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Op-ed Placement

Government Makes The Poor Poorer

For all the obsession in Washington and in college faculty lounges over income inequality, why isn't there more outrage over government policies that exacerbate the problem? There are hundreds of programs that make the poor, poorer and increase poverty in America. Many of them were exposed last week by my colleagues at the Heritage Foundation forum on this very topic.

04/07/2017
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Op-ed Placement

A Sea Change at the FCC

The Trump administration recently announced that Ajit Pai will be stepping up to be the chairman of the Federal Communications Commission. This is good news for the consumers and signals a welcome shift in the FCC's aggressive regulatory agenda.

02/03/2017
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Op-ed Placement

Another ObamaCare End Run Around Congress

Like the proverbial broken record, the Obama administration is — again — showing its contempt for the Constitution and the rule of law.

10/12/2016
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Op-ed Placement

The Bureaucracy -- The Unaccountable Fourth Branch Of Government

In arguing for the states to ratify the Constitution, James Madison wrote in Federalist 47, "The accumulation of all powers, legislative, executive and judiciary, in the same hands, whether of one, a few, or many … may justly be pronounced the very definition of tyranny." In our time, the regulatory state has become a form of tyranny led by bureaucrats who have wrested power from Congress and even influenced the Supreme Court to bow to their power.

07/13/2016
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Op-ed Placement

Hillary Clinton's College Tuition Plan Flunks Econ 101

'There ain't no such thing as a free lunch," economist Milton Friedman was fond of saying.

08/17/2015
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Op-ed Placement

Our Economy's Real Problem: The Fed's Easy Money

Americans know that there is a serious problem in the economy. Incomes are stagnant, and the employment situation is not improving in a meaningful way.

10/08/2014
Snow's job: Selling the Bush agenda in Term 2
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Snow's job: Selling the Bush agenda in Term 2

BY Thomas Kostigen

SANTA MONICA, Calif. (CBS.MW) -- In what is a surprising move to many, John Snow will remain as U.S. Treasury secretary for President Bush's second term. There had been widespread speculation that Snow would not be asked to stay on, and rumors were rampant on Wall Street as to who would be his successor. Forbes magazine publisher Steve Forbes and former Texas Senator Phil Gramm had been considered as candidates, according to reports.

12/14/2004
Don't Feel Sorry For States: They Caused Their Deficits
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Don't Feel Sorry For States: They Caused Their Deficits

BY JASON M. THOMAS

State budgets have rarely, if ever, been in worse condition than they are today. According to the National Association of State Budget Officers, the total deficit for state budgets nationwide stands at $40 billion in this fiscal year, with another $40 billion shortfall expected for 2003. Such a glaring disparity between revenues and outlays has led legislatures and governors across the nation to retrench and meet for special sessions to address the problem. Since nearly every state's constitution requires a balanced budget, the states lack the budget flexibility afforded to the federal government. But with capital spending kept off balance sheets, "rainy day funds" and refinancing of debt service obligations, states have lots of room to maneuver before real cuts have to be made. Not to mention the states' ability to return to the politically expedient well of cigarette tax revenues and the settlement money from the 1990s Medicaid class action against the tobacco industry. Yet budgetary obfuscation has its limits, and during this past year 39 states have cut enacted budgets by a total of $15 billion. This spending reduction more than tripled 1992's previous record $4.5 billion in enacted budget reductions. Most of these cuts have been across-the-board general fund reductions, with schooling and security spending exempted in many states. Federal Bailout? The size of these budget cuts has led many commentators, including Paul Krugman of The New York Times, to advocate the federal assumption of state deficits so "necessary services" aren't compromised. While good-natured, this would have the same effect as giving candy to a child for sticking a fork into an electrical socket. Today's record cumulative state budget deficit of 7.8% of aggregate general fund revenues did not just happen. It's the product of irresponsible budgeting and overly sanguine revenue forecasts. By rewarding states' fiscal negligence, the federal government would encourage -- and get -- more of the same. In the past decade, state budgets increased by 88%, which led total state government spending to eclipse $1 trillion in 2001. During the economic boom of the late 1990s, state spending grew 35% even though nearly a quarter of total state spending is need-based, which should fall during a period of prosperity. While welfare (Temporary Aid toNeedy Families) spending fell from 4.9% of state spending in 1992 to 2.2% in 2002, Medicaid's share rose from 17.8% to 20.5% during that same period. Elementary and secondary education spending grew roughly 85% during the past decade, as did higher education spending, with few, if any, criteria put in place to determine if the money was well spent. Unimpeachable in public discourse, higher education spending has fed a thriving public employees' union and done little, if anything, to address the faltering scholastic performance of American youth. Increased higher education spending has also gone to entrenched interests and established public universities instead of being targeted to needy families and prospective students. Higher education spending has become an entitlement for the upper middle class, who are able to send their sons and daughters to public universities at a fraction of the actual cost of the education. This has created excess demand for public universities, which has forced states to issue more bonded debt to build new dormitories and classrooms to house and teach these mostly middle-class students. The struggling economy has provided a welcomed check on extravagant state spending, but in some areas, like Medicaid, spending increases continue unabated. Medicaid spending is expected to rise by 13% in 2002 after an 11% increase in 2001. Health Care Nightmare While most states have blamed increases in prescription drug spending (18% in 2002), the problem is the system itself. It needlessly separates patients from doctors by erecting a dependent health care bureaucracy. Some hospitals and clinics win funding, others lose it; some treatments and drugs win Medicaid reimbursement, others do not. Through it all, the premium is placed not on quality of care and winning the trust and patronage of Medicaid beneficiaries, but on political sponsorship and lobbying. As a result, much of the Medicaid budget is squandered on the political funding contest and the inefficient allocation of resources. Patients not only have little choice among caregivers, but also absolutely no incentive to be discriminating health care consumers. Millions are lost each year on unnecessary treatments, emergency room visits and excess capacity. Until states start addressing these problems in a serious fashion, and stand up to the demands of the bureaucratic power centers of health care and education, the federal government should not take the cries of state lawmakers seriously. And state voters should remember well when lawmakers hike taxes and sacrifice their take-home pay at the altar of public employee unions. Jason M. Thomas is a staff economist with the nonpartisan Citizens for a Sound Economy. Today's record cumulative state budget deficit . . . didn't just happen; it is the product of irresponsible budgeting and overly sanguine revenue forecasts.

12/27/2002
Have Gov't Antitrust Actions Made Airlines' Woes Worse
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Have Gov't Antitrust Actions Made Airlines' Woes Worse

BY Joseph Gointo

What hurts consumers more, a merger or a bankruptcy? That's what some are asking after financial woes at US Airways and United Airlines. The two carriers scrapped a merger last summer after the Justice Department threatened to sue. It's hard to imagine now, but at the time Washington frettedthe combined carrier would be too dominant. Dozens of lawmakers complained that deal would hurt constituents. Sen. Charles Schumer, D-N.Y., for one, said it would mean a cutback in flights to New York, especially daily service from Washington's Dulles International to upstate cities. But times have changed. US Airways is bankrupt. It's cut more than 30% of its schedule. United, veering toward Chapter 11, has slashed flights by 20% andlaid off thousands. And flights between Dulles and upstate New York? United has cut daily departures to Albany from nine to four, to Syracuse from nine to three, and to Rochester from 11 to four. More cuts may be coming. Should Have Merged That has some asking if Justice was wrong to block the deal. "While the effects of Sept. 11 on airline travel cannot be underestimated . . . much of (United's and US Airways') financial turmoil could have been averted had the Bush administration allowed the two airlines to merge," said Jason Thomas, economist at Citizens for a Sound Economy. Few dispute that. But there's no consensus the Justice Department erred in opposing the deal. "The merger would have saved US Airways from the bankruptcy courts," said Richard Gritta, an industry expert at the University of Portland. "But it certainly would have done so at a price to the consumer." Experts may disagree whether Justice made the right decision. But they do agree the decision is important, because airlines are talking partnerships again. So President Bush's trustbusters must again decide whether to allow the deals or squelch them. And this time around, the airlines' finances clearly are worse, while the partnerships are more vague. Instead of merging, US Airways recently said it will "code share" with United. That will let passengers book a flight on one airline but connect to a flight on the other, all through one ticket. Northwest, Continental and Delta announced a similar pact last week. Financial Necessity The Transportation Department is reviewing both code-sharing plans. And the Justice Department may conduct its own review. In the meantime, neither agency has much to say on the subject. While the decisions await, some speculate the financial upheaval in the airline industry may mean a smoother ride through the review process than the US Airways-United deal got last year. "It is accepted by all sides, including the Department of Justice, that whena company is in financial trouble, exceptions (to antitrust rules) are made," said Nicholas Economides, an antitrust expert at New York University. The exceptions fall into a couple of categories. Both the "failing firm" and"existing assets" theories of antitrust law let otherwise anti-competitive deals proceed if one of the parties may go out of business. No one is sure whether those theories would apply to the code-sharing deals,though, since none involves actual mergers. Even if they do, the exceptions might not help. To qualify as a "failing firm," a company has to be in real danger of disappearing from the marketplace. And airlines have a long history of surviving after declaring Chapter 11. Continental has done that twice. Plus, some think the Justice Department may not consider concepts like "failing firm." Rather, it may limit a review to specific parts of the code-sharing deals that may be anti-competitive. That might mean looking at where one carrier's flights overlap with another's to see if code sharing on that route will reduce competition and boost prices. "Justice has a very narrow focus," said Luke Froeb, an economist at Vanderbilt University and an antitrust official under President Reagan. "Broader concerns . . . rarely enter into their analysis. They take it one caseat a time." Still, that can mean problems. When the US Airways-United decision was made,well before Sept. 11, the airline industry already was slumping. At the time, some analysts said a United-US Airways merger was the only way out of bankruptcy. But the contraction of the industry was not key for Bush's trustbusters at the time, many say. Creative Destruction Even if it had been, some experts argue, it's better to let firms fail even if that means short-term harm to consumers -- like the service reductions and price spikes that can happen after an airline goes broke. Economists call that "creative destruction." That idea, from Austrian economist Joseph Schumpeter, suggests markets must cycle through failure to achieve "perfect competition." Sick, dying firms are replaced by healthy, vibrant ones. By those terms, Justice arguably made the right choice in nixing the United-US Airways deal. "There are definitely short-run ramifications if an airline fails," Gritta said. "But ultimately the free market works. The airlines wanted deregulation. They got it. In a deregulated market, if you fail, you fail."

09/03/2002

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