Features

Immigration and Demographic Doom

by David Bier on May 14, 2012 · 0 comments

in Economy, Features, Trade

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America — the world’s most recent great civilization — faces a demographic problem that calls for a solution from the dawn of civilization. When civilization began in ancient Sumer over 6,000 years ago, city life increased trade and wealth, but also created the perfect environment for diseases to spread. Epidemics wiped out much of the working age population, but help soon arrived. Akkadians from neighboring rural areas traveled to the Tigris and Euphrates river basin to build Sumer’s irrigation canals, roads, and other infrastructure. The first great civilization survived, not by social isolation, but thanks to a constant supply of migrant workers.

Unlike Sumer, America has so thoroughly subdued disease and prolonged death that it has produced the opposite demographic situation — an aging population supported by a shrinking workforce. America’s over-65 demographic grew three and a half times faster than the general population during the 20th century. By 2050, it will have increased from 13 percent — a historic high — to over 20 percent, according to the Census Bureau. Meanwhile, America’s fertility rate has fallen from 3.7 births per woman in 1960 to barely replacement levels at 2.05.

All this adds up to fewer workers to pay for more retirees’ public benefits. Workers per Social Security beneficiary have fallen from 42 in 1945 to under three, and it’s only going to get worse. By 2050, there will be down just two workers. According to Social Security and Medicare Trustees, the unfunded liabilities for these programs exceed $18.7 trillion over the current generation’s lifespan plus $24.4 trillion from general revenues for Medicare Parts B and D.

Fewer workers will also mean less production, which equals less economic growth and innovation. As the European Commission has concluded, “ageing populations over the coming decades at the global level will [cause] not only a slowdown in the growth rate of output and living standards but also… falling rates of capital accumulation and a slowdown in productivity growth.” This slowdown means growing public services will rest on a shrinking tax base.

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CEI’s Battered Business Bureau: The Week in Regulation

by Ryan Young on May 14, 2012 · 0 comments

in Features, Regulation

Just another week in the world of regulation:

  • 62 new final rules were published last week, down from 70 the previous week. That’s the equivalent of a new regulation every 2 hours and 43 minutes — 24 hours a day, 7 days a week. All in all, 1,384 final rules have been published in the Federal Register this year. If this keeps up, the total tally for 2012 will be 3,838 new rules.
  • 1,577 new pages were added to the 2012 Federal Register last week, for a total of 28,191 pages. At this pace, the 2012 Federal Register will run 76,606 pages.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. The 20 such rules published so far in 2012 have compliance costs of at least $15.4 billion. Two of the rules do not have cost estimates, and a third cost estimate does not give a total annual cost. We assume that rules lacking this basic transparency measure cost the bare minimum of $100 million per year. The true cost is almost certainly higher.
  • One economically significant rule was published last week. There were a total of 5 significant actions last week, as defined by Executive Order 12866. So far, 152 significant final rules have been published in 2012.
  • 12 of last week’s final rules affect small business. So far this year, 259 final rules affect small businesses. 40 of them are significant rules.

Highlights from final rules published last week:

  • An economically significant rule from the Centers for Medicare and Medicaid Services implements section 2401 of the Affordable Care Act. It increases this year’s federal Medicaid spending by $820 million, and this year’s state Medicaid spending by $480 million. Since these costs are government spending instead of compliance costs, I am scoring it as zero-cost for this year’s compliance cost tally.
  • Just in time for summer, the FDA published a rule delaying implementation of an earlier rule amending its surprisingly detailed sunscreen regulations.
  • The EPA is liberalizing its [alpha]-[p-(1,1,3,3-Tetramethylbutyl)phenyl]-[omega]- hydroxypoly(oxyethylene) tolerance requirements for pesticides. A separate rule liberalizes “residues of ?-(p-nonylphenol)-?-hydroxypoly(oxyethylene) mixture of dihydrogen phosphate and monohydrogen phosphate esters and the corresponding ammonium, calcium, magnesium, potassium, sodium, and zinc salts of the phosphate esters and ?-(p-nonylphenol)-?-hydroxypoly(oxyethylene) sulfate, ammonium, calcium, magnesium, potassium, sodium, and zinc salts” in pesticides.
  • If you want to get a commercial driver’s license, you should be aware of new federal minimum standards.

For more data, updated daily, go to TenThousandCommandments.com.

FCC Delays Threaten to Hurt Wireless Consumers

by Joe Calascione on May 11, 2012 · 0 comments

in Features, Tech & Telecom

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America’s communications regulatory regime is broken. Case in point: prior government approval is needed for what should be a run of the mill marketplace transaction. In order to get the FCC approval needed to consummate a proposed spectrum purchase from Cox and SpectrumCo, Verizon Wireless has offered to divest some of its most valuable spectrum licenses. But the Commission continues to drag its feet.

Faced with an impending spectrum shortage, many wireless carriers are aggressively seeking more spectrum. Verizon Wireless, for its part, wants to buy a chunk of spectrum that cable companies acquired in 2006 through a bungled FCC attempt to force competition in the industry by allowing cable companies to buy up wireless spectrum. But the cable companies’ wireless services were never launched, and the spectrum at issue lies fallow to this day.

The Commission launched its investigation of the proposed spectrum deal due to concerns about concentration – essentially an inquiry into how much spectrum is in how few hands – an approach borrowed from outdated antitrust analysis. As the Commission is only guided by what it determines to be in the “public interest,” (47 U.S.C. 310(d)) CEI filed comments stressing that putting unused spectrum to use could only improve the status quo. The Commission should be concerned with consumer welfare, not just the welfare of Verizon’s competitors.

Now that additional filings have come in, the Commission claims it needs another three weeks to render a decision, despite Verizon going above the usual requirements, providing all filings in an electronically searchable format. As there are no other potential buyers for this unused spectrum and the current owners have no plans to put it to use, it is difficult to see how the Commission could find the sale contrary to the public interest.

Instead of dithering over the spectrum deal, the FCC should give Verizon Wireless the green light. Trying to micro-manage the fast-moving mobile communications industry from Washington is a disservice to wireless device owners across the country who benefit from greater deployment of mobile services.

Framing the Debate on Chemical Regulation

by Angela Logomasini on May 11, 2012 · 1 comment

in Environment, Features, Regulation

Last week, CEI hosted a congressional briefing on chemical policy and regulation (the video of the event is forthcoming). A news story in Risk Policy Report covering the event proclaims: “Free- Free-Market Group Seeks To ‘Re-Frame’ Hill Debate Over Chemical Risk.” Indeed we do!

I presented on why Congress should not “modernize” the Toxic Substances Control Act (TSCA), Dr. Rick Belzer addressed the National Toxicology Program’s faulty carcinogen classification methodology, and Dana Joel Gattuso addressed why Congress need not impose onerous regulations on the cosmetics and personal-care product industries. Unfortunately, our views are unique, but they shouldn’t be. Even those industry groups who will be harmed by misguided chemical policy reforms are not fighting back.

Risk Policy Report [May 8] explains:

In particular, Logomasini highlighted the stalled legislation from Sen. Frank Lautenberg (D-NJ) that would amend the Toxic Substances Control Act to put the onus on industry to show chemicals are safe rather than in the current system, where EPA must show chemicals pose an unreasonable risk before it can restrict their use.

She argued that updating the statute with a “reasonable certainty of no harm” standard, as proposed by the Lautenberg bill, would effectively ban many products already on the market and make it difficult for new chemicals to be used. The current TSCA standard — that EPA cannot regulate a substance unless it is shown to pose an “unreasonable risk of injury to health or the environment” — is scientifically more sound and less economically burdensome, she said.

“I would argue that’s actually a more appropriate approach to chemical regulation,” Logomasini said in suggesting TSCA is fine as is. Logomasini said in the interview that the CEI event wasn’t inspired by any upcoming votes or hearings on the legislation.

CEI held the event even though the bill’s prospects in the current Congress remain dim. The political environment “means nothing could happen until after the election,” one industry source says. “If after the election the playing field is such that we can get some movement, we’ll work it.”

Industry, in which some groups seek to “modernize” TSCA but have too raised concerns with the proposed “reasonable certainty of no harm” standard, has yet to put together its own TSCA proposal despite the urging of key Democrats. “If we put out a bill, we won’t get to characterize it,” the industry source says. “The NGOs will characterize it as a sham or worse, as making TSCA weaker.”

Chemical industry groups, although they support TSCA “modernization,” are rightly concerned about the proposed legislation. Yet, they offer no alternatives because, as the source in this story explained, they fear greens will unfairly characterize their point of view! What kind of legislative strategy is that?

It’s time to re-frame the debate, and free-market groups like CEI need not act alone. Industry groups should join us by fearlessly defending their products and highlighting the value they bring to society. And they should fight all efforts to limit their freedom to continue marketing and developing their products. If they don’t, we all may suffer from higher prices, reduced consumer choice, inferior substitute products, and reduced innovation — all resulting from misguided regulations imposed by an over-empowered, unaccountable bureaucracy.

Why JPMorgan Chase’s Mark-to-Market Losses Don’t Bolster Case for Volcker Rule

by John Berlau on May 11, 2012 · 0 comments

in Deregulate to Stimulate, Economy, Features, Regulation

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There is much still to be known about the $2 billion in losses JPMorgan Chase is reporting due to a flawed hedging strategy. But this lack of knowledge hasn’t prevented proponents of Dodd-Frank’s Volcker Rule, which bans banks from certain types of trading, from jumping into the fray and claiming this as a justification for their vaunted rule to keep banks from “gambling” with trading strategies as opposed to the “safe” activities of lending.

But just as due diligence is required by banks and investors, so it is by policy makers. $2 billion is a big number that attracts a lot of headlines, but it is dwarfed by the trillions in losses from the “traditional” bank activity of mortgage lending. Yes, these mortgages were traded, but bad underwriting of unqualified borrowers – encouraged by government subsidies through Fannie Mae and Freddie Mac — and mandates through the Community Reinvestment Act — was the root of the problem.

What’s still unclear is about JP Morgan is (1) what is the extent of the actual loss as opposed to the “mark-to-market” or paper loss, and (2) would JP Morgan’s trading fall under “proprietary trading” covered by the Volcker Rule or “hedging,” which regulators recognize that banks must do to attempt to minimize risk, even though these attempts aren’t always successful.

What we do know is that it’s not just JPMorgan Chase CEO Jamie Dimon that had criticized the Volcker Rule. A host of mid-size banks as well as respected scholars have warned that it could infringe on legitimate financial activity necessary for economic recovery, such as market making of initial public offerings of stock.

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Intellectuals Are the Shoeshine Boys of the Ruling Elite

by Ivan Osorio on May 10, 2012 · 2 comments

in Culture, Economy, Features, Regulation

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“Why do so many intellectuals lean politically to the left?”  CEI President Fred Smith has written extensively on that question. In today’s Wall Street Journal, Harvard economics professor Robert Barro makes a contribution to this conversation. Focusing on the ongoing austerity vs. stimulus debate, he remarks upon the persistence of Keynesian policy prescriptions, despite their sorry history.

Despite the lack of evidence, it is remarkable how much allegiance the Keynesian approach receives from policy makers and economists. I think it’s because the Keynesian model addresses important macroeconomic policy issues and is pedagogically beautiful, no doubt reflecting the genius of Keynes. The basic model — government steps in to spend when others won’t — can be presented readily to one’s mother, who is then likely to buy the conclusions.

Also likely to buy the conclusions are politicians seeking scientific-sounding schemes to engineer the economy. That helps to perpetuate the fatal conceit — among intellectuals that they could plan society and among politicians that they could effectively implement those plans. Thus, as Fred noted in 2010, “Intellectuals benefit psychologically and economically from the growth of the state — statism becomes the class interest of intellectuals!”

F. A. Hayek famously said that, “the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” It’s no wonder that task is so difficult both political and academic elites find expansion of the state in their class interest.

Madison, Wisconsin’s Killdozer came closer to the truth than they probably realized when they chose the title of the first album.

For more on Hayek and the fatal conceit, see Fred’s recent article in Economic Affairs.

Austerity Bites – But It Isn’t the Problem

by Iain Murray on May 8, 2012 · 0 comments

in Economy, Features, International, Regulation

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The election results in Europe, we are told, are a vote against the austerity of “savage” spending cuts. Veronique de Rugy, in National Review Online, contested this claim, backing up her words with data. The Economist‘s Ryan Avent found her claims outrageous and presented data of his own to show that austerity was sooo there. Veronique has responded with more detail. Her case is essentially that in most countries, “austerity” has been implemented more in terms of tax rises than in spending cuts. The fact that the UK and France, both of which supposedly voted against austerity last week, have not actually implemented spending cuts, is best illustrated by this alarming chart.

It is important here to note that spending cuts are, in this debate, regularly portrayed as being harmful to GDP growth, as if shaving government expenditure results inexorably in a reduction in GDP. That is clearly not the case. The respected British economist Andrew Lilico, for instance, regularly points out that spending cuts in the Uk should lead to growth:

The key ways the government could raise the sustainable growth rate are as follows:

  • Cut government spending relative to GDP. The government is already committed to cutting spending below 40% of GDP.  If it succeeds, that could add 0.5% to annual GDP growth.
  • Raise the efficiency of government spending.  If public sector productivity grew as fast as private sector productivity, that could add 0.5% to annual GDP growth.  Matching private sector productivity growth should be a modest target, since there is considerable scope for catch-up, with public sector productivity growth having dropped one third behind over the decade to 2007. To achieve private sector levels of productivity growth, use private sector methods – surplus/profit motives; competition; private sector management methods and cultures, etc..  These things will be desperately unpopular, politically.  But they won’t be as unpopular as having the banks go bust again and the economy collapsing into another massive recession.

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H-2A Visas: Open in Theory, Closed in Practice

by David Bier on May 7, 2012 · 0 comments

in Deregulate to Stimulate, Economy, Features, Immigration, International, Regulation, Trade

An Immigrant Worker in Idaho

“Our immigration problem’s not going away.” That was the title of my article for Real Clear Policy this weekend. While the Pew Hispanic Center’s conclusion that “the net migration flow from Mexico to the United States has stopped” has some declaring immigration a “non-existent problem,” the reality is that America’s immigration system is as broken as ever. Running near-double digit unemployment in a weak economy may drive a few undocumented workers out of the country, but it is not a solution to America’s immigration problem. The only solution is an immigration system that allows immigrants to come to the U.S.

One response to my article was that there is already a legal way for workers to come — the H-2A visa program. But even Labor Department officials recognize that this program has failed. As President Bush’s U.S. Secretary of Labor Elaine Chao said in 2008:

There are 1.2 million hired agricultural workers in the United States today. Estimates show that between 600,000 and 800,000 are undocumented. There simply aren’t enough U.S. workers to fill the hundreds of thousands of agricultural job openings in this country. Farmers can hire temporary foreign workers to harvest their crops through the H-2A visa program… Yet despite the fact that this program is uncapped, agricultural employers hired only about 75,000 H-2A workers in 2007… Farmers report that the H2A program is burdensome, duplicative and riddled with delays. And many who have tried it report such bad experiences that they stopped using it altogether.

As the brother of Idaho’s Lt. Gov. Jim Little, who is also a grain farmer, recently told The Idaho Statesman, “It seems like they take great joy in piling on minutia and things we have to do.” As Little’s daughter who raises sheep told the Statesman, “we needed four new workers from Peru. I started the paperwork in July and our workers didn’t arrive until February. It’s really hard to depend on a program that takes that long to get workers here. We had to sell most of our sheep last year and this was one of the driving factors. It was just getting too hard to manage the labor situation.”

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The Remote Sensing Problem

by Rand Simberg on May 7, 2012 · 0 comments

in Features, Global Warming, Natural Resources, Space, Tech & Telecom

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Over at the Washington Post, in discussing the coming crisis in weathersats, the editorial board can’t resist taking an ignorant dig at George W. Bush:

The reasons for this outlook are many — some overspending on certain projects to the harm of others, costly congressional mandates that diverted resources, and a recent rocket accident. Even if those factors were ignored, says Dennis Hartman, the chair of the panel that produced the report, agency budgets would still be too low to keep the country’s earth observation system in reasonable shape. The NRC proposes restoring NASA’s earth observation satellite funding to the level seen in the late 1990s — before President George W. Bush reprogrammed money from those satellites into things such as manned spaceflight to Mars. That level stands at about $2 billion. [Emphasis added]

There were problems with George Bush’s space policy, but shifting funding to humans to Mars was never one of them. Bush’s plans were for a lunar return, not a Mars mission, though one was envisioned as a follow on in the 2020s.

NASA has spent exactly zero dollars toward sending people to Mars, unless you count the money wasted on an unnecessary new heavy-lift rocket which might, theoretically, play a role in such a mission decades from now, but whose primary mission is to sustain what remains of the Shuttle workforce with its jobs in key states and districts.

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Endocrine Disrupters: Should We Fear Mother Nature?

by Angela Logomasini on May 4, 2012 · 2 comments

in Environment, Features, Odds & Ends, Precaution & Risk

A recent article published in the The New York Times touts a new report that claims to have finally proven that trace exposures to man-made chemicals can disrupt human endocrine systems and cause health problems.  The report authors include a number of well-known activists/scientists, who have been making suspicious claims about so-called “endocrine-mimicking chemicals” for decades.

Their Report concludes: “Whether low doses of EDCs [endocrine-disrupting chemicals] influence certain human disorders is no longer conjecture, because epidemiological studies show that environmental exposures to EDCs are associated with human diseases and disabilities.”

The article is little more than a review of the literature, selectively pulling out scientific studies that show statistical associations between health effects and certain man-made trace chemicals. But associations do not prove cause-and -effect, and a collection of studies with largely inconclusive, and often weak, associations do not prove anything. The report suffers from many of the same methodological flaws that Dr. Richard Belzer recently identified in his review of the science employed by the National Toxicology Program for it Report on Carcinogens.

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