Volume 17, Issue 29: July 21, 2015
- College Tuition, the Federal Reserve, and Love Gov
- Congress Must Cut Spending to Justify Killing Medical-Device Tax
- What the Greeks Can Learn from the Irish
- Soda-Tax Health Claims Fizzle Out
- New Blog Posts
- Selected News Alerts
1) College Tuition, the Federal Reserve, and Love Gov
Its not often that we extol the virtues of the Federal Reserveindeed, this might be a firstbut a new report from the central banks New York branch echoes what weve long said about federal student aid: its been raising college tuition across the United States. Since 2001, annual student loan originations have more than doubled and tuition has climbed 46 percent. Correlation doesnt prove causation, of course. But when the Feds researchers found that increases in student-aid limits from 2006 to 2008 were met with students taking out more loans and universities capturing most of the money, they thought that government aids role in causing tuitions to rise looked highly probable.
As a Wall Street Journal editorial explains, Independent Institute Senior Fellow Richard Vedder connected these dots a decade ago, estimating in 2006 that every dollar of grant aid raised tuition 35 cents.
Perhaps the Feds researchers have also been watching Love Gov, the new, satirical five-part video series produced by Independent Institute in association with Emergent Order. Episode 1 deals with the student-debt problem, as Scott Gov Govinski urges Alexis Smith to take on more debt than she can afford to pay. If you havent yet seen it on YouTube, please take a look and share it on Facebook. Youll be joining the more than 800,000 combined viewings (and growing). Plus, its a lot more instructive than those cat videos youve been watching!
College Aid Means Higher Tuition (The Wall Street Journal, 7/19/15)
2) Congress Must Cut Spending to Justify Killing Medical-Device Tax
In June, the House of Representatives passed a bill to kill Obamacares 2.3 percent tax on medical devices; the legislation is now in the Senate. If Congress votes to kill the tax and manages to override President Obamas promised vetothis would be good for the cause of limited government, correct? Not necessarily, says Independent Institute Senior Fellow John R. Graham.
Repealing the medical-device tax, Graham argues, would be fiscally irresponsible unless Congress cuts federal spending enough to offset the lost tax revenue. The Congressional Budget Office estimates that killing the tax would raise the federal deficit by $24 billion over the next ten years. So far Congress has not proposed the kind of spending cuts needed.
Yet even President Obama has proposed spending cuts that would nearly do the trick. In his February 2012 budget, he proposed reforms to a tax that hospitals pay to states. Because the federal government matches a portion of the provider tax collected by the states, slashing this tax would reduce federal spending $22 billion over ten years. Congress should take this idea from Obamas playbookand pass small additional spending cutsif it wishes to kill the medical-device tax responsibly. It is long past time for congressional Republicans to walk the talk on balancing the budget, Graham concludes.
The GOPs Fiscally Unsound Health Proposals, by John R. Graham (Real Clear Policy, 7/16/15)A Better Choice: Healthcare Solutions for America, by John C. Goodman
3) What the Greeks Can Learn from the Irish
The Greeks have been on a wild roller coaster ride with more downs than ups. Voters earlier this month celebrated passage of a referendum denouncing fiscal austerity, only to see Prime Minister Alexis Tsipras agree to a financial bailout with conditions that voters would have rejected. Unfortunately, confusion surrounds Greeces ailment and its cure. What it needs isnt austerity per se. What it needs are free-market reforms like the ones that revived Irelands economy in the late 1980s and 1990s, according to Independent Institute Senior Fellow Benjamin W. Powell.
In the Ireland of 1986, government accounted for 55 percent of the spending in the economy, compared to 52 percent in Greece today. And like Greece, Irelands total debt exceeded the value of its final output. But in 1987, Irelands government got serious about reversing course. It began making significant spending cuts in healthcare, schooling, and agriculture; cut back onerous business regulations; and even abolished entire government agencies. In the 1990s, the island nation began enacting tax cuts without increasing the public debt. The economy has since attracted workers from other corners of the European Union.
Irelands courageous reforms and the economic growth that accompanied them fundamentally transformed the economy by significantly reducing the burden of government, Powell writes. Greece could make a similar transformation if it had the political will to do it.
Greece Should Learn from Ireland, by Benjamin W. Powell (Detroit News, 7/8/15)
Making Poor Nations Rich: Entrepreneurship and the Process of Economic Development, edited by Benjamin W. Powell
4) Soda-Tax Health Claims Fizzle Out
Thirty states in the nation have enacted taxes on soft drinksostensibly to curb obesity and diabetes. Even some cities are trying to get into the act. Berkeley, Calif., for example, now has a soda tax that proponents say will increase soft-drink prices by 20 percent and cut consumption by up to 20 percent. Such claims, however, are wishful thinking, according to William F. Shughart II.
Writing in the Wall Street Journal, Shughart argues that virtually all of the touted benefits of soda taxes are hogwash. They really dont do much to reduce consumption, obesity, or health problems. Moreover, they help fuel a wasteful competition between pro-tax lobbyists and anti-tax lobbyists. The only thing that soda taxes are good forif you can call it goodis quenching a governments thirst for tax revenues.
The argument that taxing sugary drinks helps to promote healthy lifestyles deflects attention from their actual effects, Shughart writes. We dont normally expect politicians to be truthful. But if they want to impose these taxes, they should be honest enough to admit that they will not end obesity or diabetes, but rather will generate more of other peoples money for profligate state governments to spend.
Should There Be a Tax on Soda and Other Sugary Drinks?, by William F. Shughart II (The Wall Street Journal, 7/12/15)
Taxing Choice: The Predatory Politics of Fiscal Discrimination, edited by William F. Shughart II (Editor)
5) New Blog Posts
From The Beacon:
Did 15 MillionNot 6.6 MillionPay Obamacares Mandate Penalty?
John R. Graham (7/20/15)
The CSA and Symbols: Learning from History
Melancton Smith (7/17/15)
Love, Marriage, and Green Cards
Abigail Hall (7/16/15)
Lets Hope Arizonas New Health Law Is Contagious
John R. Graham (7/15/15)
Governments Burden on Young Americans
Randall Holcombe (7/15/15)
None Heil Trump
Mary Theroux (7/14/15)
From MyGovCost News & Blog:
K. Lloyd Billingsley (7/20/15)
Should the U.S. Ditch the Debt Ceiling?
Craig Eyermann (7/17/15)
Big Bucks for Bureaucrats
K. Lloyd Billingsley (7/15/15)
6) Selected News Alerts