Topic: Regulatory Studies

Cannon’s Second Rule of Economic Literacy

…appears at the end of this a poor, unsuccessful letter I sent to the editor of the Washington Post:

After quoting a scholar who expresses the economic consensus that the rising cost of employer-purchased health benefits “means lower wages and salaries,” “New study shows health insurance premium spikes in every state” [Nov. 17] immediately contradicts that consensus by stating, “employers are attempting to shift health costs onto their workers” by “asking employees to shoulder a larger share of the premium.”

If workers bear the cost of employer-paid health benefits in the form of lower wages and salaries, then increasing the employee-paid portion of the premium is not a cost-shift.  Workers would have borne those costs either way.

Employers cannot shift to workers a cost that workers already bear.

See Cannon’s First Rule of Economic Literacy.

‘The Dangerous Gym Membership’?

Here’s a poor, unsuccessful letter I sent to the editor of the Washington Post:

The dangerous gym membership” [Jan. 12] claims that in Medicare Advantage, “advertising a plan as the go-to health insurance source for marathoners could lure in a healthier subscriber base, disrupting the rest of the market place in the process.” Oh?

Does it disrupt the market for sneakers when running shops advertise themselves to marathoners? Since when does giving consumers something they want disrupt the market? That’s why markets exist.

What’s disrupting the market for seniors’ health insurance is government—in this case, Congress’ counter-productive attempt to cross-subsidize the sick via price controls that forbid carriers to consider each applicant’s risk when offering and pricing health insurance.

‘Professor Cornpone: Ethanol Lobbyist Newt Gingrich—and the Future of the GOP’

The title is from a Wall Street Journal editorial in January of 2011. I commented on Gingrich’s response to that editorial in the following excerpt from a chapter I wrote for a recently published book by Robert E. Looney, ed., Handbook of Oil Politics, Routledge (2012):

Even if draconian belt-tightening by U.S. motorists could significantly reduce the world price of oil (which is highly doubtful), the benefits of cheaper oil would by definition accrue to other countries.   If the U.S. allowed its own industries and consumers to benefit from the supposed drop in world oil prices (as a result of breaking the oil cartel), that would undo the effort to cut imports.  Most petroleum consumed in the U.S. is not used by passenger cars and demand for petroleum among commercial, industrial and non-auto transportation sectors would rise if any induced reduction in the world oil price was allowed to be matched by a lower domestic oil price (rather than being offset by taxes or rationing).

Consider the protectionists’ old idea that money spent on buying something useful from another country is just lost to the U.S. economy, so we would be much better off buying everything close to home (regardless what it costs, though they never say that).

Attempting to defend ethanol subsidies and mandates, for example, former Speaker of the House Newt Gingrich wrote, ‘It is in this country’s long-term best interest to stop the flow of $1 billion a day overseas… . Think of what $1 billion a day kept in the U.S. economy creating jobs, especially energy jobs which cannot be outsourced, could do.’  That is, of course, a totally false choice.  Apologists for subsidies and mandates are not proposing to pay the same price for domestic fuel as we could otherwise pay for an energy-equivalent amount of imported oil – replacing $1 billion of imported fuel with $1 billion of domestic fuel.  They are talking about paying much more for domestic fuel than we pay for imported oil.   Why else would they be asking for subsidies, tariffs and mandates?

Paying much more for something as important as energy, whether directly or through taxes, makes an economy poorer, and being poorer is no way to create ‘green jobs.’  Money wasted on something like ethanol which politicians favor is money that could otherwise have been spent on something else that consumers favor.


The President’s Spilled-Milk Joke

One of President Obama’s better applause lines the other night came when he stepped into the unaccustomed public role of a deregulator:

We got rid of one rule from 40 years ago that could have forced some dairy farmers to spend $10,000 a year proving that they could contain a spill — because milk was somehow classified as an oil. With a rule like that, I guess it was worth crying over spilled milk.

I will note for the record that we had made a bit of a hobbyhorse of EPA’s dairy-oil-spill controls, taking note of them in no fewer than four posts as the sort of regulatory overkill the Obama administration should disavow. House Republicans complain that the president is now putting himself at the head of someone else’s parade, since their members had long urged repeal of the rules and the Obama EPA under administrator Lisa Jackson had dragged its heels about going along. But I’m not going to complain. The ability to get out in front of the other side’s parades served President Bill Clinton well, and I just wish President Obama would use it more often.

When Government Is The False Advertiser, Cont’d

Mayor Bloomberg’s New York City health department has come in for repeated criticism in this space and elsewhere for crusading against salty and fattening foods through ad campaigns that manipulate viewer reactions in ways that border on the misleading and deceptive (“What can we get away with?” famously asked one official). They’re at it again. On January 9, Gotham’s for-your-own-good crew unveiled a new ad warning “Portions have grown. So has Type 2 diabetes, which can lead to amputations,” dramatically illustrated with a photo of an obese man with a stump where his leg had been. But as the New York Times reports, city officials “did not let on that the man shown — whose photo came from a company that supplies stock images to advertising firms and others — was not an amputee and may not have had diabetes.” Instead, they just Photoshopped his leg off, which certainly got the effect they were looking for, albeit at the cost of photographic reality. At an agency developing an ad campaign for a private company, someone might have advised adding a little fine print taking note that the picture was of a model and had been altered, lest the manipulation turn into the story itself, or even attract the interest of federal truth-in-advertising regulators. But the Bloomberg crew probably isn’t worried about the latter, given that their constant stream of hectic propaganda is fueled by generous grants from the federal government itself. Such grants also helped enable a contemplated booze crackdown exposed by the New York Post this month—quickly backed off from after a public outcry—that would have sought to reduce the number of establishments selling alcohol in New York City.

While on the topic of nannyism, the Times also reported this week that Penn State researchers found that the fad for banning so-called junk food in schools had no apparent effect: “No matter how the researchers looked at the data, they could find no correlation at all between obesity and attending a school where sweets and salty snacks were available.” Number of “food policy” types quoted in the article admitting “maybe we were wrong”: zero.

Let’s Regulate Harder. That’ll Provide More Jobs For Young Law Grads!

No, legal academics don’t usually come right out and say this, but Hazel Weiser, executive director of the Society of American Law Teachers (SALT), did say it as part of a discussion of the woes of new law graduates in a slow hiring market:

Rather than deregulate the legal profession, which is notoriously bad at self-policing, the best way to get more jobs for these unemployed recent graduates is to up regulation, not do away with it. Another op ed piece, “It’s Consumer Spending, Stupid” dated October 25, 2011, by James Livingston, a professor of history at Rutgers, puts it perfectly: “…private investment – that is, using business profits to increase productivity and output – doesn’t actually drive economic growth. Consumer debt and government spending do. Private investment isn’t even necessary to promote growth.” Government spending means regulation as well as bridges and tunnels. Let’s hire these young attorneys to enforce the laws of the land!

In a similar vein, note this blog post by University of Michigan law professor Sam Bagenstos, a leading disabled-rights expert who served in the Obama administration until last year as Principal Deputy Assistant Attorney General for Civil Rights, the number two official in the Civil Rights Division. Commenting on a report that the city of Mobile, Alabama, was preparing to spend $146,000 to comply with new federal rules governing its public swimming pools, Prof. Bagenstos ran the item under the headline “New ADA Regs: Job Creators.” (Update: It was a joke, he says.)

Next time you read about some daffy new idea out of Washington, keep in mind that there’s a whole school of thought out there that, faced with a choice between a mild and a stringent regulatory option, imagines that by going with the more stringent Washington can create more jobs. It explains a lot.