Sunday, March 27, 2011

Health-care law promises more than it can deliver

Published in The Tennessean, Sunday, March 27, 2011

Health-care law promises more than it can deliver

by Richard J. Grant


William F. Buckley once asked, “Socialism has long since been discredited, but when did it get so creepy?” He was of course alluding to the term “creeping socialism,” which describes the gradual expansion of statist interventions and control over private lives and property.

Historical attempts to create socialist societies have necessarily also tended toward totalitarian governance. Such governance always seems to imply the existence of a ruling elite that would decide what the rules would be and how they would be applied. Invariably, the rules were applied unevenly. The elites lived differently from the masses.

When the state controls all production, then it also controls all employment. This gives a rather special meaning to the term “getting fired.” In a free society, if you can't get along with your employer, then you have the option of looking for a new one. You might even start your own business. But in a totalitarian society, if you displease your employer, you need to make amends or face unemployment. There is really only one employer.

Even in places that are not-quite-totalitarian, the rulers can raise the cost of doing business for those who lose their favor. A newspaper publisher that fails to toe the party line might suddenly discover that newsprint has become more expensive or is no longer available. An importer might find that his application for foreign currency has been declined or that his allowance has been reduced.

The concentrations of power that make these abuses possible would not exist in a free society. But they make their entrance on the boulevard of good intentions and just keep building momentum. The arguments in favor of new programs and regulations tend to focus on intended results. When the actual results are not quite as expected then these discrepancies are dealt with through new programs and regulations.

History does not offer us many examples of the benevolent despot. But there are many examples of popular and high-minded leaders creating the institutions upon which future despots would build. Whatever the virtues possessed by a first generation of leaders, the redistributive powers of governmental authority become magnets to aspiring tyrants.

In the past few decades we have witnessed the multiplication of such redistributive powers through the creation and expansion of social programs and regulatory bureaucracies. The resulting redirection of resources and the emergence of a culture of dependency have created a political constituency that supports these programs. And many politicians have made their careers catering to that culture and by appearing to grant favors to their constituents.

The Affordable Care Act, better known as “ObamaCare,” is just one of the more recent examples of a program that promises more than it can deliver. But it can promise to attract the support of a dependent class that really believes it can get something for nothing. Its supporters continue to talk it up, but the truth is that they have wildly underestimated its costs. This is evidenced by the fact that over 1000 companies and unions, with nearly 2.4 million employees, have already been granted waivers from compliance with ObamaCare.

It is telling that even some of the biggest supporters of ObamaCare, such as unions, have applied for waivers from its restrictions. Will everyone be granted waivers, or only those who have favor? This concentration of discriminatory power in government is getting a bit creepy.


Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2011

http://www.tennessean.com/article/20110327/COLUMNIST0110/103270329/Health-care-law-promises-more-than-can-deliver?odyssey=mod|newswell|text|Opinion|p

Sunday, March 20, 2011

Reducing spending should be Congress' top priority

Published in The Tennessean, Sunday, March 20, 2011

Reducing spending should be Congress' top priority

by Richard J. Grant

The continuing resolution just passed by Congress and signed by President Barack Obama will keep the federal government funded for another three weeks. It will also cut planned spending by $6 billion. But during the previous three weeks the national debt increased by more than $109 billion.

At this rate of $6 billion every three weeks, it will take 825 weeks to reduce spending sufficiently to eliminate the deficit. That is 16 years. An increase in tax revenue will shorten the time, but if there is increased spending within entitlement programs, such as Social Security, Medicare and Medicaid, then it will take much longer. Expect entitlement spending to grow faster than revenue.

House Republicans had originally proposed cutting about $100 billion, but Democrats control the Senate and seem to believe that cutting even $6 billion is too much. This means that the national debt and our interest burden will continue to rise rapidly until voters stop it.

If Republicans propose a spending bill that appropriates $100 billion less than that requested in the president's budget, this does not "shut down'' the government. Previous administrations have functioned better on less. Voters should be intelligent enough to see that if Democrats refuse to make a reasonable deal, then they are in no way absolved from blame for the resulting government shutdown.

Given the high budget deficit, projected to be $1.65 trillion this year, as well as the high levels of constitutionally dubious spending, the Republicans should be prepared to stand firmly (with or without the Democrats) for government spending reductions. Sen. Rand Paul, R-Ky., has identified at least $500 billion worth of budget cuts that would be economically healthy and would not even touch the big entitlement programs.

If the election of 2010 meant anything, then voters are ready to place such limits onhe size of government. Voters are also willing to defund such programs as "ObamaCare,'' which goes by the wildly euphemistic name the Patient Protection and Affordable Care Act.

Normally, such program funding would have to be appropriated each year, or on a regular basis, by Congress. But hidden away by the last Congress is $105.5 billion of funding that is made automatically available. Unless the current Congress can stop it, $23.6 billion is already available, and the rest will be available over the next eight years.

Despite being declared unconstitutional in a federal court ruling in Florida and unconstitutional in part in a federal court in Virginia, and unlikely to survive U.S. Supreme Court scrutiny, "ObamaCare'' is funded and in the process of being entrenched. Given the constitutional consequences and the huge expenditures involved, Republicans should be more focused and resolute in their duty to compel Senate Democrats to agree to defund this program.

Another program set up to be funded without future congressional appropriations is the new Consumer Financial Protection Bureau created by the 2010 Dodd-Frank financial reform. This bureau will soon have widespread regulatory powers over financial institutions. Its funding is drawn from 10 percent (later rising to 12 percent) of the operating expenses of the Federal Reserve System. Defunding this new regulatory bureau would save the Treasury at least $500 million per year.

It would also save us from the insidious unintended consequences that always accompany such sweet-sounding regulatory programs.


Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2007-2011

Sunday, March 13, 2011

The "need" for unions isn't put into proper economic context

Published in The Tennessean, Sunday, March 13, 2011

The "need" for unions isn't put into proper economic context

by Richard J. Grant

Some decades ago I went to work for a company that turned out to be a closed union shop. That meant that all non-management workers had to either join the union or not work for the company.

The existence of a closed shop was not a manifestation of the exercise of workers’ natural rights: It was an outcome encouraged by the imposition of various labor laws upon workers and owners. The effect of these labor laws was to reduce the rights of both workers and owners while increasing the powers of those who wished to organize and lead trade unions.

The effect of the closed-shop rules was not to empower individual workers but to grant monopoly powers to the union. Individual workers were denied the right to negotiate separately with the company owners. This meant that both the owners and individual workers had their individual rights to negotiate taken away from them by the labor law.

Monopoly power is not a persistent natural phenomenon. Freedom of choice overwhelms those who expect us to stand still rather than innovate. Historical examples of the existence of monopolies invariably have resulted from the imposition of government charters or regulations. The East India Company is an example that should be vividly imprinted in our memories. The Declaration of Independence was in no small part a reaction to such statist encumbrances, and the Constitution that followed should have protected us from their reappearance in modern times.

History is full of legislatures and kings granting monopoly powers under the guise of charters, licenses, guilds, and closed-shop union laws. As is the case for all such laws, the first victim is freedom of choice. The real purpose is to limit the supply of labor and to limit competition. This is why such laws invariably promote conflict and limit our ability to provide for ourselves.

This is also why many critics of present-day union practices feel the need to preface their remarks with some lame version of “There was a time when unions were needed...” followed by some vague reference to Dickens. These critics mean well, but they fail to put the perceived need for unions into proper economic context.

The agitations and statist interventions that supported the rise of the trade union movement were not a reaction to the evils of what so many like to imagine were “unfettered free markets.” Lobbyists for special interests have existed as long as there have been governments. Work conditions have always reflected the political realities as much as the physical realities of the time. The trade unions were merely the latest interest group to learn how to use state regulatory power to protect their members from competition.

Until the Great Depression, the legality of union activity was ill-defined. But then a succession of legislative actions freed unions from antitrust scrutiny, imposed minimum wages on government contractors, and weakened the federal courts on union matters. Also, the Social Security Act contained provisions for unemployment compensation that served to reduce the cost to workers of strike action.

Over time, this legislated right to strike became confused with a natural right. But it was really nothing more than the granting of monopoly power to a union over an employer. The employer's right to freedom of association was taken away. Ignorance of this explains the self-righteous indignation of Wisconsin teachers’ union activists.


Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2007-2011

Sunday, March 06, 2011

States press sovereignty by rejecting health reform

Published in The Tennessean, Sunday, March 6, 2011

States press sovereignty by rejecting health reform

by Richard J. Grant

A law that is not enforced might as well not exist. We see this in property rights as well. An owner that fails to challenge those who use his property, whether land or trademark or any other form, over time risks losing control of that property. This is true for individuals, corporations, and sovereign states. The failure to live on or defend one's territory will result in its forfeiture to those who are willing and able to establish a presence there.

The failure to enforce a law will lead people to believe that it will never be enforced and allow them eventually to forget that the law exists. In this regard, the U.S. Constitution is no different from any other law.

The United States began as a decentralized federal republic within which the states retained sovereignty except for those powers specifically granted to the central government by the Constitution. It largely remains so, but over time the exercise of real power has gravitated toward the center.

The 10th Amendment of the U.S. Constitution states that “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” This amendment has not been repealed, but it has been neglected.

It was once taken for granted that the states were an integral part of a broader federal government. But now when we speak of the “federal government,” we mean the central government not including the states. From the beginning, the natural exercise of its powers led the central government to push out the practical limits of those powers. War and later the 17th Amendment also reduced the practical influence of the states over the central government.

Politicians in any government are tempted to curry favor with voters by visibly, if selectively, spending money on them while de-emphasizing the real source of those funds. As the central government expanded its powers of taxation and money creation, it was increasingly able to buy the cooperation of the states for its own programs. State governments were happy to receive extra funding without having to raise state taxes. Although there were strings attached to the funding, the full burden of the new commitment would usually not be realized until later.

Distracted by such temptations, the state governments have unwittingly abetted the expansion of the central government and its encroachment on their areas of responsibility. Education is not a constitutionally authorized area of federal responsibility. But the offer of federal money weakened the states’ resistance to federal mandates and programs. The centralization of influence over education has weakened private authority and reduced the choices available to students and families.

The central government has overstepped its constitutional authority in the area of health care. Resource-wasting programs such as Medicare and Medicaid impose burdens on the states and all taxpayers. Had the States more-presciently defended their spheres of sovereignty, they might not now be caught in such a regulatory and fiscal trap.

With the passage of the so-called Patient Protection and Affordable Care Act, the central government has claimed even more powers originally reserved to the states and the people. It is also unaffordable.

We now see state governments standing up to defend themselves, particularly in the areas of educational choice and freedom of choice in healthcare. They are returning responsibility to the people.



Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2007-2011