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OpenMarket: August 2012

  • Today's Links: August 21, 2012

    August 21, 2012 10:59 AM


    SALLY PIPES: "Gov. Deval Patrick's New Health Law Is Flat-Out Dangerous"
    "Beacon Hill was the scene of great fanfare earlier this month when Governor Deval Patrick signed controversial new healthcare reform legislation into law. The governor proudly proclaimed that Massachusetts was 'the first to crack the code' on the problem of ever-increasing healthcare costs. The mood outside the statehouse, however, has been far more sober. "

    PETER GALLAGHER: "How Government-Grade Spy Tech Used A Fake Scandal To Dupe Journalists"
    "An email claiming to reveal a political scandal will grab the attention of almost any journalist. But what if the email was just a ruse to make you download government-grade spyware designed to take total control of your computer? It could happen—as a team of award-winning Moroccan reporters recently found out."

    MASHA GESSEN: "We Must All Stand With Pussy Riot"
    "The case of Pussy Riot, three young women sentenced last Friday to two years behind bars for performing a protest song in a Moscow cathedral, has drawn more attention than any Russian cause in at least a couple of decades. People who have never followed news from Russia have felt moved to speak up in support of Nadezhda Tolokonnikova, Maria Alyokhina and Yekaterina Samutsevich. I am sure that at least some members of the Russian leadership are now scratching their heads."

  • Imagine There Are No Countries

    August 20, 2012 4:01 PM

    “Imagine there’s no countries. It isn’t hard to do,” John Lennon once told us. Ignoring Lennon's grammatical error, that is exactly what University of Wisconsin-Madison economist John Kennan tried to do in a new paper released this month by the National Bureau of Economic Research (NBER). Kennan modeled the world economy without immigration restrictions and found that free labor mobility could have a dramatically positive effect on global GDP.

    “The estimated gains from removing immigration restrictions are huge,” he concluded, “more than $10,000 a year for a randomly selected worker from a less-developed country (including nonmigrants)… with a relatively small reduction in the real wage in developed countries, and even this effect disappears as the capital-labor ratio adjusts over time; indeed if immigration restrictions are relaxed gradually, allowing time for investment in physical capital to keep pace, there is no implied reduction in real wages.”

    This rapid increase in worldwide wealth achievable at very little cost is due to productivity disparities for workers in different countries. Similarly skilled workers from different countries can have dramatically different levels of productivity. One paper (Clemens, Montenegro, and Pritchett (2005)) found, for example, that Mexican worker wages are 2.5 times less than those in the United States, which means their labor produces far less than the American worker with similar skills.

    Therefore, simply allowing that Mexican to relocate, without any increase in education or skills, would dramatically increase his or her productivity. These wage differences have everything to do with America’s free market institutions and capital that has developed over time. Preventing from foreigners from accessing America’s capital and institutions results in massive inefficiencies, as workers produce far less than they would in the U.S. Higher production levels mean lower prices for American consumers, not to mention the rest of the world.

  • Fred Weekly: Assaults On Capitalism

    August 20, 2012 2:52 PM

    CEI President Fred L. Smith, Jr., discusses how businesses respond to assaults on the free market in the latest episode of his vodcast.

  • New Moody's Standards Give Clearer Picture Of Public Pension Crisis

    August 20, 2012 12:37 PM

    The public pension funding crisis has led to a vigorous debate over how those pension liabilities are valued and how large they are. The debate is long overdue. For state and local governments across the nation to get their finances in order, they first need to define the problem they need to tackle -- and it appears to be worse than previously thought, as The Washington Post reports:

    The latest rules come on line from the bond-rating firm Moody’s at the end of this month. They are projected to triple the gap between what states and municipalities report they have in their funds and what they have promised to pay out to retirees. That hole would stand at $2.2 trillion.

    For the worst-off cities, the new pension debt calculations could mean bond rating downgrades and increased borrowing costs when localities try to raise money for new projects, Moody’s has warned.

    The accounting changes themselves will not force policymakers to alter how they fund pensions. But finance experts say that by simply highlighting greater funding gaps, the rules will intensify pressure on state and local governments to allocate more of taxpayers’ dollars to their pension funds. More likely, public workers may have to contribute more to their retirements or see promised benefits curtailed, measures that have already been implemented in more than 40 states

    Nationwide public pension liabilities being greater than expected is nothing to cheer about. However, the Moody's accounting rule change is welcome, because it presents a clearer picture, a necessary first step toward addressing the public pension crisis.

  • CEI's Battered Business Bureau: The Week In Regulation

    August 20, 2012 5:00 AM

    65 new rules, from offshore drilling to closed captioning.

  • Is Government Motors Headed For Bankruptcy Again?

    August 17, 2012 4:07 PM

    The tens of billions of dollars in taxpayer money spent on the auto bailouts did not fix the automakers' underlying problems, but rather helped mask and perpetuate them (such as inefficient work rules and high labor costs -- the Obama administration ripped off GM and Chrysler bondholders and the automakers' non-union retirees, as well as taxpayers, to enrich the UAW Union in the bailouts). For a short period, the Japanese earthquake and Thai floods so damaged the Japanese automakers that GM once again became the world's number one automaker, but when the Japanese companies recovered, Toyota once again surpassed GM as the world's biggest automaker.

    At Forbes, Louis Woodhill says "General Motors is headed for bankruptcy -- again." After crunching the numbers and market share trends, and analyzing recent GM models, he says that if President Obama "wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market."

    The bailouts resulted in new, even more inept and politicized management at GM (which replaced a pre-bailout CEO, Rick Wagoner, who had put in place changes that belatedly resulted in improved product lines coming out shortly after his ouster).  Auto industry experts are horrified by GM's recent mismanagement of its European operations:

    General Motors’ plan to displace the venerable and respected Opel brand in Europe with a new Chevrolet “global” brand really is as insane as it seems, according to Keith Crain of Automotive News. “It will take decades for Chevrolet to establish anywhere near the recognition that Opel has,” Crain argues.

  • Regulation Roundup

    August 17, 2012 3:10 PM

    Fines for inaccurate weather forecasts, illegal chocolate egg smuggling, plus more.

  • West Nile Outbreak Warrants Pest Control -- Pesticide Spraying Included

    August 17, 2012 3:07 PM

    This year, Texas is experiencing its worst outbreak of the mosquito-transmitted West Nile virus ever. Fortunately, most people who get it won't suffer the severe symptoms -- some won't even notice they have been infected, and others will experience a range of flu-like symptoms. But the bad news is, some people will suffer severe, painful and even a debilitating illness with permanent neurological damage, and some will die.

    The Centers for Disease Control and Prevention (CDC) tracks the number of cases reported around the country. Texas appears to be experiencing the worst outbreak, but the problem affects many states and the illnesses and death toll will continue well into the fall. In fact, most cases occur late summer and into late fall, so we have many months to go.

    Some greens suggest that we should not bother to control the disease using pesticides, because most people are not affected. But even a handful of unnecessary deaths and horrible suffering of those who get the illness warrants action. When deciding to spray, Dallas Mayor Mike Rawlings explained: "I cannot have any more deaths on my conscience because we did not take action." Dallas County has begun aerial spraying of pesticides for the first time  in 45 years.

    Greens second guess the expertise of the local public health officials working to control mosquito populations and disease transmission -- suggesting the activists somehow know better. I've presented at several meetings of the American Mosquito Control Association, which represents local mosquito control officials around the nation. The members include highly educated, hard-working people with PhDs in biology, entomology, etc., who work in concert with a host of other experts to protect communities around the nation. I'd rather put my confidence in their decisions over environmental activists who have exhibited a callous disregard for the people who suffer from West Nile.

  • Wishful Thinking About Religious Freedom And Gay Marriage

    August 17, 2012 12:38 PM

    One of the reasons that social conservatives oppose gay marriage is the belief that if it is legalized in a state, private institutions, like religious employers, and religious schools, will be forced to treat gay unions the same as heterosexual marriages. The unstated assumption they have is that if they can just block gay marriage, no bossy government official will be able to force them to treat gay unions like straight marriages.

    But this assumption is just wishful thinking: blocking gay marriage solves nothing, because bossy civil-rights bureaucrats and liberal judges (most state judiciaries, and virtually all civil-rights bureaucrats, are liberal) will force them to treat gay couples as if they were married couples, even if gay couples cannot formally get married in the state.  Multiple court rulings and administrative rulings show that this is so, by effectively ordering religious businesses and schools to treat unmarried gay couples as if they were married, under existing state laws and municipal ordinances banning private-sector discrimination against gays.

    I have been one of the most outspoken critics of these rulings restricting religious freedom; and I have repeatedly defended the First Amendment rights of social conservatives to express their views about homosexuality (for example, I have criticized politicians' harassment of Chick-fil-A over its CEO's opposition to same-sex marriage, which was constitutionally protected speech, see here, here, here, and here). And I can tell you that banning gay marriage does not solve this problem, it just causes other problems, such as creating perverse incentives for gays (and occasionally harming heterosexuals).

    Blocking gay marriage (unfairly) prevents committed monogamous gay couples in long-term relationships from accessing useful government benefits limited to legal spouses (while also shielding them, ironically enough, from "marriage penalties" in the tax code and welfare system). It also sometimes results in gay couples in short-term relationships unfairly obtaining certain government benefits available only to those heterosexuals who are married (and thus not in short-term, non-legally-binding relationships), and increases the risk that private institutions will be forced to treat gay couples the same as married heterosexuals even if they are not in a long-term relationship akin to marriage. Banning gay marriage thus reduces incentives for long-term monogamy among gays, even though monogamy is as desirable among gays as among heterosexuals (since it can reduce the incidence of AIDS, and promote family stability, such as households in which gay couples are raising children).

  • Struggle Over Union-Owned Bank Is A Sign Of Union Weakness

    August 17, 2012 11:01 AM

    Shifting deposits to the union-owned Amalgamated Bank has become a leftist cause celebre, as several Democratic and progressive  groups try to be seen as dissociating themselves from the politically incorrect Bank of America. However, as I outline in the Daily Caller,  Amalgamated Bank's recent history, which includes a bitter struggle over its control, muddies the left's portrayal of Amalgamated as an oasis of virtue in the otherwise corrupt world of finance.

    Amalgamated Bank is controlled by a subsidiary of the powerful Service Employees International Union's (SEIU),  which won control over the bank as a result of a protracted union civil war. Stern, a political heavy hitter during his tenure at the helm of SEIU, was the most frequent visitor to the White House for most of the first year of the Obama presidency.

    The struggle over the control of Amalgamated is itself indicative of private sector union's weakness and of the extent to which they are willing to go to preserve their influence.

    The SEIU subsidiary, Workers United, itself broke away from UNITE-HERE, which was itself the result of the 2004 merger of two unions representing workers in two unrelated industries, hospitality and textile manufacturing: the Hotel Employees and Restaurant Employees (HERE) and UNITE (formerly the Union of Needletrades, Industrial and Textile Employees, itself the product of a series of textile union mergers).


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