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The Lighthouse


The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 16, Issue 43: October 28, 2014

  1. Obamacare Stifling Full-Time Hiring
  2. Ebola and Incentives
  3. K-12 Spending and the Midterms
  4. The Trick or Treat Tax
  5. New Blog Posts
  6. Selected News Alerts


1) Obamacare Stifling Full-Time Hiring

Nearly five years after the official end of the Great Recession, the current economic recovery is distinguished by a disproportionate rise in part-time employment and moribund hiring for full-time labor. Why are employers holding back? In his latest op-ed for the Daily Caller, Independent Institute Senior Fellow John R. Graham lays the responsibility at the doorstep of the White House.

“Employers themselves continue to tell us that they are cutting employment in response to Obamacare,” Graham writes. “Some policy analysts who support Obamacare can happily torture the data until it confesses to Obamacare’s lack of harm. However, employers themselves are giving us a clear message: Obamacare is stifling their willingness to increase workers’ hours.”

Graham takes to task a study published last month, by the Urban Institute and the Robert Wood Johnson Foundation, that attributes the labor-market doldrums to a slow economic recovery. That study, Graham suggests, overlooks a vital source for understanding employers: surveys that asked them about their responses to the Affordable Care Act—including polls conducted by the Federal Reserve Banks of New York and Philadelphia. Too often, the media defer to the nation’s central bankers on arcane matters of monetary policy. In this case, however, the media and public-policy organizations can learn much from Federal Reserve Bank reports. The lesson: Sometimes a good way to learn how hiring managers and other decision-makers think is to ask them.

Yes, Obamacare Is Continuing to Hurt Employment, by John R. Graham (The Daily Caller, 10/21/14)

Priceless: Curing the Healthcare Crisis, by John C. Goodman

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2) Ebola and Incentives

Tragically, the Ebola problem shows that government officials and the public-health community have yet to grasp the importance of basic economic principles in combatting communicable disease. Instead, they have relied on an “engineering” approach that ignores the roles of self-interest and incentives in human action. Yet those factors are at the root of almost all the mistakes made to date regarding Ebola, including the lapses of Thomas Eric Duncan, the Liberian man who succumbed to the deadly virus after he brought it to the United States, as well as the errors of the nurses who became infected with Ebola and of Dallas Presbyterian Hospital, according to Independent Institute Senior Fellow John C. Goodman. Each had incentives to ignore the costs that their risk-taking or negligence imposed on other parties.

“How could the incentives be different?” Goodman writes in Forbes. “We could consider penalties for people who unreasonably put others at risk (even if there is no eventual harm). And we could consider rewarding those who (at significant cost of themselves) avoid putting others at risk.”

Goodman also urges federal officials to lift restrictions, imposed by the Food and Drug Administration, that prevent hospitals from fully utilizing the accurate and fast-acting Ebola detection kits that some institutions already possess. Dallas Presbyterian Hospital, for example, possessed such a kit when it admitted Duncan into its emergency department, but it failed to use it because the FDA has approved the kits only for medical research, not for testing patients. This is yet another example of the federal agency’s tendency toward deadly overcaution—itself a product of bad incentives. It’s also additional evidence of hubris and myopia that plague policymakers who prescribe engineering solutions where an economic approach would be more effective.

What Economics Can Teach Us about Ebola, by John C. Goodman (Forbes, 10/17/14)

Priceless: Curing the Healthcare Crisis, by John C. Goodman

FDAReview.org

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3) K-12 Spending and the Midterms

Public spending on education is a heated issue in some elections that voters will decide next week. In those races—a U.S. Senate seat in North Carolina and the governorship in Wisconsin are two examples—candidates on the offensive have lashed out at opponents for making allegedly reckless cuts to K-12 schooling. They may claim that school funding and student achievement are closely associated, but in reality, no strong tie has been proven, according to Independent Institute Research Fellow Vicki E. Alger, who is writing a book on the history of the Department of Education.

For evidence that the tie between monetary inputs and scholastic outputs is weak, consider that per-pupil spending can vary between states by more than ten thousand dollars. Whereas New York spends more than $20,000 per pupil on K-12 schooling (the national average is $12,000), Idaho and Utah spend less than $8,000 per pupil, Alger explains in an op-ed for USA Today. “Using the ‘more is better’ formula, top spenders should be top performers,” she writes. “But the relationship between spending and student achievement is murky at best.”

More evidence of a disconnect between spending and outcomes comes from the National Assessment of Education Progress. Comparing test scores on national reading and math exams, the organization finds that low-income public-school students from low-spending states score the same as low-income students from high-spending states. If per-pupil spending were strongly correlated with student achievement, you would not expect that result. The message for voters is that they won’t learn much if they ask which candidate plans to support more spending on K-12 schooling. Writes Alger: “The question voters should be asking is: Which candidate has a plan to improve education that makes the most sense.”

Education Attack Ads Distort Spending Facts, by Vicki E. Alger (USA Today, 10/22/14)

Distorted Education Attack Ads Hide the Facts, by Vicki E. Alger (The Beacon, 10/27/14)

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4) The Trick or Treat Tax

As Halloween approaches, here’s a scary fact to consider: Seventeen states have imposed higher taxes on candy—and twenty-six have enacted tax hikes on sugary beverages. Tax pushers typically sell their nostrums by telling the public that the additional taxes will reduce unhealthy eating, but new evidence suggests that their primary motive may be to feed the government’s growing addiction to tax revenue.

A forthcoming study on selective taxation, by Independent Institute Research Director William F. Shughart II and economist Adam J. Hoffer, finds that excise taxes are weak tools for reducing consumption of the taxed product. “Not only do selective taxes do little to influence behavior, their burden falls disproportionately on low-income households during a time of growing income inequality,” Hoffer and Shughart write.

One reason for the income-based disparity, according to Hoffer and Shughart, is that wealthier consumers typically have a greater variety of alternatives for satisfying their cravings, allowing them to more easily find lower-taxed substitutes for the higher-taxed goods. In any case, state politicians have better policy options at their disposal than selective taxes, but they avoid them because those policies “do not generate tax revenue,” Hoffer and Shughart write. That’s also true of lawmakers in Washington, DC, where members of Congress last summer introduced the Sugar-Sweetened Beverages Act of 2014. The so-called SWEET Act is a sour trick being played on the public, especially on low-income consumers.

Trick or Treat? Government’s Halloween Tax Costume, by Adam J. Hoffer and William F. Shughart II (Star-Telegram, 10/26/14)

Big Brother Declares War on Consumption, by William F. Shughart II, Adam J. Hoffer, and Michael D. Thomas (USA Today, 8/4/13)

Taxing Choice: The Predatory Politics of Fiscal Discrimination, edited by William F. Shughart II

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

Social Security for Nazis
K. Lloyd Billingsley (10/27/14)

The 2014 Wastebook Is Here!
Craig Eyermann (10/23/14)

Ruling Class Rail Rolls On
K. Lloyd Billingsley (10/22/14)

Fiscal Year 2014 National Debt Wrap-up
Craig Eyermann (10/21/14)

You can find the Independent Institute’s Spanish-language website here and blog here.

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6) Selected News Alerts

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  • MyGovCost.org
  • FDAReview.org
  • OnPower.org
  • elindependent.org