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Mercatus scholars apply economic analysis to the issues of the day

Time to Tear down the Walls to Healthcare

by Christopher Koopman on August 23, 2016

Politicians looking for a way to break through the stale healthcare debate in Washington are missing something obvious: Republicans — many of whom still pine for the Reagan Revolution — need only to finish what their former standard-bearer started. Democrats need only to follow through on a current Obama administration policy. And these two policies are one and the same. 

As Salim Furth and Reece Brown have recently explained, nearly 30 years ago President Ronald Reagan convinced Congress to repeal its mandate that states in our union restrict the provisions of healthcare services through certificate-of-need (CON) programs. For the preceding decade, these little-known, yet hugely significant programs required providers to demonstrate...

Transportation Taxation Without Representation

by Michael Farren on August 23, 2016

Earlier this month, Massachusetts became the 35th state to pass ride-hailing legislation to regulate so-called transportation network companies like Uber and Lyft. Much of the law is the same standard boilerplate used by other states, but Massachusetts' law has some new and frustrating twists.

Gov. Charlie Baker, who first proposed the legislation, said that it would ensure that Massachusetts remained a leader in innovative new technologies, but the governor and the Massachusetts legislature missed a major opportunity to be truly innovative. The Massachusetts law prohibits local jurisdictions from implementing their own licenses for ride-hailing firms or requiring them to pay fees – but it could have done the same for taxicabs and limos and applied the same regulations to all transportation service providers.


Don't Buy the Ex-Im Lie

by Veronique de Rugy on August 20, 2016

Don’t be fooled by lawmakers who tell you that government subsidy programs like the Export-Import Bank are necessary for the economy to create jobs. This is the whopper peddled by Rep. Charlie Dent (R, PA) in a recent article for the Lebanon Daily News.

There are plenty of bad arguments for why taxpayers should continue to subsidize large corporations via the Ex-Im Bank, but none are more misleading than Dent’s claim that “the bank provides financial protections, such as capitol guarantees, for American exporters looking to do business abroad […] where private sector banks are unable to provide the needed assurance.”

This is simply factually incorrect. Most of Ex-Im’s beneficiaries are powerful corporations, not capital-strapped firms. The main foreign and domestic beneficiaries of Ex-Im do not need the government to get access to capital. What’s more, foreign...

Promising More of Everything -- Except for Growth

by Veronique de Rugy on August 18, 2016

Hillary Clinton recently laid out her plan for the economy, which boils down to more government, more spending, more taxes, more regulations and more red tape. It translates into more debt and less growth. Some of the most outrageous provisions of her plan are those that target U.S. corporations abroad.

To be fair, Clinton's policies are very similar to those of President Barack Obama. They both want to prevent U.S. companies from leaving the country through a process called inversion. They both also fundamentally misunderstand the reasons behind inversions and try to fix the perceived problem by treating the symptoms rather than the causes.

The reason companies engage in inversions (usually by merging with a foreign firm to pay taxes abroad instead of at home) is obvious to most economists: U.S. companies doing business overseas are put at a terrible disadvantage because...

ACA on the Brink

by Brian Blase on August 18, 2016

Outside the legal challenges it previously faced, the Affordable Care Act has never been as threatened as it is right now.

President Barack Obama’s signature law has so destabilized the individual market for insurance that three large companies have announced they are better off not participating in the exchanges.

Aetna earlier this week announced it will exit 11 of the 15 states where it has offered plans through ACA exchanges, while UnitedHealthcare plans to exit 30 of its 34 states, and Humana is pulling out of 88 percent of the counties where it offered coverage.

While these big players are cutting their ACA losses, they’re fortunate enough to have other business lines to fall back on. Without those buffers, the new health insurance cooperatives that started with funding through the ACA have mostly collapsed. To date, 16 of 23...

ACA and the Increasing Politicization of Health Care

by Brian Blase on August 18, 2016

The Affordable Care Act (ACA) has produced massive consolidation among health care providers, largely the result of hospitals merging and large hospital systems taking over private doctor practices. In response and in an apparent attempt to improve their negotiating position with the consolidated providers, four of the five major for-profit health insurance companies have proposed mergers: Aetna with Humana and Cigna with Anthem. The Department of Justice (DOJ) has moved to block the mergers, citing a growing threat to health care market competition.

Before making that decision, the DOJ asked Aetna, and...

Risky Investments Hurt Alabama Pension Program

by Eileen Norcross on August 18, 2016

In "The truth behind the big money efforts to change pensions in Alabama," (August 1 "Guest Voices) Tom Krebs makes two excellent points: Public sector employees deserve a secure retirement, and risky investments are no way to guarantee Alabama's pension holders what they've earned.

I agree with Mr. Krebs. Indeed, my research on Alabama's pension situation drives these points home. Importantly, another lesson of finance – don't value a guaranteed pension based on risky assets – continues to elude the Retirement Systems of Alabama, with predictable results.

Mr. Krebs cites numbers showing the pension plans are doing well, but recent returns suggest otherwise. According to the RSA's audited report in 2015, "a poor finish to the fourth fiscal quarter wiped...

A Proposal for Allowing State Pension Buyouts

by Mark J. Warshawsky, Ross Marchand on August 17, 2016

Many U.S. state and local employee pensions are facing dire problems as massive plan liabilities come due, threatening to drain government coffers. As Robert Novy-Marx and Joshua Rauh wrote in the Journal of Finance, 21 state pensions held less than 40 percent of the assets needed to pay benefits. Their estimate of the aggregate “funding gap” faced by states was roughly $2.5 trillion in 2009. Since then, the story has not improved, and it has likely worsened. Puerto Rico recently joined Detroit as a case study of fiscal and public pension mismanagement and failure, and the Puerto Rican pension is essentially without any assets.

Prohibitive Costs of Full Funding

In short, many state and local plans today are simply unsustainable. To fix the...

An Effective Plan for Regulatory Reform

by Jerry Ellig on August 17, 2016

In his recent Detroit Economic Club speech, Donald Trump labeled federal regulation “the anchor that is dragging us down.” He promised to remove this burden by adopting a temporary regulatory moratorium and asking every federal agency to identify and eliminate regulations that “are not necessary, do not improve public safety, and which needlessly kill jobs.”

It will take a lot more than that to ensure that regulations solve real problems at a reasonable cost. A targeted and effective regulatory reform program would consist of at least three elements:

1. Agencies should be required to show evidence that a significant problem exists, that they understand its root cause, and have considered alternative solutions that address it — before...

Ditching NAFTA Would Be a Bad Deal for America

by Daniel Griswold on August 17, 2016

With all the challenges confronting the United States, the two major presidential candidates have committed themselves to picking a needless trade fight with the two biggest customers for U.S. exports: Canada and Mexico. Hillary Clinton recently joined Donald Trump in threatening to reopen and potentially scuttle the 22-year-old North American Free Trade Agreement. But tearing up NAFTA would be an economic and foreign-policy blunder of historic proportions.

NAFTA was a bipartisan achievement, approved by Congress with strong Republican support and signed into law by Bill Clinton in 1993. Once fully implemented, the agreement eliminated virtually all trade barriers between the United States, Canada and Mexico. By every reasonable measure, NAFTA has been a success.

The trade agreement delivered its core promise of deeper North American economic integration. Since its...

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