Barry is a Senior Economist with the National Center for Policy Analysis, one of the most influential think tanks in America today.
The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care, taxes, Social Security, welfare, criminal justice, education and environmental regulation.
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Daily Policy Digest
Provided courtesy of: http://www.ncpa.org/
Daily Policy Digest
- Challenging Dodd-Frank in Court
- 26 Nov 2014 07:00:58 CDT -
The Dodd-Frank Act has created a host of problems, for consumers, banks and other financial entities. According to the Financial Services Roundtable, there are now 40 percent fewer free checking accounts as a result of the law, and banks have seen large drops in annual earnings. The bill also requires 26,000 full-time employees devoted to paperwork compliance. The Economist notes that financial regulation, in general, has been unpredictable and opaque, with new Dodd-Frank regulations continuing to be developed years after its passage.
The Competitive Enterprise Institute (CEI) has actually filed a lawsuit in federal court challenging the Dodd-Frank Act, and oral arguments were heard in the case in November. Specifically, the suit focuses on the Consumer Financial Protection Board (CFPB) and the Financial Stability Oversight Council (FSOC). The CFPB has extensive control over the consumer finance industry, while FSOC has a great deal of power to regulate large financial companies. Iain Murray of CEI explains the plaintiffs' arguments:
- The CFPB is unaccountable to the other branches of government. Its $400 million annual budget comes not from Congress but from the Federal Reserve, leaving legislators without power over the agency's purse.
- Only in very limited circumstances can the president remove the CFPB director, limiting his ability to ensure that laws are "faithfully executed."
- Dodd-Frank tells courts to defer to CFPB legal interpretations, limiting judicial scrutiny of CFPB actions.
- FSOC can liquidate private companies, which CEI calls a violation of due process and the law's guarantee that bankruptcy laws will be "uniform."
Murray notes that there may be an effort among the new Congress to reform Dodd-Frank in 2015.
Source: Iain Murray, "Dodd-Frank Court Case Could Provide Injunctive Relief for America," The Blaze, November 18, 2014; "Capital Punishment," Economist, November 15, 2014.
For more on Economic Issues:
- FEMA Playing a Greater Role in State Disasters than Intended
- 26 Nov 2014 07:00:57 CDT -
The Federal Emergency Management Agency (FEMA) is considered by many to be the nation's "first responder" in the event of a disaster, but a new report from Chris Edwards of the Cato Institute contends the agency is supposed to be a financial aid organization only -- not to replace state and local responders. That, however, has not been the case, as FEMA has become more involved in handling state disasters.
Under the Stafford Act of 1988, the federal government is only supposed to involve itself in state disasters if responding to the disaster is beyond the state's capability. But in practice, says Edwards, the federal government routinely agrees to declare state disasters "major disasters" so that they qualify for aid from FEMA. While just 51 disasters were declared in the 1970s, 127 were declared in the 2007s. Already in the 2010s there have been 139 disaster declarations. What's the problem? Edwards explains:
- Federal intervention creates a great deal of paperwork which inhibits recovery and response.
- Residents of non-dangerous states are forced to subsidize those who choose to live in more dangerous locations.
- States and localities are disincentivized from preparing for disasters themselves, because they expect federal monetary aid. As a result, states have cut disaster preparedness budgets.
Edwards explains how FEMA has actually obstructed local relief efforts, despite that local actors are often better equipped to handle disasters because they are familiar with the area. Moreover, the program has been plagued with waste: a GAO report estimates that at least $1 billion in Hurricane Katrina aid payments were invalid, and a report from the Associated Press found that individuals received up to $1 billion in taxpayer funds by claiming to have lived in homes that did not actually exist before the hurricane.
Source: Chris Edwards, "The Federal Emergency Management Agency," Cato Institute, November 18, 2014.
For more on Government Issues:
- Top Earners Change from Year to Year
- 26 Nov 2014 07:00:56 CDT -
Are America's highest earners the same, static group of ultra-wealthy individuals, sitting atop the income distribution from year to year? Not at all. As Mark J. Perry of the American Enterprise Institute explains, the wealthiest Americans are an ever-changing group, and Americans move up and down the income ladder throughout their lives.
The IRS recently issued new data regarding how often American taxpayers appeared in the list of top 400 earners, analyzing tax returns across the 19-year period from 1992 to 2010. What they found differs markedly from most commentary on income mobility. There were 4,024 unique taxpayers whose tax returns filed from 1992 to 2010 placed in the top 400 earners. Of those:
- The vast majority -- 72.3 percent -- of the 4,024 taxpayers were in the top 400 only once during the period.
- Just 27.7 percent of the top 400 taxpayers made the list more than once during the period.
- Eighty-five percent of top earners (3,413 of the 4,024 taxpayers) made it into the group only once or twice.
- Just 95 taxpayers (2.4 percent of the total) sat in the top 400 for at least a decade.
Perry says the data contradicts the widely-held belief that America's top income earners are a set group that doesn't move down the income ladder.
Source: Mark J. Perry, "IRS data show that the vast majority of taxpayers in the 'Fortunate 400' are only there for one year," American Enterprise Institute, November 25, 2014.
For more on Tax and Spending Issues:
- Reduced Saving Means Fewer Jobs and Growth
- 26 Nov 2014 07:00:55 CDT -
Various studies have claimed Americans' retirement savings are in trouble, with some estimates suggesting that up to 84 percent of American shave insufficient savings targets. Veronique de Rugy of the Mercatus Center says that those figures are somewhat overblown. Still, she says the United States does have a saving problem:
- In 1975, Americans had a personal savings rate of 17 percent. In 2005, it fell to a low of 2.2 percent. While that rate has increased somewhat, de Rugy says it is unlikely to continue to increase.
- With less saving, there is less capital, which slows economic growth and investment.
- Recent studies suggest that older businesses are increasingly dominating the American market -- a problem, because it is the young and new firms that create new jobs. This has been attributed to the fall in the personal savings rate.
What to do about this? The answer is not making Social Security even bigger, says de Rugy. While some have suggested strengthening the program, it is unsustainable and underfunded by trillions of dollars. Moreover, she notes that the existence of the program disincentivizes saving; by one count, $100 in Social Security wealth reduces private saving by $40.
Instead, de Rugy suggests that the government do the following:
- Get rid of policies that penalize savings or artificially encourage consumption.
- Replace the tax system with a consumption-based tax.
- Get rid of the Federal Reserve's zero-interest rate policy -- it only discourages saving.
- Reform housing policies that encourage Americans to spend and take on debt.
Source: Veronique de Rugy, "Why Don't Americans Save Their Money?" Reason Magazine, December 2014.
For more on Economic Issues:
- Which Tax Deductions Expired this Year?
- 26 Nov 2014 07:00:54 CDT -
Each year, Congress votes on a group of bills known as "tax extenders" -- various deductions or tax credits that must be renewed year-to-year, or else they expire. Several of the provisions expired at the beginning of 2014 and have yet to be renewed. Some are speculating that Congress will vote on the extenders before Christmas. Until then, Kelly Erb at Forbes offers a list of expired tax provisions that taxpayers should take note of when they go to file their taxes:
- Educators were previously able to deduct up to $250 for books and other classroom supplies that teachers had not been reimbursed for during the school year.
- When a lender writes off a debt, the individual being forgiven is supposed to report that forgiven debt to the IRS to be counted as income. There was an exception to this rule, however, for underwater homeowners, though the provision expired last year.
- Federal tax law allows taxpayers to deduct their state income taxes for federal income tax purposes. Previously, taxpayers were instead allowed to deduct state sales taxes -- a provision that was aimed at taxpayers in states that lacked an income tax. That provision expired last year.
- One tax provision had allowed IRA holders to exclude up to $100,000 from their income if they paid IRA funds to charity. As that provision has expired, IRA holders must pay taxes when they withdraw their IRA funds for charity donations.
- Employers who hired veterans and other specified workers were previously given a tax credit of up to $9,600 per veteran, but the credit has expired for employees hired this year.
These are just a few of the 55 tax extenders that expired at the start of the year.
Source: Kelly Phillips Erb, "10 Expired Tax Provisions That Might Affect You In 2014," Forbes.com, November 24, 2014.
For more on Tax and Spending Issues:
- Some Generic Drug Costs Are Rising: Why?
- 25 Nov 2014 07:00:53 CDT -
Americans have benefited enormously from generic drugs. Scott Gottlieb, resident fellow at the American Enterprise Institute, says that the average generic drug price is 75 percent less than its brand-name counterpart. From 1999 to 2010, generic drug use saved the American health system over $1 trillion; in 2010, it saved Americans $157 billion.
Some lawmakers have recently turned their attention to generic drug costs, because a few generics have seen substantial price increases. According to Gottlieb, however, the individual cost increases are not indicative of an overall trend but have to do with the specific circumstances of the individual drugs:
- Of the 10 generic drugs that have seen significant increases in price over the last two years, some saw their prices rise because manufacturers experienced an ingredient shortage due to closures of pharmaceutical plants.
- Some drugs rose in price because usage fell after consumers began using competing drugs in their same class; manufacturers limited production, leading to shortages.
- At least one of the 10 drugs faced fewer competitors after a manufacturer quit producing it. Less competition leads to price increases -- Gottlieb notes that a generic drugs needs at least four manufacturers to achieve a price that is 40 percent of the cost of the brand-name drug.
While many generic price increases were the result of individual factors, Gottlieb does suggest that generic drug prices could rise, over the long run, due to government action:
- He notes that FDA oversight of generic drug production has increased the barriers to entry to the generic market.
- The FDA is facing a backlog of applications for generic drugs, limiting competition.
- Due to FDA regulation, generic drug manufacturers are now required to change their warning labels without FDA approval (previously, that burden had been on the brand-name drug makers). This will expose generic drug makers to tort liability, which will raise costs.
- Generic drug makers are subject to heavy user fees, which only raises costs for consumers. For example, an application fee for a new generic drug costs $58,730.
These are the real problems plaguing the generic drug industry, says Gottlieb.
Source: Scott Gottlieb, "Why Are Some Generic Drugs Skyrocketing In Price?" Testimony before the United States Senate Committee on Health, Education, Labor, and Pensions, November 20, 2014.
For more on Health Issues:
Health Policy Digest
Provided courtesy of: http://www.ncpa.org/
Consumer Driven Health Care
- Health Care Reform Tax Will Hurt Franchisees
- 04 Oct 2011 12:43:58 GMT - When the employer mandates go into effect in 2014, many franchised businesses will be motivated to reduce the number of locations and move workers from full-time to part-time status...
REAL CLEAR MARKETS
- Saving Jobs from Health Reform's Harmful Regulations
- 04 Oct 2011 12:43:58 GMT - If the rate of health care cost growth had not exceeded general inflation, a typical family would have had $545 more per month in spendable income instead of $95 -- a difference of $5,400 per year...
- Does Health Insurance and Seeing the Doctor Keep You Out of the Hospital?
- 04 Oct 2011 12:43:58 GMT - Gaining health insurance and using more primary care services leads to more hospitalizations as a result of physicians' discretionary decisions regarding aggressive and intensive treatment...
AMERICAN ENTERPRISE INSTITUTE
- The Case for Competition in Medicare
- 04 Oct 2011 12:43:58 GMT - A well-functioning marketplace would set in motion the forces needed to transform American medical care into a model of efficient patient-centered care...
- Potential Effect of Health Care Reform on Emergency Department Utilization Not Clear
- 04 Oct 2011 12:43:58 GMT - In 2010, 71 percent of emergency physicians said that they expected emergency department visits to increase due to the implementation of the Affordable Care Act...
NEW ENGLAND JOURNAL OF MEDICINE
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