Compared to COGDs in the past, this year’s date marks a milestone of sorts in that taxpayers have never before had to work so far into the year to pay for their share of government. In fact, only one other time in the history of calculating COGDs has the date fallen so far into the year, and that was last year – August 11, 2009. Prior to that date, COGDs typically fell in June and July.

Though this year’s COGD estimate isn’t entirely surprising given the recent trillions spent on TARP, ARRA, ObamaCare, the $26 billion state bailout, etc., it should sound the alarm that the rate of growth in federal, state, and local government spending is accelerating far faster than in the past, making it increasingly difficult for the economy to recover and jobs to return.

Source: Americans for Tax Reform

- James Quintero ]]>PublicationTue, 24 Aug 2010 00:00:00 MDTTexas Senate Business and Commerce Committee helped shine some light on the challenges of Texas’ green energy efforts.

We heard great things about the state’s energy efficiency program. However, there was very little focus on the costs to consumers. Since 2002, Texas consumers have paid $591.1 million to support the state’s energy efficiency program, and the program’s estimated cost for 2010 is $114.8 million. A recent increase to the program by the Public Utility Commission of Texas will probably double these costs. And legislative proposals could increase the annual cost to over $500 million. All of this would be okay, of course, if the state’s energy efficiency program saved consumers money through reduced consumption of electricity. However, there is simply no way to properly determine the efficiency of the state’s energy efficiency program. But an educated guess is that it costs more than it saves.

This same flaw also plagues the state’s subsidies of renewable energy through the renewable portfolio standard, CREZ lines, and tax breaks. Several people testifying today were asking the legislature to give them subsidies for technologies like solar, biomass, and geothermal. But Sen. Chris Harris captured the problem with these subsidies when he asked, “How can I justify going to my constituents and tell them that I voted to give you money?” Sen. Mike Jackson also pointed out that solar projects are much like wind projects in that we give them credits for economic development but after the installation there are very few jobs left. Renewable energy generation simply costs more than generation from conventional sources.

The results of these two green programs stand in stark contrast to the history of energy use. Market-based energy efficiency has for centuries made electricity less expensive to use so that we could use more of it. This makes sense because there is almost a one on one correlation between the increased wealth and health of society and the increased use of energy.

In the last four weeks Texas has set four new records of peak electricity demand, i.e., we’ve used more electricity recently than ever before. But rather than fret about this and create more government programs, we should receive this as good news that clearly shows that the market can handle the increased demand for electricity in the state. It also shows that what Texans want is more, less expensive electricity, not less, more expensive electricity.

If Texas wants to reduce energy costs and save money for Texas consumers, it needs to go back to the drawing board and make significant changes to the energy efficiency program and eliminate the Renewable Portfolio Standard.

- Bill Peacock]]>PublicationWed, 11 Aug 2010 00:00:00 MDTnew record for electricity use. According to ERCOT, power use for the hour ending at 5 p.m. yesterday was 63,830 megawatts. This tops the peak record of 63,594 MW set just last week.

Despite the record usage, prices for wholesale electricity and retail electricity have dropped significantly, and major investments in generation have provided more than adequate reserves to cover our electricity needs. This despite significant new regulatory costs being loaded onto the system through mandates for wind energy, energy efficiency, and deferred payment plans.

Looks like Texas’ competitive electricity market is performing exactly as promised—delivering plenty of electricity to Texans when they need it at prices they can afford.

- Bill Peacock ]]>PublicationMon, 09 Aug 2010 00:00:00 MDTNational Sheriffs Association report states that one is three times more likely to find a mentally ill person in jail or prison than in a hospital. In Texas, the odds are even more pronounced: 7.8 to 1. A Texas county official is quoted: “[T]he combined cost of incarcerating and treating the mentally ill is $87 million annually” and “[t]he jails have become the psychiatric hospitals of the United States.”

During the 1950s, popular sentiment and litigation mounted against mandatory institutionalization in state-sponsored psychiatric hospitals, and those institutions were closed. However, the states never created a replacement, and so the mentally ill have been funneled into jails and prisons for lack of a better place to send them. The emphasis on incarcerating the mentally ill presents several problems:

a) Recidivism is high. In L.A. County Jail, 90% of mentally ill inmates are repeat offenders.

b) Mentally ill inmates are more expensive. In Texas, the average prisoner costs about $22,000 per year. Mentally ill prisoners cost between $30,000 and $50,000. They also cost more because they stay longer, partly because their illness often worsens behind bars.

c) Mentally ill inmates are more prone to commit suicide. Half of all prison suicides are by seriously mentally ill inmates. In California, about 77% of all attempted suicides involve the mentally ill.

d) Mentally ill inmates are sometimes abused as they confound correctional staff. One correctional officer justified punching a mentally ill inmate: “[y]ou need to instill fear in these inmates or they won’t listen to you.... Especially crazy inmates.”

Most recommended solutions in the report would require more funds. However, in tough budgetary times, measures that divert suitable mentally ill offenders from lockups to treatment, including home-based care, can actually produce net savings. Outsourcing to private mental health providers that are more efficient and cost effective is another promising strategy. Clearly, public safety and offender accountability must remain paramount, but relying almost exclusively on prisons to solve this perpetuates a revolving door that is costly for victims and taxpayers. Instead, we must break the cycle of illness and crime.

- A.J. Smullen
Intern, Center for Effective Justice ]]>PublicationMon, 09 Aug 2010 00:00:00 MDT In the early years, EPA’s SOx cap-and-trade program worked well. Since 1995, the program led to a 50 percent reduction in these emissions. EPA initially allocated a set number of baseline allowances to electric power companies. These utilities then had to “pay” for each ton of SOx emitted with one allowance. By switching to low-sulfur coal, increasing plant efficiencies, and investing in pollution control technology, electric generators reduced emissions. With reduced SOx emissions, the utility then sold allowances or reduced the number of purchased allowances needed each year. The emission reductions and market for trading SOx credits grew until late 2005 when litigation undermined the certainty of EPA’s rules. In 2008, the DC Circuit Court finally vacated portions of the rule and ordered a revision.

The EPA’s new Clean Air Transport Rule devalues SOx emission credits accumulated or purchased under the previous rules, and substantially limits, if not precludes, trading of emission allowances. The final cap in the previous rule was 8.65 million tons of SOx per year. The new rule shrinks the annual SOx limit to 4.1 million tons.

Beware of EPA-created markets. Genuine markets are dynamic. Supply, demand, and price respond to the ever changing dynamics of free exchange. In contrast, markets created and controlled by government are volatile, fragile, and subject to fraud. When the government creates an artificial market for trading emission allowances, i.e. government permission slips, one new EPA edict can nullify the market and vaporize the value of emission credits.

- Kathleen Hartnett White ]]>PublicationThu, 05 Aug 2010 00:00:00 MDT As a result of the Texas Comptroller’s efforts to post detailed spending information online as well as conducting a top-to-bottom review of her agency’s expenses, the Comptroller’s transparency efforts have “saved taxpayers a projected $10 million” over the last few years. A pretty good return on investment considering the initial cost for Texas’ spending website, Where the Money Goes, was only $310,000.

Transparency’s money-saving ability extends beyond just that example though—state and local governments have also been able to see big savings from TexasSmartBuy, an online ordering system that leverages the state’s purchasing power to boost competitiveness among vendors and cut costs. In the short time that TexasSmartBuy has been up and running, Texas’ state and local governments, as well as the taxpayers who support them, have seen “over $50 million in annually reoccurring savings.”

And there are numerous other “success stories” are out there detailing how governments in Texas are benefitting financially from their transparency efforts, be it by reducing open records requests, saving on printing, or other ways. So the next time you think about how transparency may benefit you, just think about all the money you could be saving.

- Katy Hawkins
Intern, Center for Fiscal Policy ]]>PublicationTue, 03 Aug 2010 00:00:00 MDT At the probation facility, McLennan County officials highlighted measures intended to reduce recidivism and increase the effectiveness of various rehabilitative methods. Although boot camp programs have been considered generally ineffective at deterring recidivism by juvenile offenders, the McLennan County C.O.R.P.S. program has been modified to contain a roughly 40% military emphasis and 60% therapeutic emphasis, which county officials say has increased the program’s effectiveness. In addition, officials spoke about Quickscreen brain scanning, which used brain imaging to identify signs of behavioral or learning disabilities in juveniles, enabling treatment strategies to be better tailored to the youth.

At the Texas Youth’s Commission’s McLennan County Juvenile Correctional Facility, a new feature is the “grievance” system. Drop boxes are placed in hallways throughout the facilities for youths to place forms detailing any complaints regarding other youths, TYC administration, or even if they just want to say that lunch wasn’t served hot enough.

This system seems to provide a method for youths to report misconduct like that which led to the TYC crisis in 2007. However, when asked, the youths distrusted the grievance system. Youths reported that, even though the grievance form promises a response within 24 hours, a response often takes up to two weeks. Additionally, a youth cannot remain anonymous, which may discourage complaints due to fear of retaliation if an administrator is the subject of his grievance.

Youth also reported that they had only received about four days of in-class education during May. Officials stated that this was mostly due to staffing shortages, including the recent death of one of the GED coordinating educational personnel. As youths entering TYC are on average several grades behind, they clearly need more than a half week of school per month.

My visits suggest reasons to be hopeful about the future of Texas juvenile justice while also indicating that there is still much room for further progress.

- A.J. Smullen
Intern, Center for Effective Justice ]]>PublicationTue, 03 Aug 2010 00:00:00 MDTPresident Obama’s earlier assurances that the federal government would strive to live within its means.

According to a mid-year review by the Office of Management and Budget (OMB), this year’s projected deficit will top $1.47 trillion and is projected at $1.42 trillion next year. Starting in 2013, the nation’s deficit projections are slightly rosier, ranging in the hundreds of billions rather than in the trillions, but their cumulative effect will be to push the amount of debt held by the public to nearly $19 trillion, or 77.4 percent of GDP, by 2020.

Fiscal irresponsibility of this magnitude and duration is not without risk. In a newly released brief, titled Federal Debt and the Risk of a Fiscal Crisis, the Congressional Budget Office (CBO) warns that if present conditions are allowed to continue, the U.S. could face “several negative economic consequences,” including potentially higher interest rates, lower economic output, and an increased probability of a “sudden fiscal crisis.” Though it is impossible to know just when a fiscal crisis of this sort might arise or how long it may last, it would almost certainly have a lasting impact on everyone’s finances.

Risking this kind of fiscal crisis because of persistent deficits and a gargantuan national debt is reckless, to say the least. If we are to avoid future calamity, meaningful budget reforms are needed now.

- Katy Hawkins
Intern, Center for Fiscal Policy ]]>PublicationThu, 22 Jul 2010 00:00:00 MDT Case in point: the U.S. Postal Service. Earlier this month, it announced plans to increase the price of a first-class stamp to 46 cents and raise the price of a postcard to 30 cents starting in January 2011. The proposed rate increases come as the agency faces a projected $7 billion shortfall for the next fiscal year.

Whether or not raising prices in a recessionary climate amid plummeting demand and in the Age of the Internet is a well-reasoned idea is yet to be seen—though I would strongly suggest it is not—but what can be said for certain is that the Post Office is in need of long-term solutions, like privatization, to help the agency solve its ongoing fiscal crises.

For some, the call to privatize the nation’s mail delivery service is unthinkable—after all, who would trust the “greedy” private sector with such an important task. But for others, the move to privatize the Post Office is commonsensical, as it has already proven a success in other countries, like Great Britain, where officials are “considering a 100 per cent privatization.” Profit, in this case at least, seems to be the right motivator for delivering the mail and offering a better product.

- Bill Fix
Intern, Center for Fiscal Policy ]]>PublicationWed, 14 Jul 2010 00:00:00 MDTmajor new purchase like a home or automobile, most do their homework before they actually commit themselves. Too much time and money is at stake to do otherwise.

Like consumers, higher education students also tend to do a bit of “comparison shopping,” evaluating professors and classes as they create their schedule for the semester. However, unlike consumers, students only have a very limited amount of information available to them before making their “purchases.” That is, until recently.

A new state law, HB 2504, goes into effect beginning this fall that requires Texas’ public colleges and universities to post faculty and course information online aimed at helping students make more informed decisions. The newly available information includes course syllabi, student evaluations, and professors’ curricula vitae, as well as departmental budgets.

While most consider giving students access to more information about their higher education choices a good thing, some university officials have begun to express their dismay, citing cost concerns and issues with manpower—a familiar tune, it seems, whenever new transparency initiatives are launched.

No matter how much hullabaloo is raised by officials though, the fact of the matter is that the average Texas undergraduate invests upwards of $80,000 in pursuit of a four-year degree and they have every reason to know what they are putting their money towards. Plain and simple.

- Bill Fix
Intern, Center for Fiscal Policy ]]>PublicationWed, 14 Jul 2010 00:00:00 MDTpersonal income tax would do more harm than good.

First, creating a new revenue stream would shift the focus away from the state’s real budget problem: government spending. With state government spending having increased by 81 percent since 2000 – compared to just a 43 percent growth in population plus inflation – it is hard to argue that the state lacks revenue.

Next, and perhaps most importantly, much of Texas’ past economic success has been based on the state’s commitment to a low-tax, business-friendly environment that attracts employers, creates jobs, and encourages investment. A state income tax puts that success in jeopardy.

As noted in the Foundation’s previous research, economic growth in the nine states without an income tax has greatly exceeded economic growth in the nine states with the highest marginal income tax rates over a 10 year period.

Finally, the creation of a broad-based personal income tax lets policymakers off the hook and shifts the burden to workers and their families. At a time when most Texans are making cuts to their family budgets, policymakers should be leading by example and making the same kind of tough decisions.

- Katy Hawkins
Intern, Center for Fiscal Policy ]]>PublicationFri, 09 Jul 2010 00:00:00 MDTreported that the small southern California city of Maywood, population 28,137, is handling its budget woes in a rather unusual way: by firing all of its employees and contracting out essential services, including its police force.

Maywood, a city chronically troubled with its police department\'s insurance program, was finally driven to the edge when its insurance rates and pension obligations increased, while its property and sales tax revenues declined. In response, the city has pulled out all the stops in an effort to find cost-savings and identify unnecessary expenses in everything from school buildings to fire departments.

From the looks of things, it appears city officials are taking to heart an oft-repeated slogan in national politics: \"Treat government more like a business.\"

The city\'s distress shows that a government need not provide all those services itself – and in fact, it shouldn\'t. Every organization has a \"comparative advantage\" – a service it is best suited to providing. When local government acts as the direct provider of public goods, it foregoes the comparative advantages of private firms. If a local government instead simply acts as a bargaining agent on behalf of citizens, it can capitalize on the comparative advantages of the private organizations to provide services to citizens more efficiently.

Local governments can go further, of course, and use opportunities like this to make long-needed reforms of labor and pension rules. At the very least, they should recognize that Maywood\'s reaction to its fiscal distress is a viable strategy to improve municipal services while reducing costs.

- Andrew Glidden
Intern, Armstrong Center for Energy and the Environment]]>PublicationThu, 08 Jul 2010 00:00:00 MDTMcDonald v. Chicago case to incorporate the 2nd Amendment’s protection of gun ownership onto the states via the 14th Amendment. During the Reconstruction Era, relying on the controversial Slaughter-House case, the Cruikshanks, Presser v. Illinois, and Miller v. Texas decisions had expressly stated that the 2nd Amendment did not apply to the various states even though it was binding on the federal government.

The Reconstruction Era Court did not believe that the 2nd Amendment right to bear arms was a privilege or immunity of citizenship as contemplated by the first clause of the 14th Amendment. A plurality of the present Court – Alito, joined by Roberts, Scalia and Kennedy, and with Scalia writing an additional concurrence – navigated around the Reconstruction Era opinions by declaring that the right to bear arms extended onto the states via the Due Process Clause of the 14th Amendment.

The decision to extend using the Due Process Clause is merely a plurality, rather than a majority, because Thomas voted to directly overturn the Slaughter-House-Cruikshanks line and extend the 2nd Amendment via the Privileges and Immunities provision. What this means for us is that, while the Court’s decision to incorporate is binding against the states, there is technically no settled authority on the precise scope of gun regulations that will still pass muster.

Nevertheless, those of us who consider the 2nd Amendment to stand for a defense of individual liberty and self-determination are now more secure in our right to self-defense that was so important to our nation’s founders.

- A.J. Smullen
Intern, Center for Effective Justice]]>PublicationSun, 04 Jul 2010 00:00:00 MDT When we see these opening words of the Declaration of Independence, it can be easy to skim over them in the rush to get to the really exciting part about equality, unalienable rights, and life, liberty, and the pursuit of happiness.

Yet, if we do this, we miss something important.

These opening lines talk about “one people … declar[ing] the causes which impel them to the separation.” But if you look at who signed the declaration, it wasn’t an anonymous group, but 56 individual men who actually declared these causes and thus put their lives on the line.

Signing the Declaration wasn’t like signing a simple ballot petition in our country today. It was instead declaring to England—the greatest military power in the world at the time—intentions that would be treated as treason should the fight for independence fail.

These men put their honor, fortunes, and lives on the line for the good of their country.

Today, 234 years after the Declaration was signed, where does this leave us?

Free, for one thing. The sacrifices they made so long ago are still bearing fruit in the lives of all Americans today. For this we should be ever grateful.

However, all is not as it should be. The United States is now ranked only “mostly free” in the 2010 Index of Economic Freedom from the Heritage Foundation and The Wall Street Journal. Seven countries, including Canada, now rank as Free ahead of us. Our health care system is on the verge of a complete federal takeover—and collapse. And excessive spending and regulation seem to be driving our economy towards years of economic malaise.

We are seeing these impacts first hand in Texas. The mandates of ObamaCare may force many changes to our system unimaginable only six months ago, not to mention billions of dollars of new spending. These costs, along with the impact of federal stimulus spending and the recession, have us facing a budget shortfall next biennium of as much as $18 billion.

We all have a lot of work to do.

We’ve wasted no time in getting started at the Foundation. Two of the leading architects of Texas’ successful 2003 effort to close a $10 billion budget gap without increased taxes—former state representatives Talmadge Heflin and Arlene Wohlgemuth—are now heading up our unprecedented budget project. Over the next few months, our entire policy team will put their regular research work on hold in order to scour the budget of every single state agency looking for ways to save taxpayers money.

We also recently launched our Center for Tenth Amendment Studies led by former Texas Solicitor General Ted Cruz and former Texas Supreme Court Justice Scott Brister. They are looking for ways where Texas can just say “No” to the federal government—its money and the strings that come attached to it.

All of this comes on the heels of our national outreach efforts on ObamaCare, climate change legislation, and federal stimulus spending.

We are fortunate to live in a country where pledging our lives to liberty doesn’t involve the level of sacrifice it once did here—and still does in too many countries around the globe. That is all the more reason we should all redouble our efforts in the name of liberty.

Thank you for joining us in the fight for freedom.

-Brooke L. Rollins
President & CEO]]>PublicationFri, 02 Jul 2010 00:00:00 MDTState Farm, the state’s largest homeowners insurance company, recently raised its rates; as a result, some policyholders began to shop around for less expensive alternatives. This appears to come as a surprise to advocates of increased regulation of homeowners insurance. It shouldn’t.

Consumers are able to help themselves in a competitive marketplace. In today’s competitive insurance market, where the voluntary nature of markets forces attention to the needs and desires of consumers, consumer-protection laws generally just get in their way.

As Bill Peacock points out in his recent study on consumers, competition, and homeowners insurance, consumer-protection measures generally seek to replace consumer preferences with those of the regulators and other intervening parties. This does not mean there is no place for government intervention, but it does mean intervention should be carefully targeted toward unethical, rather than competitive, behavior.

- Ryan Brannan ]]>PublicationWed, 30 Jun 2010 00:00:00 MDT China, the world’s second-largest consumer of energy, is turning to renewable sources – primarily wind. According to Bloomberg New Energy Finance, China invested $34.5 billion in low-carbon technologies in 2009, compared with $18.6 billion in the US. In 2009, China invested $110 billion – 2.2% of its gross domestic product – in power construction projects, increasing wind projects by 44%.

What has China received in exchange for its spending on wind power? Overcapacity. Over the last nine years, China’s government has launched several subsidy programs designed to support domestic manufacturers. These subsidies have flooded the market with more turbines than needed to meet demand.

According to Asia Times Online, many internal experts have pointed to potential waste in China’s large-scale wind power development. China will require extensive upgrades to its power grid to support these large-scale wind farms. These were costs not anticipated, nor accounted for, in the original investment plans.

These problems are the same that Texas will experience. As explained in our sunset report on the Public Utility Commission of Texas, the below market price of wind – due to state and federal subsidies – floods the system with more wind than it would otherwise have, increasing the challenge of maintaining system reliability and the costs of ancillary services. Not only could this have a detrimental impact on system reliability at peak loads, it could also threaten the success of Texas’ energy-only market.

Texas should look to China as an example of the failure of wind power and reach a similar conclusion –namely that “investment in large-scale wind development has created large-scale waste, and the sustainability of such projects is brought into question.”

- Ryan Brannan ]]>PublicationThu, 24 Jun 2010 00:00:00 MDTTexas higher education recognizes this fact and seeks to reward the best educators. In the past couple of days, criticism from outside the state has appeared – criticism which ignores several key parts of the proposal.

• The program is voluntary. Faculty members are not required to participate. The plan rewards those teachers based upon evaluations and the number of students taught. This encourages faculty to teach as many students as possible.

• Existing evaluation forms submitted at the end of the year are used to rate the teachers. These evaluations are typically conducted before final grades are awarded. Multiple studies have shown that students’ ratings are not biased by their likely grades, thus limiting teachers’ incentives to award higher grades in an effort to secure a higher evaluation and thus, a bonus. Additionally, all faculty members are encouraged to agree to limit high grades and grade inflation when first joining the program.

• Studies show that student evaluations are effective measures of teacher performance, especially when the goals and expectations for a course are clearly laid out.

• These bonuses would be available to all teachers, not just tenured professors. As we showed in a 2009 article, 70% of courses taught in public universities are taught by non-tenure-track faculty, including graduate teaching assistants. The average tenured professor teaches fewer than three courses per year. Non-tenured faculty normally earn far less than tenured faculty, often as little as $10 per hour. Those teachers who do the most and best work of educating our youth should be rewarded for such.

The criticisms of student evaluations also ignore the fact that these are only one part of a much larger reform plan that encourages students, parents, and taxpayers to become more involved in improving higher education at public universities.

The Foundation has no problem with sound academic research; after all, we are researchers ourselves. But as important as academic research is, it is secondary to the primary goal of educating students. These are public universities funded by public tax dollars established to educate our citizens.

So while there may be value to “highly qualified scholars working on problems that may have no practical payoff except the unquantifiable payoff of advancing our understanding of something in philosophy or nature that has long been a mystery,” the public should rightly expect accountability from these institutions for the tax dollars being spent. And unlike the students who the critics say “may not realize [the value of a course] for decades, the public is pretty savvy at understanding immediately the value it is getting in return for its money.

- Bill Peacock]]>PublicationFri, 18 Jun 2010 00:00:00 MDT This year alone, the federal government will spend more than $30,500 per household, according to a new report from the Heritage Foundation. This figure, up $5,000 per household from just a few years ago, is expected to grow to more than $35,600 per household by the year 2020.

As outrageous as this growth of government spending is, it is even more obscene considering what our tax dollars are being spent on. Here is just a short catalogue of the wasteful spending items identified in the report:

- Washington spends $25 billion annually maintaining unused or vacant federal properties;
- The federal government made at least $98 billion in improper payments in 2009;
- Because of overstaffing, the U.S. Postal Service selects 1,125 employees per day to sit in empty rooms. They are not allowed to work, read, play cards, watch television, or do anything. This costs $50 million annually;
- Washington will spend $2.6 million training Chinese prostitutes to drink more responsibly on the job;
- The federal government owns more than 50,000 vacant homes; and
- The National Institutes of Health spends $1.3 million per month to rent a lab that it cannot use.
- James Quintero]]>PublicationTue, 15 Jun 2010 00:00:00 MDT In reading just a 35-page section of ObamaCare that outlines the establishment of state health care exchanges, the Secretary of Health and Human Services – an appointed official, mind you – was listed 110 times as the recipient of certain powers that originally would have belonged to Congress. The authority granted to Secretary Sebelius borders on violating the non-delegation doctrine, the principle that Congress cannot delegate legislative powers to anyone else. Considering the significance of this law – the violation of federalism and interference into the daily lives of all Americans – ObamaCare does not provide anything resembling sufficient guidance for the Secretary.

Out of the 110 times this small section delegates power to Secretary Sebelius, there are five that are particularly striking. Secretary Sebelius has been given authority to (1) certify health plans, (2) determine whether a state will have its required exchange fully operational by January 2014 lest the federal government take over the operation, (3) investigate the affairs of an exchange and require yet more reports, (4) establish geographically adjusted premium rates from Washington, and (5) set provider reimbursement rates.

The federal government is usurping what is intended to be the states’ responsibilities, only to hand it to an unelected official.

- Caitlin Buck
Intern, Center for Health Care Policy ]]>PublicationTue, 08 Jun 2010 00:00:00 MDTJoseph Schumpeter popularized the term “creative destruction” to define the process by which a free market abandons less efficient means of production for more favorable ones, thereby creating greater value for society on a whole. Oftentimes, this means the destruction of businesses through competition. But fair competition comes from other businesses, not government regulations.

The fear that Obama Care would stifle business as opposed to encourage it has now become reality. On June 2, Virginia-based nHealth announced its decision to cease operations, citing “uncertainties in the regulatory climate coupled with new demands imposed by national health care reforms.” Few people doubt that private enterprise is more efficient than government bureaucracy. However, the government, through legislative or administrative means, can establish an environment where no amount of innovation can succeed, a feat diametrically opposed to the free market.

nHealth described the new minimum loss ratios – the amount of money paid out to claims in relation to the amount kept for overhead and profit – as being particularly detrimental to their business. By restricting flexibility on these loss ratios, the federal government has directly legislated how much profit an insurance company can make.

Since the Code of Hammurabi, the earliest known codified rule of law dating back to 1790 B.C., governments have in some way regulated business, but rarely before in American history has our federal government taken such a direct and destructive role in business. Rest assured nHealth will not be the last casualty in the Obama Administration’s takeover of the health care industry.

- Spencer Harris ]]>Publication