system, we have incentives for almost everything unrelated to performance (seniority, tenure, etc.) and zero incentive for adapting new technologies that could help learning inside and outside the classroom. On top of it all, we have chancellors, superintendents and principals who can't hire and fire based on performance.

How to Raise Boys That Read (As Much as Girls Do): Not With Gross-Out Books and Video Game Bribes - WSJ.com

How to Raise Boys That Read (As Much as Girls Do): Not With Gross-Out Books and Video Game Bribes - WSJ.com

According to a recent report from the Center on Education Policy, for example, substantially more boys than girls score below the proficiency level on the annual National Assessment of Educational Progress reading test. This disparity goes back to 1992, and in some states the percentage of boys proficient in reading is now more than ten points below that of girls. The male-female reading gap is found in every socio-economic and ethnic category, including the children of white, college-educated parents.

The appearance of the boy-girl literacy gap happens to coincide with the proliferation of video games and other electronic forms of entertainment over the last decade or two. Boys spend far more time "plugged in" than girls do. Could the reading gap have more to do with competition for boys' attention than with their supposed inability to focus on anything other than outhouse humor?

Dr. Robert Weis, a psychology professor at Denison University, confirmed this suspicion in a randomized controlled trial of the effect of video games on academic ability. Boys with video games at home, he found, spend more time playing them than reading, and their academic performance suffers substantially. Hard to believe, isn't it, but Science has spoken.

The secret to raising boys who read, I submit, is pretty simple—keep electronic media, especially video games and recreational Internet, under control (that is to say, almost completely absent). Then fill your shelves with good books.

Most importantly, a boy raised on great literature is more likely to grow up to think, to speak, and to write like a civilized man. Whom would you prefer to have shaped the boyhood imagination of your daughter's husband—Raymond Bean or Robert Louis Stevenson?

An Even More Inconvenient Truth - WSJ.com

William McGurn: An Even More Inconvenient Truth - WSJ.com

The man who produced both the Barack Obama short for the 2008 Democratic Convention and Al Gore's Academy Award-winning documentary about global warming offers an inconvenient truth of his own.

His new film, "Waiting for 'Superman,'" is his own attempt to right that balance with a focus on those he calls "other people's children." At the Washington, D.C., premiere last Wednesday, Education Secretary Arne Duncan called it "a Rosa Parks moment." New York Magazine suggests it might be "the Inconvenient Truth of education, an eye-opening, debate-defining, socially catalytic cultural artifact."

For years, of course, conservatives have documented the failures that Mr. Guggenheim highlights, and in some cases have even succeeded in pushing through some good reforms. Yet that's just what gives "Waiting for 'Superman'" its potency—the indictment issues from an unrepentant liberal instead of the Heritage Foundation. I suggest to him that the kind of truths about public education he illustrates will be far more inconvenient for those in his circle than say, the friends of a former Bush speechwriter.

The way Mr. Guggenheim says it, you can tell two things. First, he really means it. Second, that until people do get on the side of reform, they will find him, well . . . inconvenient.

Why It's Time for the Tea Party - WSJ.com

The populist movement is more a critique of the GOP than a wing of it.

So far, the tea party is not a wing of the GOP but a critique of it. This was demonstrated in spectacular fashion when GOP operatives dismissed tea party-backed Christine O'Donnell in Delaware. The Republican establishment is "the reason we even have the Tea Party movement," shot back columnist and tea party enthusiast Andrea Tantaros in the New York Daily News. It was the Bush administration that "ran up deficits" and gave us "open borders" and "Medicare Part D and busted budgets."

Everyone has an explanation for the tea party that is actually not an explanation but a description. They're "angry." They're "antiestablishment," "populist," "anti-elite." All to varying degrees true. But as a network television executive said this week, "They should be fed up. Our institutions have failed."

I see two central reasons for the tea party's rise. The first is the yardstick, and the second is the clock. [follow the link to read more]

Tax Contradictions - WSJ.com

Review & Outlook: Tax Contradictions - WSJ.com

 

After 20 months and more than $1 trillion down the Keynesian drain, President Obama is discovering the virtue of tax cuts.

Yesterday the President proposed a $180 billion plan that includes a permanent research and development tax credit and a tax write-off for all business capital purchases in 2011. These are both sensible ideas that would counteract at least some of the damage from Mr. Obama's looming tax increase. John McCain could sue for plagiarism because versions of both ideas were part of his 2008 campaign platform.

The White House will deny it, but it's important to understand what a conceptual switcheroo this is. Mr. Obama's economic policies to date have been based on the belief that government can drive growth by handing out checks to consumers, who will then spend the money and increase what economists call aggregate demand. Missing was any attempt to spur incentives for business or individuals to invest and take more risks. Even if this policy reversal is motivated by election desperation, it is still a tacit admission of the failure of its growth model.

The big flaw in this proposal is that it's temporary. If the tax cut is for only one year, businesses will move spending forward that would have happened in future years. The economy will grow faster in 2011, other things being equal, but some of that growth will be stolen from 2012 and 2013. We've seen this temporary effect before with the home-buying tax credit, cash for clunkers and tax rebates.

In the Keynesian world-view, this is no problem because the one-year policy is supposed to kick-start the recovery and the stimulus can be safely withdrawn because the economy will become self-sustaining. But in the real world, investment will be greater and growth will be faster with a permanent reduction in the tax penalty on capital that will permanently increase the value of that capital. The White House still has some tax learning to do.

We'll nonetheless give the President and his economic team points for intellectual progress. Their proposals for corporate tax cuts are a de facto recognition that the 35% U.S. corporate tax rate is too high.  Now that Mr. Obama has conceded that tax cuts are good policy, Republicans should see him—and raise.

 

 

 

Gates and Buffett Take the Pledge - WSJ.com

 

Kimberly Dennis: Gates and Buffett Take the Pledge - WSJ.com

 

Bill Gates and Warren Buffett announced this month that 40 of America's richest people have agreed to sign a "Giving Pledge" to donate at least half of their wealth to charity. With a collective net worth said to total $230 billion, that promise translates to at least $115 billion.

It's an impressive number. Yet some—including Messrs. Gates and Buffett—say it isn't enough. Perhaps it's actually too much: the wealthy may help humanity more as businessmen and women than as philanthropists.

What are the chances, after all, that the two forces behind the Giving Pledge will contribute anywhere near as much to the betterment of society through their charity as they have through their business pursuits? In building Microsoft, Bill Gates changed the way the world creates and shares knowledge. Warren Buffett's investments have birthed and grown innumerable profitable enterprises, making capital markets work more efficiently and enriching many in the process.

Other signers of the pledge, like Oracle's Larry Ellison and eBay's Pierre Omidyar, have similarly transformed the way people all over the world exchange information and products. They have democratized the transmission of ideas and goods, creating opportunities for people who never would have had them otherwise.

Successful entrepreneurs-turned-philanthropists typically say they feel a responsibility to "give back" to society. But "giving back" implies they have taken something. What, exactly, have they taken? They haven't taken from society, but rather enriched us in ways that were previously unimaginable.

 

 

 

On Gay Marriage, Leave It to the Voters - WSJ.com

I disagree with Mr. Yoo on the policy goal, but he is correct in describing how we should resolve the issue.

 

John Yoo: On Gay Marriage, Leave It to the Voters - WSJ.com

 

In deciding Perry v. Schwarzenegger last week, Judge Walker struck down California's Proposition 8, which banned gay marriage, as a violation of the rights of gays to equal treatment under the law. Judge Walker did more than distort settled precedent and sweep aside centuries of practice. He short-circuited the Constitution's democratic process for the resolution of moral disagreements.

A single judge, he elevated himself above the collective wisdom of millions of California voters and the considered judgment of state and federal officials.

The Constitution does not set up the federal courts as a roving commission of do-gooders to correct all of the nation's problems. The courts, populated by a small number of older lawyers deliberately isolated from the people and inexpert in any field, are likely to cause more social diseases than they cure.

This distortion of the judicial role and rending of the political fabric are wholly unnecessary. The Constitution creates a far better approach to decide contentious moral issues: federalism. Under our decentralized system of government, states offer different combinations of taxes, spending and rights. Citizens can vote with their feet and live in the states that satisfy their preferences.

We trust federalism on other fundamental questions, like life and death. Gay marriage should be treated no different than capital punishment, euthanasia and the basic questions of education, welfare and the family. During the Constitution's ratification, Alexander Hamilton assured New Yorkers that the Constitution would never permit the federal government to "alter or abrogate" a state's "civil and criminal institutions [or] penetrate the recesses of domestic life, and control, in all respects, the private conduct of individuals."

Federalism will produce the political durability that supporters of gay marriage want. If states steadily approve, a political consensus will form that will be difficult to undo.

Consider, by contrast, abortion. Roe v. Wade (1973) only intensified political conflict at a time when the nation was already moving in a pro-choice direction. The decision tied the fate of abortion to the whim of the courts. It poisoned our politics, introduced rounds of legislative defiance and judicial intervention, and undermined the neutral principles of constitutional law.

 

 

 

Washington vs. Paul Ryan - WSJ.com

 

Washington vs. Paul Ryan - WSJ.com

 

Mr. Ryan wants to remodel Medicare by giving seniors a modified voucher to buy private insurance. Mr. Orszag, et al., concede that the roadmap would make the entitlement permanently solvent, as confirmed in an analysis by their icon the Congressional Budget Office, but they claim that the amount of the voucher would not keep pace with rising health-care costs.

This is an odd complaint for an economist like Mr. Orszag, given that more market discipline and consumer choice in health care would drive down costs as it does in all other dynamic sectors of the economy. To take one example, recent research shows that a one percentage point increase in seniors insured by Medicare Advantage HMOs—the Ryan-like program that offers private options—reduces traditional fee-for-service Medicare spending by 0.9%, despite its price controls.

In other words, cost-conscious competition changes how doctors and hospitals provide care to all patients. A larger transition to market-based medicine could turn out to be as smooth as the private-sector shift to 401(k)s from defined-benefit pensions, and a similar reform was even suggested in 1999 by Bill Clinton's Medicare commission, which was led by Louisiana Democrat John Breaux.

This model is a threat to the ideology of those like Mr. Krugman who believe that government can and should decide how all patients are treated. But technocratic central planning won't reform the system, as its sad 45-year history in Medicare shows, and nothing is more likely to finish off Medicare "as we know it" than to continue the current trajectory as it swallows the federal fisc and crowds out all other priorities.

In that sense, Mr. Ryan is really presenting Washington with a philosophical choice between the status quo of an ever-larger and ever-more indebted government and a plan to pay for the promises we've made while still preserving free markets and economic growth. The firehose of invective pointed at Mr. Ryan is in part an attempt to scare voters and in part an effort to prevent voters from understanding that there is in fact a choice.

 

 

 

Why I'm Not Hiring - WSJ.com

First-hand account from an employer.

 

Michael P. Fleischer: Why I'm Not Hiring - WSJ.com

 

When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits.

To offset tax increases and steepening rises in health-insurance premiums, my company needs sustainably higher profits and sales—something unlikely in this "summer of recovery." We can't pass the additional costs onto our customers, because the market is too tight and we'd lose sales. Only governments can raise prices repeatedly and pretend there will be no consequences.

And even if the economic outlook were more encouraging, increasing revenues is always uncertain and expensive. As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company's vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive, and to the difficulties of this economic environment.

A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price.

 

 

Does Language Influence Culture? - WSJ.com

I almost didn’t read this article, but I’m so glad I did!  Fascinating!

 

Does Language Influence Culture? - WSJ.com

New cognitive research suggests that language profoundly influences the way people see the world.

 

It turns out that if you change how people talk, that changes how they think. If people learn another language, they inadvertently also learn a new way of looking at the world. When bilingual people switch from one language to another, they start thinking differently, too. And if you take away people's ability to use language in what should be a simple nonlinguistic task, their performance can change dramatically, sometimes making them look no smarter than rats or infants.

All this new research shows us that the languages we speak not only reflect or express our thoughts, but also shape the very thoughts we wish to express. The structures that exist in our languages profoundly shape how we construct reality, and help make us as smart and sophisticated as we are.

 

 

 

Taxes: A Defining Issue - WSJ.com

Daniel Henninger: Taxes: A Defining Issue - WSJ.com

 

At a time when the American people need to make some decisions about the nation's purpose, along comes Barack Obama to make the choices crystal clear.

In one corner of the world you have Europe, beset by a sovereign debt crisis that's been building for 50 years.  Americans, staring at fiscal crevasses opening across Europe, have to decide if they also wish to spend the next 50 years laboring mainly to produce tax revenue to pay for public workers' pensions and other public promises. The private sector would exist for the public sector.

In another corner of the world, wealth is rising from the emerging economies of the east—China, India, Korea and the rest—posing America's greatest economic challenge in anyone's lifetime. Do the American people want to throw in the towel, or do they want to compete? If the latter, the public sector has to give way to the private sector.

One or the other. It's time to choose.

This election and these times are a chance to put to the voters opposed visions of why we work and what we do with the money we earn.

If voters ultimately feel more secure with a Barack Obama and the like designing a national itinerary for some 300 million people in 50 states, then certainly one should vote for letting taxes rise now on one class of Americans and imposing a VAT next year on everyone. They need a whole lot of money, so give it to them to the horizon. We work, they decide.

The alternative vision is that to compete for the next 50 years, the U.S. is going to need a tax structure that keeps more of the nation's decisions about using its wealth in the hands—and minds—of millions of intelligent citizens, from any economic class. They work, they decide.

So: Extend the current tax rates for all and free everyone in an economy begging for the chance to be strong again. Yes, the U.S. economy will always be "strong," but it needs to be strong enough to take on all comers and win, which last time I looked was the real American way.

 

 

 

Giving Lousy Teachers the Boot - WSJ.com

McGurn: Giving Lousy Teachers the Boot - WSJ.com

 

Donald Trump is not the only one who knows how to get attention with the words, "You're fired." Michelle Rhee, chancellor for the District of Columbia schools, has just done a pretty nifty job of it herself.

On Friday, Ms. Rhee fired 241 teachers—roughly 6% of the total—mostly for scoring too low on a teacher evaluation that measures their performance against student achievement. Another 737 teachers and other school-based staff were put on notice that they had been rated "minimally effective." Unless these people improve, they too face the boot.

Now, getting good teachers in the classroom and rewarding them for their work has always been a key aim of reformers. Alas, that also requires getting the dead weight out of the classroom and off the payroll. That's not so easy to do in big-city school districts, as reformers like Joel Klein, New York's school chancellor, have found.

So why has Ms. Rhee succeeded where others have come up short? One huge reason is the advance of school choice and accountability throughout Washington. Though reform has come fitfully to D.C., today 38% of the district's students are in charter schools. Until the Democrats killed it, there was also a voucher program for a few thousand more. The result of all this ferment is that the teachers union is feeling pressure it has never felt before.

 

 

 

The Liberal Dilemma - WSJ.com

Not that I care if liberalism’s agenda gets strangled, but I’m curious to observe the debate on that side of the isle and if there is courage to take on gold-plated public pensions.

 

Daniel Henninger: The Liberal Dilemma - WSJ.com

 

The Democratic Party's capture by public unions and professional politicians is strangling much of liberalism's agenda.

 

Listen to Jeff Adachi, a San Francisco Democrat and the city's elected Public Defender:

"San Francisco is the most progressive, pro-union, you know, lefty, and I'm probably the poster boy for that in many ways. But the reality is, if we don't do something, all of the important programs, not only public defense but we're talking about children's programs, after-school programs, education, senior programs, everything that we care about as progressives is going to be lost because it's being sucked up by the cost of pensions."

This downward spiral won't stop when the economy returns. The unions will get theirs; the vulnerable categories will get the shaft. For this to change, the modern Democratic Party would have to change. It's got to decide if it wants to do more for real people and less for gerrymandered politicians and union protectorates. Lifetime pol Joe Biden says the stimulus "is working." It is, for the boys in the clubhouse. Honest liberals and progressives distraught over the harsh math of 2010 have more in common with the tea partiers than they imagine.

 

 

 

The 'Paralyzing Principle' - WSJ.com

 

Review & Outlook: The 'Paralyzing Principle' - WSJ.com

 

The Gulf oil spill is having all sorts of nasty consequences well beyond damage to the regional environment and economy. Not least, the resulting political panic seems to be rehabilitating the thoroughly discredited theory of regulation known as the precautionary principle.

This principle holds that government should attempt to prevent any risk—regardless of the costs involved, however minor the benefits and even without understanding what those risks really are.

[Obama White House regulatory czar] Cass Sunstein's insight is that there are risks on all sides of a question—doing nothing can be dangerous, but acting might be more dangerous—so the only rational way to judge regulation is to quantify the costs and benefits. If the Food and Drug Administration took a harder line in approving new medicines, it might protect the public from a future thalidomide disaster. But it could also deprive the public of cures for disease or expose it to serious peril, like having no recourse in a pandemic.

In a 2002 book, Mr. Sunstein pointed out that the best way to prevent automobile pollution would be to eliminate the internal combustion engine. Should the EPA ban that too? "If these would be ridiculous conclusions—as I think they would be—it is because the costs of the bans would dwarf the benefits. Pollution prevention is not worthwhile as such; it is worthwhile when it is better, all things considered, than the alternatives."

 

 

 

David Souter vs. the Constitution - WSJ.com

This historical example illustrates that law should mean what it says, not what some justices think it should say or mean.  If a law is outdated, than we should change it, not just impose “new realities” thru judicial dictat.

 

John McGinnis and Michael Rappaport: David Souter vs. the Constitution - WSJ.com

 

The former justice's logic would justify Plessy v. Ferguson.

At the recent Harvard commencement, retired Supreme Court Justice David Souter attacked what he regards as the "simplistic" model of giving the Constitution a "fair reading." A judge, he said, must determine which of the conflicting constitutional values should become our fundamental law by taking account of new social realities. His remarks were a thinly veiled assault on those who think the Constitution should be interpreted according to its original meaning.

Justice Souter actually provided a primer on how not to be a judge. He made up a Constitution that never was to justify a kind of judicial power that was never intended.

We should reflect on the great suffering and injustice that a failure to follow the original meaning of the 14th and 15th Amendments caused to so many for almost a century. While we believe that an originalist reading of the Constitution also supports Brown, the salient point here is that Brown would not have had such central importance had the Reconstruction-era amendments been enforced according to their original meaning. The greater economic and voting power that enforcement would have ensured would likely have prevented the caste system of public education in the South.

Justice Souter recognizes that his method of interpreting the Constitution is indeterminate, but he argues that it is necessary to put our trust in justices to reach just results. The historical reality is that this interpretive method permitted justices to create a Constitution of their own contrivance in the service of injustice.

 

 

 

Obama's Political Oil Fund - WSJ.com

Obama's Political Oil Fund - WSJ.com

The BP oil spill is already a calamity for the Gulf Coast ecosystem and economy, but now that Washington is looking to deflect all political blame it could also became a disaster for the rule of law. Exhibit C is the new White House demand that BP pay into an escrow account controlled by government to pay for the economic costs of the spill.

The idea is for BP to turn its assets over to a fund administered by an "independent" trustee who would decide what are legitimate damage claims from Gulf residents and businesses.

The White House knows it has no legal authority to demand such a corporate ATM card, but it is counting on public anger to coerce BP to go along. The White House also knows BP is currently operating under the Oil Pollution Act, a piece of legislation passed in 1990 by a Democratic Congress.

The bill made polluting oil companies responsible for all containment and clean-up costs. The law also established a claims process, which requires that companies compensate businesses or individuals harmed by oil spills.

BP has more than 600 claims personnel working to pay fishermen and others that have suffered economic damage. It has vowed to pay all "legitimate" claims and has worked through 20,000 of 42,000 submitted so far…

By contrast, a government-administered fund more or less guarantees a more politicized payment process. The escrow administrator will be chosen by the White House, and as such would be influenced by the Administration's political goals. Those goals would include payments to those harmed by the Administration's own six-month deep water drilling ban. That reckless policy will soon put thousands of Gulf Coast residents out of work, but the White House knows that BP isn't liable under current law for those claims. The escrow account is an attempt to tap BP's funds by other means to pay the costs of Mr. Obama's own policy blunder.

Offshore drilling, even in shallow water, is coming to a stop as the entire industry considers the additional political risks of operating amid a political panic in which even the President of United States seems oblivious to the rule of law. We hope BP resists Mr. Obama's demands to put a political actor in control of its Gulf payments—both for the sake of legitimate Gulf claims, and to vindicate the U.S. as a nation that doesn't discard the law for the sake of political retribution.

 

 

Are You Smarter Than a Fifth Grader? - WSJ.com

Before you read today’s article, test yourself by answering the following questions AGREE or DISAGREE, based on your understanding of basic economics:

1)      Restrictions on housing development make housing less affordable.

2)      Mandatory licensing of professional services increases the prices of those services

3)      Overall, the standard of living is higher today than it was 30 years ago

4)      Rent control leads to housing shortages

5)      A company with the largest market share is a monopoly

6)      Third World workers working for American companies overseas are being exploited

7)      Free trade leads to unemployment

8)      Minimum wage laws raise unemployment

It’s too bad basic econ isn’t actually taught in 5^th grade, or 12^th grade for that matter.  Perhaps our country would be in a better financial situation if it were.

 

Daniel Klein: Are You Smarter Than a Fifth Grader? - WSJ.com

Who is better informed about the policy choices facing the country—liberals, conservatives or libertarians? According to a Zogby International survey the answer is unequivocal: The left flunks Econ 101.

How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.

Americans in the first three categories do reasonably well. But the left has trouble squaring economic thinking with their political psychology, morals and aesthetics.

Adam Smith described political economy as "a branch of the science of a statesman or legislator." Governmental power joined with wrongheadedness is something terrible, but all too common. Realizing that many of our leaders and their constituents are economically unenlightened sheds light on the troubles that surround us.

 

 

Does the Internet Make You Smarter? or Dumber? - WSJ.com

A pair of articles today.  I found the implications of both articles worth the time spent reading, and I don’t think they made me dumber.

Does the Internet Make You Smarter? - WSJ.com

Every increase in freedom to create or consume media, from paperback books to YouTube, alarms people accustomed to the restrictions of the old system, convincing them that the new media will make young people stupid. This fear dates back to at least the invention of movable type.

What the 16th-century foes of print didn't imagine—couldn't imagine—was what followed: We built new norms around newly abundant and contemporary literature. Novels, newspapers, scientific journals, the separation of fiction and non-fiction, all of these innovations were created during the collapse of the scribal system, and all had the effect of increasing, rather than decreasing, the intellectual range and output of society.

We are living through a similar explosion of publishing capability today, where digital media link over a billion people into the same network. This linking together in turn lets us tap our cognitive surplus, the trillion hours a year of free time the educated population of the planet has to spend doing things they care about. In the 20th century, the bulk of that time was spent watching television, but our cognitive surplus is so enormous that diverting even a tiny fraction of time from consumption to participation can create enormous positive effects.

 

Does the Internet Make You Dumber? - WSJ.com

The picture emerging from the research is deeply troubling, at least to anyone who values the depth, rather than just the velocity, of human thought. People who read text studded with links, the studies show, comprehend less than those who read traditional linear text. People who watch busy multimedia presentations remember less than those who take in information in a more sedate and focused manner. People who are continually distracted by emails, alerts and other messages understand less than those who are able to concentrate. And people who juggle many tasks are less creative and less productive than those who do one thing at a time.

 

 

 

Storming the School Barricades - WSJ.com

"The Lottery"—an explosive new documentary about the battle over the future of public education opening nationwide this Tuesday.

The Weekend Interview with Madeleine Sackler: Storming the School Barricades - WSJ.com

 

A new documentary by a 27-year-old filmmaker could change the national debate about public education.

Finding out that the teachers union had hired a rent-a-mob to protest on its behalf was "the turn for us in the process." That story—of self-interested adults trying to deny poor parents choice for their children—provided an answer to Ms. Sackler's fundamental question: "If there are these high-performing schools that are closing the achievement gap, why aren't there more of them?"

Some parents in the film do not know what exactly a charter school is. And the truth, as the film implicitly points out, is that such technical designations don't much matter. What these parents know is that they desperately want their children to have the best possible education, and to have opportunities that they themselves could only imagine. Winning a spot in Harlem Success Academy—or another high-performing school—is critical to reaching that goal.

"The public education system is at a crossroads," Ms. Sackler says. "Do we want to go back to the time when children are forced to attend their district school no matter how underperforming it is? Or do we want to let parents choose what's best for their kids and provide a lot of options? Sometimes those options might fail. But . . . I don't see how you could choose to settle for what we've been doing for half a century when it's been systemically screwing over the same kids—over and over and over."

 

 

 

The West's Wrong Turn on Natural Resources - WSJ.com

 

Joseph Sternberg: The West's Wrong Turn on Natural Resources - WSJ.com

 

For all that talk about a new knowledge economy, things still matter a great deal in this world. And whether it's the steel beam holding up the floor of your office, the gasoline you put in your car or the circuitry in your new iPad, "things" mean natural resources. So it's worrying that one of the major policy trends emerging in recent days is that the capitalist West is cutting itself out of the resource game.

The danger is that if [democracies] won't supply minerals to the world on market principles, others—like China—will step into the gap with other ideas.

Without giving too much credence to China alarmists, it is still possible to say the world is better off if resources are in the hands of transparent companies that will trade on market principles free of the risk of excessive government interference. The third and worst alternative is to stay on the current track of crippling Western resource reserves while also blocking capital from the willing investors that remain.

Yes, companies will continue to extract resources in the West even under the taxes (though the outright drilling ban is another story). But those bad policies will make a major difference at the all-important margins of the market, which drive pricing decisions. The choice for Western policy makers now is simple: They can clamp down on their resource industries for domestic political reasons and hand pricing and supply power to nonmarket and nondemocratic governments. Or they can allow their own companies to run a truly global resource market capable of meeting the world's need for things.