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Volume 14, Issue 38: September 18, 2012
- The Hidden Costs of Priceless Healthcare
- Income Tax Overhaul Is Long Overdue
- New Federal Reserve Policy Picks Favorites
- The Independent Review: Fall Issue Now Available
- New Blog Posts
1) The Hidden Costs of Priceless Healthcare
A recent article in the New York Times reported on an emerging problem neglected in the run-up to the signing of the Affordable Care Act: the projected shortage of doctors. Because the new healthcare law gives consumers a right to a host of preventive measures without copayments or deductibles, it’s conceivable that doctors could spend their entire day delivering screening tests instead of seeing patients who are sick, according to Independent Institute Research Fellow John C. Goodman. To make the larger caseload more manageable, nurse practitioners and others may need to perform tasks now taken up by doctors.
But the situation is actually more complicatedand more problematicthan it appears. As Goodman notes, no one in health care sees a real market pricenot doctors, not hospitals, and not patients. Therefore no one really knows whether more money should be spent training one more doctoror two more nurses. Goodman writes: “If we choose the doctor, should she be a primary care physician? Or an internist? Or some other specialist? . . . In the absence of real prices, we have no way of knowing the marginal value of one more doctor, one more nurse, one more technician, or one more anything.”
The problem of allocating scarce resources without the guidance of a price system is the same challenge that the Soviet economic system faced, Goodman explains. Prices serve to keep various inputsincluding different types of labor servicesin balance with each other and with consumer demand. Remove real prices and you remove an essential mechanism for rational resource allocation. In healthcare, some consumers will react by leaving the highly regulated market and entering a less regulated marketconcierge care. This will make it harder for consumers in the more controlled marketthe “second tier”to find a doctor who will see them. “And ironically, those in the second tier will primarily be the very people the Democratic supporters of ObamaCare thought they were trying to help,” Goodman concludes.
Health Care Without Prices, by John C. Goodman (Right Side News, 9/5/12)
Priceless: Curing the Healthcare Crisis, by John C. Goodman
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2) Income Tax Overhaul Is Long Overdue
Next year the federal income tax will be celebrating its 100th birthday. But will you be celebrating? Probably not. One reason is that you might think the feds take too much from you in order to fund a bloated bureaucracy that provides little in the way of services that you actually value. The other reason is that the annual ritual of filing tax returns has for many taxpayers become frighteningly complicated, notes Burton A. Abrams, a research fellow at the Independent Institute and director of the Government Cost Calculator at MyGovCost.org, in a new op-ed for Investors Business Daily.
What began 99 years ago as a three-page income tax form with one page of instructions has evolved into a monstrosity with more than 500 separate tax forms, Abrams writes. Tax-preparation instructions now exceed a staggering 7,000 pages.
The enormous size of the tax-preparation industry is a leading indicator of the tax codes labyrinthine complexity. That complexity, according to Abrams, is the fundamental scandal of the tax codethe cause of many of the frustrations it fosters. We need a fairer, more transparent and simpler system, he continues. If U.S. politicians want to avoid scandal and make life easier for everyone, their goal should be an income tax code that mirrors its first year. Three pages of forms and one page of instructions seems just about right.
Celebrate the Income Taxs 100th Birthday by Fixing It, by Burton A. Abrams (Investors Business Daily, 9/11/12)
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3) New Federal Reserve Policy Picks Favorites
Last week the Federal Reserve made a landmark announcement: it will buy $40 billion in mortgage-backed securities each month until the lagging economy shows meaningful growth. At first glance, the Feds new round of quantitative easingQE3, as its calledseems no different than the earlier rounds of pump priming it has undertaken since the advent of the Great Recession. In reality, by buying mortgage-backed securities rather than government securities (its traditional tool known as open-market purchases), the Fed is engaging in a new kind of enterprise. This current foray, specifically targeted at the housing market, is crony capitalism, writes Randall Holcombe, a research fellow at the Independent Institute, in the first of three related posts in The Beacon.
The sheer size of the Federal Reserves intervention is remarkable. Whereas the U.S. governments bailout of General Motors totalled $60 billion, QE3 amounts to $40 billion per month. By favoring specific firms in the real estate and financial industries, the Fed will be reinforcing perceptions of political and institutional patronage. This is a risky gambit: Perceptions of favoritism may strengthen the political movement to limit the central banks relative independence and autonomy. On the other hand, perhaps Fed Chairman Ben Bernanke knows that if he is unsuccessful by Novembers election day, he will be out of a job next year. So, hes going for broke.
QE3 offers lots of lessons to students of economic policy, but none of them put the Fed in a particularly good light, Holcombe concludes in his third installment. Bernankes policies create a serious threat to the Feds independence. Prior to 2008 one could see the Fed as an impartial administrator of monetary policy. Under Bernanke it has expanded its regulatory powers, is heavily involved in economic policy, and has been captured by the industry it is supposed to be regulating. Bernankes actions offer good arguments to those who would like to see the Feds independence reduced.
The Feds New Foray into Crony Capitalism, by Randall Holcombe (The Beacon, 9/13/12)
GM, QE3, and Crony Capitalism, by Randall Holcombe (The Beacon, 9/14/12)
QE3: An Example of Regulatory Capture, by Randall Holcombe (The Beacon, 9/17/12)
Boom and Bust Banking: The Causes and Cures of the Great Recession, edited by David Beckworth
Housing America: Building Out of a Crisis, edited by Randall Holcombe and Benjamin Powell
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4) The Independent Review: Fall Issue Now Available
The fall 2012 issue of The Independent Review, our quarterly journal edited by Robert Higgs, is hot off the press! As always, our quarterly journal answers a host of fascinating questions.
Among those raised in the new issue are the following:
- What assumptions must economic theorists drop in order to make their work relevant to policymakers in the real world?
- How can philanthropists help make colleges and universities more receptive to the ideals of a free society? Read the article.
- What does the Arab-Israeli dispute suggest about broad trends of war in the world?
- How do markets moderate the dark side of emotional morality? Read the article.
- What essential provision has been lacking in proposals for a Balanced Budget Amendment? Read the article.
- How do economists view ideological openness?
- How would a market approach to accreditation in higher education work?
- How did property rights work to minimize environmental externalities in the worlds most productive silver mining district?
- How would a market-based legal system solve the problem of regime uncertainty?
- Why is individualism declining in the western world?
- What is the key issue in regulatory reform?
- How can Adam Smith help us better understand whats wrong with government intervention?
- What exactly is the U.S. governments policy on torture?
- If a society sought only to maximize general prosperity, what kinds of moral beliefs would it choose? Read the book review.
- How does war-making rhetoric affect the size and scope of government, the status of rights, and the ideological landscape? Read the book review.
- What rhetorical strategies do war makers employ to reduce the publics resistance to going to war? Read the article.
The Independent Review (Fall 2012)
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5) New Blog Posts
From The Beacon:
From MyGovCost News & Blog:
You can find the Independent Institute’s Spanish-language website here and blog here. Overseen by Independent Institute Research Analyst Gabriel Gasave, our Spanish website has 1,600 articles translated into Spanish and our Spanish blog has more than 31,000 posts!
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