NCPA | Daily Policy Digest

Provided courtesy of: http://www.ncpa.org

Daily Policy Digest

Capitalism, Democracy and Environmental Quality

02 Sep 2010 08:09:58 CDT -

Both capitalism and democracy improve a society's quality of life, measured by such things as infant mortality and literacy.  Suppose, however, that beyond improving the basic conditions of human life, the most important goal is to improve environmental quality.  In that case, asks Michael D. Stroup, professor of economics at Stephen F. Austin State University and a senior fellow with the National Center for Policy Analysis, which should be more strongly encouraged in other countries: capitalism or democracy?

Data on members of the Organization for Economic Cooperation and Development (OECD), a group of developed countries, shows that additional income, or gross domestic product (GDP), is linked to lower emissions.  Over the period 1985 to 1995:

• A 10 percent increase in per capita income reduced daily sulfur oxides emissions per billion dollars of GDP by 7 metric tons.
• The income increase reduced nitrous oxide emissions per billion dollars of GDP by 2.2 metric tons.
• The higher income also reduced discharges of organic water pollutants by 464 kilograms.

The Fraser Institute's economic freedom index and Freedom House's political rights index can each be used to evaluate the relative impacts on environmental quality from increases in economic freedom and political rights.  Using the OECD data on emissions of pollutants in the same analysis as above reveals the impact of an increase in democracy when holding economic freedom constant:

• A one-unit increase in the democracy index reduces sulfur oxides emissions per billion dollars of GDP by 42 metric tons per day.
• The same increase in democracy reduces discharges of organic water pollutants per billion dollars of GDP by 21 kilograms daily.
• However, a one-unit increase in democracy increases nitrous oxide emissions per billion dollars of GDP by 28 metric tons.

By contrast, holding political freedom constant reveals that increased capitalism reduces all three types of pollutants:

• A one-unit increase in the economic freedom index reduces nitrous oxide emissions per billion dollars of GDP by 162 metric tons per day.
• The increase in economic freedom reduces discharges of organic water pollutants per billion dollars of GDP by 154 kilograms daily.
• It also reduces sulfur oxides by 131 metric tons.

Developing countries with limited natural and institutional resources can improve air and water quality more efficiently by increasing the amount of economic freedom in society rather than by expanding democratic control over collective resource allocations, says Stroup.

Source: Michael D. Stroup, "Capitalism, Democracy and Environmental Quality," National Center for Policy Analysis, September 2, 2010.

For text:

http://www.ncpa.org/pub/ba721

For more on Environment Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=31

Low Interest Rates Squeezing Pension Funds

02 Sep 2010 08:09:57 CDT -

As interest rates plunge in an attempt to save the U.S. economy and banking system, managers of public pension funds are having a tough time filling the widening gap between assets and liabilities.  That's because tax revenues, the main source of funding for most state pension funds, have fallen sharply since the recession began in December 2007:

• The largest states, such as California and New York, face the biggest budget gaps.
• But the pension squeeze is even worse for a handful of smaller states.
• That's because the size of their pension fund shortfall is much larger in relation to the size of their economies.

"If it takes up a large amount of their gross domestic product (GDP), essentially they are going to have to grow their way out of this," says Pamela Villarreal, a senior policy analyst with the National Center for Policy Analysis (NCPA). "It's just not feasible."

• Connecticut, for example, which has only 27 cents set aside for every dollar of pension liabilities, will have to close a funding gap that represents roughly a third of its GDP, according to an NCPA analysis.
• The shortfall for Kentucky, which is only 37 percent funded, amounts to 36 percent of GDP.
• Hawaii, which has set aside only 31 cents per dollar of pension obligations, has to come up with an amount equal to 37 percent of GDP, according to NCPA figures.

States have limited ability to borrow money to shore up pension funds; when they do, they simply defer the day of reckoning.

Source: John W. Schoen, "Low interest rates squeezing pension funds," MSNBC.com, September 2, 2010.

For text:

http://www.msnbc.msn.com/id/38941692/ns/business-your_retirement/#

For NCPA study:

http://www.ncpa.org/pub/st329

For more on Economic Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=17

ObamaCare and the Constitution

02 Sep 2010 08:09:56 CDT -

The new health care law, nicknamed ObamaCare, requires every American to purchase health insurance or pay a fine.  Supporters say this unprecedented requirement is permitted by the Constitution's Commerce Clause, which allows Congress "to regulate commerce...among the several states."   Robert A. Levy, a distinguished legal scholar who chairs the Cato Institute board of directors, speaks on the legitimacy of this legal interpretation.  He gave three reasons why the individual mandate should not pass constitutional muster, says Reason Magazine.

• The Commerce Clause was never intended, and has never been used, to compel the purchase of a private product.  If Congress can force individuals to buy health insurance, then Congress can mandate the purchase of exercise equipment, diet foods, and on and on -- extending the dominion of the federal government to all manner of human conduct, including nonconduct. 
• The penalty for violating the mandate is not a tax.  That means Congress's power "to lay and collect taxes" does not apply.  To justify the mandate, Congress expressly cited the commerce power but not the taxing power.  The courts should be guided accordingly.
• Even if the penalty is deemed to be a tax, the Constitution does not authorize it.  The Supreme Court has held that Congress cannot use its taxing power as a backdoor means of regulating, unless the regulation is authorized elsewhere in the Constitution.  In this case, there is no other constitutional authorization.

Source:  Robert A. Levy, "ObamaCare and the Constitution," Reason Magazine, August-September 2010.

For text:

http://reason.com/archives/2010/06/17/obamacare-and-the-constitution

For more on Health Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=16

Business Leaders Explain How to Create Jobs: Arthur B. Laffer

02 Sep 2010 08:09:55 CDT -

Columnist Donald Lambro asked America's major business associations, chief executive officers and top economic analysts to name the three best ways to create jobs and expand the U.S. economy.  Here's what economist Arthur B. Laffer had to say:

• The United States should move toward a true flat tax where taxes on things such as income, corporations, payroll and Medicaid are eliminated in favor of two flat-rate taxes of 11 percent on business net sales (value added) and personal unadjusted gross income (with some deductions).  A true flat tax with a rate of 11 percent would be static revenue positive by about 3 percent of gross domestic product (GDP) and would spur enormous economic growth.
• Once a flat tax is put into law, America should also have a federal, state and local tax amnesty program to bring tax cheats into compliance with the new tax codes.  It is estimated that such a tax amnesty program would raise a one-time amount of somewhere between $600 billion and $800 billion, and $50 billion annually on an on-going basis.
• Additionally, the Federal Reserve should do what needs to be done to return to responsible monetary policy.  This entails selling upwards of $1 trillion in Federal Reserve assets to contract bank reserves back to where total reserves are approximately equal to required reserves.  Such actions will help ensure a stable value of the dollar going forward.
• Tax reform, along with spending restraint, sound money, free trade and a rational regulatory policy would lead to a period of exceptional prosperity and asset appreciation.

Source: Donald Lambro, "Business Leaders Explain How to Create Jobs," Human Events, August 5, 2010.

For text:

http://www.humanevents.com/article.php?id=38405

For more on Economic Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=17

MBAs Are For Wusses

02 Sep 2010 08:09:54 CDT -

Many Israeli tech start-ups should pay royalties to the army, says Edouard Cukierman, a venture capitalist in Tel Aviv, Israel.  He is only half joking.  Despite the recession, Israel's technology exports grew by more than 5 percent last year.  Cukierman thinks military service deserves some of the credit.  Israel's army does not just train soldiers, he says; it nurtures entrepreneurs.

• Teenagers conscripted into high-tech units gain experience "akin to a bachelor's degree in computer science," says Ruvi Kitov, cofounder and chief executive of Tufin Technologies, an Israeli software firm.
• Almost all of Tufin's employees in the country are, like Kitov himself, veterans of the Israel Defense Forces (IDF).
• One of the firm's cash cows is software that finds spam servers and blocks their transmissions. It is based on IDF cyberwarfare technologies that developers first used as soldiers.

Traditional armies drill unquestioning obedience into their grunts.  Israel's encourages creativity.  An IDF spokesman says it is "highly acceptable" for soldiers to point out problems and pitch ideas to superiors.  In other countries, employers rely on the college-entry obstacle course to select the brightest and best.  In Israel, thanks to conscription, most job applicants have tackled real obstacle courses, says The Economist.

In the IDF soldiers are encouraged to improvise, lest they lose the initiative in the fog of battle.  This culture helps ex-army entrepreneurs solve civilian problems, says The Economist.

Source:  "MBAs are for wusses," The Economist, August 26, 2010.

For text:

http://www.economist.com/node/16892040

For more on International Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=26

CDHC - Weekly Health Policy Digest

Provided courtesy of: http://www.ncpa.org/sub/whpd/

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