AIFG Blogs

Saving for health care

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Newly announced regulations under the Patient Protection and Affordable Care Act threaten the very existence of consumer directed health plans in the individual market (including the anticipated health insurance exchanges), according to Roy Ramthun. Yet according to a RAND study, these plans have the potential to reduce health care spending by 30% without causing any harm, even to vulnerable populations.

In what follows, I will review some of the advantages and disadvantages of the various health savings options, based on a recent post of mine at Health Affairs. But let’s begin by jumping to the bottom line: none of them is ideal. As Mark Pauly and I explained in Health Affairs some time ago, an ideal account is one that does not distort incentives.

In the current period, people must choose between spending on health care and spending on other goods and services. When saving comes into play, people must choose between current and future health care and between future health care and future other goods and services. An ideal savings account is one that keeps all these choices on a level playing field with respect to the tax law. I call this account a Roth Health Savings Account, or Roth HSA.
  
All the things I could do
If I had a little money.

There are two ways people can insure for medical expenses: third party insurance and individual self-insurance. Under the former, a third party (insurance company, employer or government) pays the expenses. Under the latter, people must save and pay the expenses directly, from their own resources.

This division of insurance responsibility is a normal aspect of every insurance market. In health care, however, the tax law complicates our choices. In general, employers are able to pay third party insurance premiums with pre-tax dollars (untaxed to the employee), whereas out-of-pocket payments by patients must normally be made with after-tax dollars. A second problem is that most families are not in the habit of saving while they are healthy for expenses that will arise with an unexpected illness.

To overcome these two problems, the law allows people to save on monthly basis in tax-favored accounts by using several vehicles. Unfortunately, the rules governing these accounts are arbitrary and inconsistent — reflecting no clear public policy purpose.

Comparing the Accounts. With all the acronyms in use these days, readers can be forgiven if they get confused. The table below gives an overview, but let’s start with the two most popular accounts: Flexible Spending Accounts (FSAs), which hold funds available only for the current period, and Health Savings Accounts (HSAs), with funds that roll over from year to year tax-free. In general:

• Both accounts are established by employers, and employees can make pre-tax deposits to them to pay medical expenses not covered by the employer’s health plan. The HSA contribution limits are currently $3,050 (individual) and $6,150 (family). Starting January 1, 2013, FSA deposits will be limited to $2,500 per employee.
• Employers are allowed to make deposits to both accounts; the HSA deposit is limited, but there is no limit to how much they can deposit in an FSA.
• HSAs must be combined with rigidly designed health insurance plans (with minimum and maximum deductibles, limits on out-of-pocket costs, etc.); in contrast, the FSA account is completely flexible — it can wrap around any health plan.
• Employees have a more secure property right in their HSAs; they can take their HSA funds with them when they leave an employer, but they have no legal right to unused FSA balances.
• The FSA account holder can never take the money out in cash; by contrast, employees can withdraw their HSA balances if they pay ordinary income taxes and a 20% penalty if the withdrawal is before age 65.
• Unlike the HSA approach of use-it-or-save-it, FSA accounts are use-it-or-lose-it; any account balance left at year end (or after an extra 2½ month grace period) is forfeited.

Although employers are allowed to make deposits to FSAs, few take advantage of this opportunity. Because of the use-it-or-lose-it feature, these plans are additions to, rather than integrated parts of, employer health plans. Because the deposits are tax free, they almost certainly add to health care spending, as they are currently structured. They encourage employees to purchase designer eye glasses with pre-tax dollars, for example, rather than purchase other goods and services with after-tax dollars. At year end, employees will view almost any kind of wasteful spending as preferable to forfeiting the money left in the account.

Why are these accounts use-it-or-lose-it? Apparently this feature is the result of a Treasury Department ruling, not the result of any act of Congress.
Here is how Flexible Spending Accounts and Health Reimbursement Arrangements (HRAs) differ from each other:
• Like FSAs, the HRAs are also created by employers and they are completely flexible, in the sense that they can wrap around any health plan.
• Unlike FSAs, HRA balances roll over from year-to-year.
• Like the FSA, HRA balances can never be taken out in cash (so they are long-term use-it-or-lose-it).
• Finally both FSA and HRAs are notional accounts — in contrast to the HSA, no money is actually deposited in an employee-earmarked account — and employers can abolish the employees’ claims if they leave the company.

The 401(k) Option. Although 401(k) plans were never designed to function as a health account, the law does allow employees to make a hardship withdrawal for a large medical bill. The withdrawal must be for an immediate financial need for which the employee has no other funds available and it is subject to a 10 percent penalty plus federal income taxes.

Employees may also borrow from their 401(k) and this could be a source of funds to pay medical bills. Plans with loan provisions generally allow an employee to borrow up to half of a vested account balance, but not more than $50,000. Federal law requires that the borrower be charged a “reasonable rate” of interest, which is normally fixed at the prime rate plus 1 percentage point and the loan must be repaid within five years.
The primary disadvantage of taking a 401(k) loan is the loss of compound interest and dividends that would have accrued if the money had not been borrowed. Moreover, the interest paid back into the account is unlikely to equal the interest earned by 401(k) investments. For example, if an account were earning a market interest rate of 6.25 percent, and a 47-year old plan holder borrowed $10,000 at a lending rate of 3 percent for two years, he would have $80,000 less at retirement (age 67) than if he had not borrowed.

Making Flexible Spending Accounts Better. There is something rather simple the Obama administration could do that would have a very large impact on health care spending. Apparently, this is something that can be done administratively, without Congressional action. The simple step: Allow deposits to Flexible Spending Accounts (FSAs) to roll over at year end and grow tax-free.
Currently, there are about 25 million people with an HSA or HRA account (roughly evenly split) and another 35 million people with FSAs. That means that over half the people with a health account have an incentive to spend rather than to save. If FSAs could roll over and become use-it-or-save-it accounts:
• There would be a huge immediate impact on the incentives of the 35 million current account holders; instead of end-of-year wasteful spending, they would be tempted to save for more valuable future health care spending.
• Employers across the country would consider integrating these accounts into their health plans, making employer contributions to them and experimenting with new health plan designs.
Moreover, employers and their employees would have a vehicle much better than any option currently available to them to control health care spending:
• FSAs could be combined with high deductibles, allowing employees to directly control, say, the first $2,500 of spending without all of the pointless restrictions that hamper the usefulness of HSAs.
• FSAs could be created to allow employees control of whole areas of spending, say, all preventive care and all diagnostic tests — services for which individual discretion is both possible and desirable.
• FSAs could be created for the chronically ill — allowing, say, diabetics or asthmatics to manage their own health care dollars, much as home-bound, disabled Medicaid patients manage their own budgets in the Cash and Counseling programs.
• FSAs could be combined with value-based purchasing insurance plans — where the insurer only pays, say, for certain drugs, doctors and hospitals, but allows patients to add money out-of-pocket and make other choices — thus allowing the development of a real market for more expensive health care services.

The Potential Impact of High Deductibles. Every serious study that has ever been done on the subject has found that patients spend less on health care when they are spending their own money. The latest study by the RAND Corporation estimates that families with high deductible plans and Health Savings Accounts spend about 30% less than families with conventional insurance. And that’s with HSA plans designed by Congress. Think how much more effective the accounts could be if they were designed by the marketplace.
Achieving the Ideal. Finally, good as the idea of FSA rollovers is, it is still short of the ideal. For starters, people need to have the option to withdraw cash from their FSA and spend it on non-health care goods and services. Beyond that, we should consider more fundamental reform.
As the table shows, today we have an array of account options — each with advantages and disadvantages when compared to each other. This reflects the complete lack of a public policy purpose. Why should the contribution limit be $3,050 for an HSA, $2,500 for an FSA and unlimited for an HRA? Why should people be able to withdraw cash from the HSA, but not from the FSA or HRA? Why are FSAs and HRAs flexible, while HSAs are not?


As noted, the ideal account is a flexible Roth HSA. The Roth account involves after-tax deposits and tax-free withdrawals. It is the account that is most compatible with subsidizing health insurance with lump sum tax credits — an approach advocated by Sen. John McCain and incorporated in the Coburn/Burr/Ryan/Nunes health reform bill.

Last Edited by John Goodman at 5/10/2012 6:15 AM Comments (0)

The story behind the recent jobless claims

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For those looking for reasons for optimism in the recent unemployment data, there have been some mixed messages. While initial weekly jobless claims fell last week by 2,000, the total number of claims was still well above what economists were hoping for. The upward spike in jobless claims, to 386,000, stands in stark contrast to the 369,000 at the time of the March employment report.

The progress we seemed to make in March has been reversed thus far in April. It certainly doesn't bode well for those looking for job creation that this week, for the eleventh consecutive week, the level of jobless claims had to be revised upward.

Digging a bit deeper, we find that the real story is in the four week rolling average. Just three or four weeks ago, that number was in the 360,000 range. Now it's close to 375,000, roughly the same level as last spring's stagnant economic conditions.

It doesn't have to be this way. At the American Institute for Growth, we have staked out policy positions that, taken together and properly pursued, would create a better climate for small business growth and job creation right here in America. We believe that there are things we can do this year that would turn the tide and put us back on the path to job creation.

There has been a lot of debate over how to jumpstart the economy and create more jobs—but it's important to keep in mind that while job creation has certainly been lagging here in the United States, it hasn't necessarily been the case in a more global context. Consider that, according to S&P Capital IQ, since 2007 the companies listed in the S&P500 have added 1.1 million jobs—but the majority of these are jobs located abroad. They have generated $1.4 trillion in profit, but again, most of those gains are with subsidiaries overseas.

We at American Institute for Growth understand why these large companies have had to pursue investments overseas; they have a fiduciary duty to do what is right for their shareholders. Another factor is taxes and regulations are stacked against these companies domestically, forcing them beyond our borders.

If we truly want to focus on job creation in America, we have to create a better economic climate for small businesses in America—the source of the majority of new jobs. We need to reform our tax code, we need to take away the regulatory uncertainty small businesses face, and we need a rational fiscal policy in our government. The American Institute for Growth's policy recommendations are a road map of how we can lead our nation back to sustainable, stable economic growth and prosperity for all.

This work originally appeared in US News & World Report.

Last Edited by David Park at 4/30/2012 7:32 AM Comments (0)

Senate plans to offset cost of student loan bill with higher taxes on small businesses

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Members of the U.S. Senate plan to vote on a proposed freeze in student-loan interest rates is their latest effort to boost one one of the administration's re- election campaign issues.

Senate Democrats and the White House are seeking a one-year freeze in the interest rate for subsidized student loans, which carry half the interest rate of regular student loans. Fine, one supposes, if it ended there.

However, buried deep in the Businessweek story is one fact they aren't trumpeting:

The $6 billion cost would be offset by limiting a tax provision that allows some owners of so-called S-corporations to avoid paying Medicare payroll taxes on their earnings, Senator Tom Harkin, an Iowa Democrat, told reporters yesterday. 

Harkin said the legislation would require the Medicare payroll tax on income of more than $250,000 a year earned at S-corporations with fewer than three shareholders. 

 

Consider that we know that a weak labor market already has left half of young college graduates either jobless or underemployed in positions that don't fully use their skills and knowledge -- this doesn't seem like a wise policy.

 

 

Last Edited by Michael Holthouse at 4/30/2012 7:32 AM Comments (0)

Most regulations are about protecting entrenched interests, not public safety

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Too often regulations are all about squeezing out small businesses for the benefit of big businesses. You know, those who can afford high-priced lobbyists on K Street so that they can stick it to the merchants of Main Street. 

Take a look at this:

District of Columbia Circuit Court Judge Janice Rogers Brown raised eyebrows recently with a concurring opinion in an otherwise mundane economic-regulation case. Here is the passage that got keyboards tapping:

America’s cowboy capitalism was long ago disarmed by a democratic process increasingly dominated by powerful groups with economic interests antithetical to competitors and consumers. And the courts, from which the victims of burdensome regulation sought protection, have been negotiating the terms of surrender since the 1930s.

Judge Brown, of course, was referring to the series of Supreme Court cases that constitutionalized New Deal economic policy. Most of the resulting commentary has focused on the propriety of expressing such views in an official opinion instead of a speech or legal article. But the most beneficial corollary would be a national conversation on the substance: the role of courts in protecting individual economic liberty.

Liberals, viewing government as the slayer of social ills, applaud the modern regulatory state as good policy, and consider the enabling judicial decisions sacrosanct. Unfortunately, judicial conservatives have also acquiesced, lest they be seen as “activist.” Even Justice Clarence Thomas, who in so many areas has indicated a willingness to at least consider overturning wrong precedent, has endorsed a hands-off approach to economic regulations.

But while the two sides are in agreement, both are wrong.

The dirty little not-so-secret fact is that many economic regulations have little to do with protecting citizens’ health, safety and welfare, and instead are propagated by entrenched interests that use the force of government to squeeze out less powerful competitors.

The case involved in Judge Brown’s concurrence is a prime example. The proprietor of a dairy farm offered to sell milk to large-volume customers in California at a price 20 cents per gallon cheaper than his competitors. Powerful dairy interests were having none of it, and along came the Milk Regulatory Equity Act of 2005. How little has changed. The 1938 case of United States v. Carolene Products Co. — famous for its fourth footnote, which obliterated stringent judicial review of economic regulations — involved an enterprising Illinois company selling perfectly healthful “filled milk” at 7 cents per can compared to the industry’s whole milk that sold for 10 cents. The result after the dairy lobby went to Washington: the Filled Milk Act — and no more upstart competition.

Of course, government-sponsored economic protectionism was thriving well before the New Deal...

To read more, click here.


Last Edited by Gary Rabine at 5/10/2012 6:15 AM Comments (0)

Taxation eclipses personal morality

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The idea that a majority in Congress knows best is not just contemptibly patronising; it is also a breathtaking moral claim. Even if they do reflect majority opinion, who is to say that the values and ethics of the majority are superior to those of the minority?

Taxation forces people to pay for things they disagree with, and indeed for things that they may oppose morally, at the deepest personal level. People may have fundamental moral objections to foreign wars, mixed-sex schools, even bank bailouts – yet they are still forced to finance these things through taxation. Their values may be just as profound as those of the majority, their feelings as keen, their views just as rigorously constructed. Yet we force them to live with the dismal thought that their money is being used for purposes they consider highly immoral, and that things they regard as evil – perhaps as plain murder – are being done in their name. This should give the tax authorities huge discomfort – though there is scant evidence that it does.

When government takes money from people in taxation, it denies them the freedom to use their own earnings, capital and savings as they believe is right for themselves and their families. This extinguishes an important part of their moral being. People can only be considered moral – or immoral – if they actually have control over their own actions, and are free to make moral choices. A person whose choices are made by another is not a whole human being, but a mere cypher. Taxation eats into people’s moral integrity and makes them, in part, mere agents of government.

But institutions like government do not have values. Only individuals have values. Only individuals choose, act, and hold ethical beliefs. They may combine on collective projects such as mutual defense or welfare or the creation of large infrastructure projects. But that collectivity is not some super-human being with values and beliefs of its own, to which the values and beliefs of individuals can be legitimately sacrificed. Individuals remain the ultimate ethical units. And since no person has any more or less moral worth than another, individuals must be treated as ends, not as means to someone else’s ends.

This is why the argument that some people must be forced to pay money for the benefit of others is extremely thin. The state has no prior moral right to people’s property. If it did, there would be no logical stopping point; no level of government expropriation which any of us had any right to resist.

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Dr. Eamonn Butler is director of the Adam Smith Institute and author of The Best Book on the Market. In his next piece, he will show how taxation erodes personal responsibility.

Last Edited by Dr. Eamonn Butler at 4/24/2012 8:39 AM Comments (0)

Unemployment correlates with runup in mid-decade housing bubble

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Econbrowser has a good map showing the average unemployment rate over the last year by U.S. county. Things are back to normal along a swath through the middle of the country, but still fairly bleak elsewhere, particularly for example here in California.

Source: BLS.
unemp_county_apr_12.gif

Calculated Risk also prepared this interesting graphic comparing current unemployment rates by state (in red) with the maximum achieved during the recession (in blue). Karl Smith comments on some related graphs.


Source: Calculated Risk.
unemp_state_apr_12.jpg

The states which had experienced the biggest run-up in real-estate prices between 2000 and 2005-- California, Rhode Island, Nevada, and Florida-- were among those hit hardest by the recession and today are the places having the most difficult time recovering. That observation is consistent with the claim that the recession was fundamentally a spending shock, with the ongoing deleveraging in affected regions a main factor holding back spending.

Last Edited by Tom Stemberg at 4/23/2012 1:46 PM Comments (0)

Eamonn Butler's (Im)morality of taxation, pt. 2 - Eroding personal morality

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A little preview of what's in store for tomorrow.

The idea that a majority in Congress knows best is not just contemptibly patronising; it is also a breathtaking moral claim. Even if they do reflect majority opinion, who is to say that the values and ethics of the majority are superior to those of the minority?

Posted by JCA Staff at 4/23/2012 12:23 PM Comments (0)

MEXICAN DIET: 32% Lower Risk of Breast Cancer in One Study

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Move over "Mediterranean Diet" -- there's a new ethnic cuisine gaining recognition for health benefits. In this case: the Native Mexican Diet and breast cancer protection. Before you decide to celebrate next month’s Cinco de Mayo by raising a margarita and ordering another round of nachos, keep in mind that we are not talking about the fast-food version of Mexican fare popular in the U.S., but a whole-food, fiber-rich diet emphasizing beans, tomato-based dishes, spices and soups. 

The American Journal of Clinical Nutrition published what's become known as the "Four Corners Breast Cancer Study," as it compares disease risk and dietary patterns for 3,989 women from the area where New Mexico, Arizona, Colorado and Utah meet. As expected, the Mediterranean Diet (including seafood, poultry, vegetables, salad greens, olive oil and wine) offered significant reduction in the risk of breast cancer: 24%.Also not surprisingly, the Western diet (including high-fat dairy, refined grains, gravies, fast food, red and processed meats) posed an increased breast cancer risk of 32%.But the show stopper was that the Native Mexican Diet offered the most protection of all: 32% lower risk.

Why might that be? For one thing, fiber-rich beans are a staple of the Mexican diet. In fact, depending on the variety, a cup of cooked beans can help you meet nearly half your fiber needs for the day -- and premenopausal women with the highest fiber intake had half the breast cancer risk as those with lowest intakes, according to one study. Other research found a 40% lower risk of breast cancer among postmenopausal women with the highest fiber intake. No wonder the USDA recommends Americans triple their bean consumption to three cups a week.

The Native Mexican Diet also includes tomato-based dishes and tomato phytochemicals may suppress breast cancer cell growth according to one Israeli study. 

Traditional Mexican cuisine also relies heavily on herbs and spices, which may contain protective compounds. For example, one study showed that phytochemicals in cilantro may help halt progression of liver cancer.
Last Edited by Jennifer A. Grossman at 4/18/2012 8:48 AM Comments (0)

The (im)morality of taxation

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Part 1: Taxation rests on the evil of force

Everyone knows the moral arguments for taxation. Taxes are necessary to fund large public projects such as roads and bridges; to pay for essential functions such as defense and the justice system; and to provide support to the needy.

We hear the moral arguments against taxation much more rarely – yet these arguments are numerous and strong. Tax may be a necessary evil – but it remains an evil.

First, taxation relies on the use of force. Most of us would willingly make some voluntary contribution towards things like policing and education. But taxes at today’s levels can be extracted from us only by the threat that non-payers will be fined or imprisoned. The main reason we pay up is not the thought of doing good, but the thought of going to jail if we don’t.

Coercion is an evil. It might be justifiable if it forestalls some greater evil – arresting an intended terrorist, for example. That is simply choosing the lesser of two evils. But it is much harder to justify the evil of force against some people in order to produce good for others – evicting home owners, for example, to make way for a new airport. We simply cannot get into people’s minds and measure the balance between the grief of those who lose their family homes against the pleasure of air travellers.

So if government wants to coerce people in the name of creating some wider social benefit, it must have a really strong case. There is an awesome responsibility on the authorities to ensure that the money they force out of us in taxes is spent wisely and effectively. Waste in government is not just a loss to the economy, but a moral evil. Every time our politicians come across it, they should cringe with shame and guilt. The fact that Congress is not full of permanently embarrassed red faces speaks volumes about the moral integrity of our representatives.

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Eamonn Butler is director of the Adam Smith Institute and has a PhD in Moral Philosophy from the University of St Andrews in Scotland. In his next piece, the second of seven, he will show how taxation undermines personal morality.

Last Edited by Dr. Eamonn Butler at 12/19/2012 4:50 PM Comments (0)

Dr. Eamonn Butler joins JCA's blog

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 Dr. Eammon Butler

Dr. Eamon Butler, the director and co-founder of Britain's leading free-market policy think tank, the Adam Smith Institute, will be blogging weekly for American Institute for Growth. 

Eamonn is a leading author and broadcaster on economics and social issues. He discusses politics and economics with a wry sense of humor and an insightful manner.

Eamonn writes on a wide range of subjects – not just economics and finance, but politics, psychology and social affairs too.

His books include easy-to-read basic primers on important economists such as Adam Smith (author of the 1776 classic, The Wealth of Nations), Nobel laureates Milton Friedman and F A Hayek, and the leading Austrian School thinker Ludwig von Mises. He has also written a short, popular introduction to how markets work, called, appropriately if immodestly, The Best Book on the Market.

Eamonn is also co-author (with Robert S Schuettinger) of the much-acclaimed Forty Centuries of Wage and Price Controls, which, he says, traces the history of politicians’ economic incompetence back to the age of Hammurabi of Babylon.

 

The first of Eammon's weekly blogs will be posted Tuesday morning.

 

Last Edited by JCA Staff at 4/17/2012 4:00 PM Comments (0)

Government regulations are killing middle class opportunity

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When things happen gradually, we tend not to notice. Just 12,300 years ago, Niagara Falls was about seven miles further downstream. It has slowly eroded and no one noticed along the way.

It's the same with our free enterprise system.

Since the 1930s, the federal government has seized more authority and imposed masses of new laws, rules, and regulations on all of us. Some of it was much needed. For example, the Environment Protection Agency did a great job of cleaning up our dirty air and contaminated water over a period of 30 years. Then, like all bureaucracies, they just couldn't stop being "helpful."

The result today is increasingly complex rules and regulations that are applied at levels that are well below where they have any value-adding impact. They simply drive up cost: cost to understand the rules (the average person can't understand the rules and regulations because they are written in a special language called bureaucratese--you must hire an expert who is fluent in the language for an explanation), cost to comply, and then added cost to the products or services you are selling.

Storm water regulations are a great example. If you built a house or a small office building, you are ultimately familiar with the requirements that cause you to hire an environmental engineer to assess the property, and then various measures you must take to limit storm water runoff, including detention ponds. I recently lost a sale on a residential lot that I own because the young couple could not afford to build a house and handle the $80,000-plus cost of complying with the storm water regulations on a seven acre lot that was nowhere close to a stream or other waterway.

[On Energy: The Illogic of EPA Carbon Regulations]

If it is a large property with significant impermeable surfaces, such as parking lots, the rules probably make sense, but not for a small residential lot. That is one home not built that would create business for carpenters, plumbers, material suppliers, lawyers, and many more. There is no question that the impact of excessive regulation is that it stifles job creation. The real strength of America is its middle class, many of whom are small businesses or self employed and who are most impacted by these regulations.

Our government is killing off their opportunities with inappropriate regulation that penalizes these important people with high cost and high stress. Big business may complain, but generally they like heavy regulation because it drives out smaller competitors. Smaller competitors tend to be more aggressive and therefore help drive prices down. The upshot is prices for the average consumer go up, small businesses are hurt, and only big corporations reap any benefit.

It is time to help the bureaucrats and the politicians understand we have had enough.

Last Edited by Steve Zelnak at 6/18/2012 10:41 AM Comments (0)

Small businesses should be wary about Washington

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No matter where you are, you have to see the signs. The signs help you get past all the arguments about what is going to happen and show you what is real. In an election year, seeing the signs is even more important, as we face an important decision over whether the president deserves four more years, or whether someone else deserves the job.

Depending on what media outlet you go to, it’s easy to predict what they will say about the election. Turn on one channel, load one website, read one paper, and the President is the second coming of Abraham Lincoln, Franklin Roosevelt, and George Washington, all rolled into one. Switch to another channel, site, or paper, and you will predictably hear the exact opposite.

I don’t think we reach good decisions when we approach them with such obvious filters on. We have to take an honest look at the signs to get at the truth, which will help us in our decision making.

The signs I have been looking at to evaluate the job President Obama has done since taking office, and what he is likely to do in a second term, have me a bit concerned as a small business entrepreneur.

A positive sign is that small businesses are recognized more and more for their importance to the economy. Just a few years ago, nobody was talking publicly about small businesses as the engine of job growth in this country. Talking “business” was synonymous with big business. That is no longer the case, and the president often talks about the importance of helping small businesses out to get the economy going.

However, what concerns me is that I haven’t seen actions to match the talk.

Early in his administration, President Obama recognized the importance of reducing the debt. He campaigned on cutting the deficit in half. He did a great thing: he appointed a bipartisan commission to come up with a plan to get the country’s fiscal house in order. But when the Bowles-Simpson Commission came out with its recommendations, they were completely ignored.

That concerns me.

The president’s plan for reforming the tax code does nothing for the vast majority of small businesses. His plan is to reduce the corporate tax rate, which is a fine proposal that is a part of every presidential candidate’s platform; however, stopping there means that reform has no impact on the millions of Americans working in sole proprietorships, LLCs, partnerships, or other pass-through organizations. We are taxed at the individual rates, and his plan is not to reduce those rates, but to raise them.

That concerns me.

President Obama seems more interested in making big rhetorical gestures, which look good on paper but accomplish little, than in growing the economy. His pet proposal, the Buffett Rule, would raise $47 billion over 10 years—or less than 0.5 percent of the projected deficits ($9.5 trillion) over the next 10 years. That hardly seems like the place to draw a line in the sand and prepare for political battle. An obsession with punishing the “1%” seems to be distracting the president from creating a better business environment for all entrepreneurs.

That concerns me.

As a small business entrepreneur, I believe it is common sense that you can’t spend more than you make. When you see that something is costing you more and more, sending your budget out of control, you need to do something about it, and fast. But as the always-sensible Thomas Friedman of the New York Times points out, President Obama’s proposals do “not credibly address the country’s long-term fiscal imbalances, which require cuts in Medicare and Social Security.” That’s why we’re projected to run $9.5 trillion in deficits over the next 10 years.

That concerns me.

Our country is at its greatest when we work together, debating rationally and without demonizing each other. In one of his most memorable speeches, Barack Obama, then just a candidate for Senator in Illinois, said at the 2004 Democratic National Convention that there are no Red States, and no Blue States; we are just the United States. That approach drew independents in droves in 2008, and gave President Obama sky-high approval ratings at the start of his administration. But I have not seen that attitude enough in his governance.

When I hear of the president dismissing Republican lawmakers by telling them, “The election’s over,” and “I won,” that concerns me.

Our health care system needs reform. But when the president expends every penny of his political capital pushing through a health care bill along strict party lines during the worst recession in my lifetime, that concerns me.

Our president is a critically important office, but we do not elect a dictator. We have three equal branches of government with checks and balances, all designed to make sure that there is a maximum of oversight and multiple opportunities to prevent bad decisions. So it was confusing to see President Obama, a constitutional scholar, tell the Supreme Court that it would be inappropriate to overturn a law passed by Congress; the Court has been doing that for more than 200 years.

That concerns me.

Whoever President Obama faces in the fall, presumably Mitt Romney, will have to undergo similar scrutiny about how his proposals will affect small businesses—and whether they incorporate the innovative thinking of entrepreneurs. But after three years, I can say with certainty that the incumbent has given me a lot of things to worry about.

Last Edited by Fran Tarkenton at 4/25/2012 10:32 AM Comments (0)

What is the secret to why some nations are wealthy and other impoverished?

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The natural state of makind through most of history is abject poverty. How, then, did some nations manage to escape this?

The answer is not surprising, but it is fascinating.It comes down to the types of institutions that a nation builds--democratic governments, rule of law, enforcement of contracts, strong private property rights, and freedom of movement.These are what are called "inclusive" institutions that set the stage for free markets and capitalism, and the creative destruction necessary for innovations.

These inclusive institutions encouraged technological and entrepreneurial innovations that have produced the historically unprecedented rise in living standards in the United States, Western Europe, Japan, and Australia.

There's a whole new book on it, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, and it's a must-read for anyone who cares about maintaining and expanding our own prosperity, and about solving the poverty that still bedevils much of the rest of the world.

Last Edited by Brad Anderson at 4/16/2012 8:26 AM Comments (0)

Morning Bell: Hispanics and the 2012 Election

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After last week’s Republican primary elections in Wisconsin, Maryland, and Washington, D.C., the 2012 presidential primary season is reaching an inflection point, and eyes are turning toward America’s final decision on Election Day in November. While pundits and pollsters speculate on the horse race and who will capture the hearts and minds of the American people, one segment of the electorate is garnering increased attention — Hispanic Americans.

It is, to be sure, a population that continues to grow in size, voice, and importance. In the 2008 election, Hispanics turned out in force — 9.7 million Hispanics voted, and those numbers are projected to grow to 11.8 million to 12.2 million in 2012, with particular importance in presidential battlegrounds such as Colorado and Nevada, according to a Wall Street Journal report.

Last May, President Barack Obama spoke to Hispanic voters in El Paso, Texas, and delivered a highly partisan speech on immigration reform where he chastised his political opponents and their views of border security. In July, the President reached out to the Hispanic community at a gathering organized by The National Council of La Raza, where he again attempted to use the issue of immigration as a wedge issue, casting conservatives as being anti-immigration for their opposition to illegal immigration.

The President’s effort in appealing to Hispanics is not surprising given how that population has suffered under his economic policies. Clearly, he sees there is work to be done in order to firm up his base. From 2005 to 2009, median household wealth among Hispanics fell by 66%, compared with a drop of 53% among blacks and 16% among non-Hispanic whites; the unemployment rate among Hispanics in March was 10.3 percent, compared to 8.2 percent among the broader population; and between 2006 and 2010, the poverty rate among Hispanics increased more than any other group, from 20.6 percent to 26.6 percent, all according to the Pew Hispanic Center. And a majority of Hispanics believe that the economic downturn has been harder on them than on other groups in America. It’s not surprising, then, that Hispanics rank jobs, not immigration, as the number one issue in the 2012 election. Additionally, 56 percent are dissatisfied with the direction the country is headed.

None of this is to say that any one ideology has an iron-clad lock on Hispanics’ loyalty. In fact, among registered Hispanic voters, 35 percent say they’re conservative, 32 percent view themselves as moderate, and 28 percent describe themselves as liberal. What it does mean, though, is that conservatives have a compelling message for the Hispanic community and a case that needs to be made.

And what is the liberal message? They say Hispanics are victims in a racist and unfair society and need government to give them protected status. Is this an inspiring message for the latest group seeking to realize the American Dream and get on the ladder of success?

On the issue of immigration, conservatives have always recognized the need to have more legal immigration. Illegal immigration, though, ignores all the law abiding individuals seeking to legally obtain their citizenship, while others illegally flout the system.

Conservatives must make the case, too, on the issue of jobs, enterprise, and free markets. Like all Americans, Hispanics are suffering high unemployment rates, joblessness that has gone on too long, and stagnant home values. The promise of the President’s big hand of government — the trillion-dollar stimulus, Obamacare, and his mountain of regulations — has not delivered a better life for any American, Hispanic or otherwise. Meanwhile, America’s debt continues to grow, and future generations of all backgrounds will be saddled with the burden of having to cover the costs of the checks the President is writing today. Conservatives, on the other hand, call for a government that lives within its means, empowers the people, and lifts burdens from job creators so that they can grow and thrive.

The Heritage Foundation’s Spanish-language website, Libertad.org, communicates The Heritage Foundation’s policy analysis and research to a Hispanic audience that prefers to read in their first language. Its goal is to educate a growing community about conservative ideals and how limited government — not big government — can help them achieve the American dream.

Hispanics are an important and growing part of America’s fabric. Those who immigrate to the United States are in pursuit of a better life, and they want to be rewarded for the fruits of their labor, just as any other American would. They’re a growing political voice, too, and they should hear the message of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. Those concepts are vital to ensuring a strong future for all Americans, no matter their heritage.
Last Edited by JCA Staff at 4/19/2012 4:50 PM Comments (0)

Poll shows majority of Hispanics now believe next generation will not be better off

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A new survey by The Libre Initiative of U.S. Hispanics and Latinos tells a tale of shrinking confidence in the next generation of Hispanic Americans to be financially better off. A majority believe the persistent adverse economic conditions, the current unsustainability of government spending, government cronyism and the unfettered regulatory overreach are taking the country in the wrong direction and making the American dream less attainable.

Political sentiments aside for now, of fundamental concern is the negative outlook Hispanics now have of achieving the American dream and the shrinking prospects they have of opening up a business someday.  Alarmingly, a majority (51 percent) say it is harder to open a business in America today compared to 4 years ago, and the data also shows that a majority (52 percent) now fear that the next generation will not be able to achieve the American dream.  Similarly, a majority of respondents (51 percent) believe the country is headed in the wrong direction.
  
Regardless of how you parse the numbers, these results are bad. Nothing contributes more to the proposition of American exceptionalism than steadfast optimism and a resolute belief that its citizens will be rewarded for working hard, saving and investing, and taking entrepreneurial risks. But when that belief erodes because political spenders punish those that work and reward those that don’t; when professional politicians increasingly hinder small business owners with onerous regulations that limit creativity, innovation, and expansion; and when the current Administration punishes job creators by rejecting badly needed projects like the Keystone XL Pipeline only to gamble away hard earned taxpayer dollars on a bankrupt California energy company like Solyndra; the can-do spirit of its people begins to erode as well.


Of particular necessity is the assurance of open competition in the marketplace, the freedom of businesses to hire and fire workers, and the need for greatly reduced government interventions that have served to distort true prices in the market. That is, to avoid a future of debt, doubt and despair, we must restore the principles of economic freedom that reward hard work and accountability. Anything short will only increase the anxiousness and disquiet beginning to spread throughout the Hispanic community.

It all marks back to the dismal job market that nose-dived in 2007, and the Administration’s ineffectiveness to deliver on promises it would reverse the trend. Currently, the Department of Labor figures show Hispanics suffer from an official unemployment rate of 10.7 percent, which is higher than the national rate of 8.2 percent.  The government reported the economy added 120,000 jobs in March, just half of the jobs that were expected. Of course, the personal economic ruin suffered disproportionately by the Hispanic community as a result of the housing market collapse, and having the highest poverty rates of any other group, has not helped restore optimism.
  
Although the results show President Barack Obama retains an overall 58 percent approval rating among Hispanics, his concern should be that much of this support is due to mainly to his own personal popularity, as the same survey indicates the majority of those polled do not approve of the way he has managed the economy, high gas prices, and runaway government spending. Fifty two percent of Hispanics, for example, disapprove of the job President Obama is doing in handling the rise in gas prices and just 34 percent approve.


Furthermore, a full 85 percent of Hispanics say they are “very” or “somewhat” concerned about Washington’s current levels of spending and debt, according to the survey (the poll has accuracy rate of plus or minus 4.5 percent). Despite President Obama’s overtures for increased spending, a 54 percent majority of Hispanics say the higher priority of the federal government right now should be a reduction in spending to shrink the deficit while just 36 percent say more spending is the answer.

Today, significant doubts remain of the economy improving anytime soon, and with regard to the community’s ability to weather further continuance of the dismal economy. The Case Shiller index of home prices has dropped 36 percent since June 2006. This collapse in home prices - coupled with the massive number of Hispanics suffering loan foreclosure of their homes - leaves many unable to turn to home equity loans and refinancing as options that gave them a boost in the past.

Not surprisingly, the new data, commissioned by The Libre Initiative, also found that 51 percent of Hispanic respondents identified jobs and the economy as America’s most pressing problem, and only 27 percent indicated their individual condition had improved in the last 4 years.
  
It would seem President Barack Obama does not appear to suffer significantly from the Hispanic community’s dismal view of America’s current economic condition as 59 percent say they are currently planning to vote for President Obama in the upcoming presidential elections while only 31 percent say they will be voting for the Republican candidate.


My sense is Hispanics have been patiently waiting for the turnaround because they genuinely like President Obama and truly desire he do well. They have also bought President Obama’s line that Republican obstructionism has had more to do with continuing stagnation, than his own policies. All the same, the Administration’s disappointing results and inaction on immigration may well prove to be the President’s Achilles’ heel in what promises to be the mother of all elections.

To put it bluntly, when the unemployment level of the American labor pool remains above the 8 percent mark for an unprecedented 50 straight months, it is not enough for the sitting president to say these results persist despite “sound” policies presumably advanced by his administration. As the election heats up, the Hispanic electorate may be persuaded to pin the continued stagnation directly to the President’s own disastrous policies as the root cause of the systemic failure that have kept our economy from rebounding.

I say disastrous because his policies have focused on increasing spending and growing government on the backs of small business owners and hardworking Americans struggling to make ends meet. This approach does not grow the economy, it grows government - it also grows the burden on the American people to sustain it. The poll indicates this approach does not have the support of the Hispanic community as 85 percent said they are very concerned (56 percent) or somewhat concerned (29 percent) about the federal government’s current level of spending and debt. Only six percent of Hispanics said they are not too concerned, and just eight percent are not concerned at all.


What is clear is that Hispanics believe our leaders must set aside their own political interests, stop dividing Americans on the immigration issue, and work to advance real solutions, real jobs and real gowth.  And even though a majority of Hispanics now believe that the future will not improve if we continue on the current path, they also know that decline is not inevitable.

In this election cycle, Hispanics will be looking to support  liberty-oriented candidates and policies aimed at achieving personal economic security for their children, for themselves, and for every American.
And isn’t that what the American Dream is all about?

*The poll was conducted by The Tarrance Group. The findings include data from a sample of N=500 Hispanic voters (in English and Spanish) throughout the country. Interviews were conducted over the telephone from March 13-19, 2012, and the margin of error for this type of sample is =/- 4.5%
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Daniel Garza was formerly Associate Director at the Office of Public Liaison for The White House. He is currently the Executive Director of The LIBRE Initiative. You can learn more about The LIBRE Initiative by visiting their website at www.thelibreinitiative.com, liking their facebook page “The LIBRE Initiative” or following them on twitter @libreinitiative
Last Edited by Daniel Garza at 4/18/2012 8:55 AM Comments (0)

Governments cling to power even when private solutions work best

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Barack Obama became President Obama when voters were swept up by the slogan, "Yes, We Can!" It implied that a magical president and activist government would end the recession and solve America's problems. Republicans make similar promises. But it is a fatal conceit to put so much faith in politicians and their promises.

One example: After 9/11, politicians insisted that government take over airline security. "You can't professionalize if you don't federalize," proclaimed then-Sen. Tom Daschle. The Senate voted 100-0 to create the Transportation Security Administration, or TSA.

Airport security has been federalized for a decade. So is security now...

To read more, click here. 

Last Edited by John Stossel at 4/10/2012 1:36 PM Comments (0)

Unemployed engineer who got Presidential attention still unemployed

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Do you remember the engineer from Fort Worth whose wife participated in a Jan. 30 video chat with the President using the "hangout" feature on Google Plus. She told him that her husband, despite his impressive credentials as an engineer, couldn't find work.

The President took the unusual step -- or politically opportunistic, depending on your point of view -- of asking her to send her husband's resume directly to him at the White House.

Well, three months later, the engineer is still unemployed.

 

FORT WORTH -- More than two months after President Barack Obama asked for Darin Wedel's résumé, the phone is quiet, e-mails are no longer flooding in and the long-sought-after job interviews -- which had begun to be scheduled -- have petered out. 

"Not even recruiting companies are calling anymore," said Jennifer Wedel, the Fort Worth mother of two who chatted online this year with Obama about her out-of-work husband. 

She says his job search has been hurt by a program to hire skilled foreign workers. 

It's been more than three years since Darin Wedel lost his job as a semiconductor engineer at Texas Instruments. 

But the family had newfound hope after Jennifer Wedel participated in a Jan. 30 video chat with the president using the "hangout" feature on Google Plus. 

She asked the president why the government issues and extends H-1B visas to foreign workers when highly skilled Americans like her husband can't find full-time work. 

Obama, who said industry leaders have told him that the U.S. doesn't have enough high-tech engineers to meet its needs, ended up asking for Darin Wedel's résumé. 

For weeks after that, the family's telephone rang constantly with calls from recruiters, headhunters, the news media, the Texas Workforce Commission, the White House, and out-of-town and out-of-state companies about possible job opportunities. 

"I did feel we got our hopes up a little," Jennifer Wedel said last week. "I mean, he's the POTUS. But it seems not even the leader of our country can get [Darin] a job." 

Shortly after Jennifer Wedel talked with the president, the family was overwhelmed with attention. 

Many calls came from out-of-state companies, as well as companies throughout Texas. But Darin's work choices are limited to North Texas because of a custody agreement for one of his two daughters that prevents him from moving away. 

Even so, the family thought a new job was right around the corner, possibly weeks away. 

But the phone calls lessened, and now they have stopped. 

To read more, click here.
 

Last Edited by Gary Rabine at 4/10/2012 9:43 AM Comments (0)

Fort Worth engineer who got Obama's attention still doesn't have a job

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Do you remember the engineer from Fort Worth whose wife participated in a Jan. 30 video chat with the President using the "hangout" feature on Google Plus. She told him that her husband, despite his impressive credentials as an engineer, couldn't find work.

The President took the unusual step -- or politically opportunistic, depending on your point of view -- of asking her to send her husband's resume directly to him at the White House.

Well, three months later, the engineer is still unemployed.

FORT WORTH -- More than two months after President Barack Obama asked for Darin Wedel's résumé, the phone is quiet, e-mails are no longer flooding in and the long-sought-after job interviews -- which had begun to be scheduled -- have petered out.

"Not even recruiting companies are calling anymore," said Jennifer Wedel, the Fort Worth mother of two who chatted online this year with Obama about her out-of-work husband.

She says his job search has been hurt by a program to hire skilled foreign workers.

It's been more than three years since Darin Wedel lost his job as a semiconductor engineer at Texas Instruments.

But the family had newfound hope after Jennifer Wedel participated in a Jan. 30 video chat with the president using the "hangout" feature on Google Plus.

She asked the president why the government issues and extends H-1B visas to foreign workers when highly skilled Americans like her husband can't find full-time work.

Obama, who said industry leaders have told him that the U.S. doesn't have enough high-tech engineers to meet its needs, ended up asking for Darin Wedel's résumé.

For weeks after that, the family's telephone rang constantly with calls from recruiters, headhunters, the news media, the Texas Workforce Commission, the White House, and out-of-town and out-of-state companies about possible job opportunities.

"I did feel we got our hopes up a little," Jennifer Wedel said last week. "I mean, he's the POTUS. But it seems not even the leader of our country can get [Darin] a job."

Shortly after Jennifer Wedel talked with the president, the family was overwhelmed with attention.

Many calls came from out-of-state companies, as well as companies throughout Texas. But Darin's work choices are limited to North Texas because of a custody agreement for one of his two daughters that prevents him from moving away.

Even so, the family thought a new job was right around the corner, possibly weeks away.

But the phone calls lessened, and now they have stopped.

To read more, click here.

Last Edited by Gary Rabine at 4/10/2012 9:05 AM Comments (0)

ObamaCare will add $340 billion to the deficit

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It's "only" $340 billion more on top of the $14 trillion national debt, but they sold it to the American people promising it would reduce the deficit. As broken promises go, it's a doozy.

According to the Washington Post, the study was not conducted by a partisan, anti-Obama organization, but rather by Charles Blahous, a policy analyst whom Obama approved in 2010 as the GOP trustee for Medicare and Social Security. His analysis challenges the conventional wisdom that the health-care law, which calls for an expensive expansion of coverage for the uninsured beginning in 2014, will nonetheless reduce deficits by raising taxes and cutting payments to Medicare providers.

To read the full story, click here.

Last Edited by Steve Zelnak at 4/10/2012 9:54 AM Comments (0)

How to bring back American prosperity

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Robert Luddy is a member of the North Carolina Leadership Team for the American Institute for Growth, a nonprofit committed to the defense of the free enterprise system. He is also president and founder of CaptiveAire Systems, Inc.

America is an exceptional country because it was established as the freest country in the history of the world with a Constitution, Bill of Rights, and respect for the rule of law. Our traditions developed from this founding included hard work and a can-do attitude, which allowed America to become the most prosperous country in the world by barely 65 years after its founding.

Personal freedom and, yes, economic freedom allows the individual to reach his or her fullest potential. These freedoms enshrined in the Constitution allowed individuals to compete and prosper in those early days, raising the standard of living for everyone. Community issues were resolved locally, often in the marketplace rather than in the courthouse and by those most affected, rather than by fiat or edict from a distant authority.

The free market allowed early America to excel at education, jurisprudence, farming, manufacturing, and the developments of innovative new technologies. Alexis de Tocqueville wrote, "America is afire with invention. Americans love risk."


By the early 1800s, many such as Alexander Hamilton, Henry Clay, John Calhoun, and John Quincy Adams promoted a stronger centralized government, which would be empowered to levy high tariffs and new taxes, to create a central bank and to dole out government subsidies, favors, and assistance. Fortunately, a balance was struck between the states and the federal government that lasted for decades.

Renewing American Leadership, in its review of historian and scholar Dr. Michael Novak’s book The Spirit of Democratic Capitalism, noted that what made success in this age possible was

"…an interdependent interweaving of free market including economics, democratic political structures, and pluralistic moral-cultural institutions like the press, the universities, the church and voluntary associations. This 'triune' system generated more freedom, opportunity, and wealth for more people than any other system in history."

It was true. Standards of living and life expectancies grew at an amazing rate, while poverty and infant mortality plummeted.

All the while, a movement that called themselves the Progressives was working to change the limited government vision, because they found the restrictions in the Constitution an impediment to their agenda.


Progressives from the left and right—Teddy Roosevelt, Woodrow Wilson, and many others through the first half of the 20th century culminating in Franklin Delano Roosevelt—ushered in a more centralized government approach, always a little at a time. Their efforts gave us the income tax, the Federal Reserve and, as a result of their policies, the Great Depression and the New Deal. Notably, the most prosperous period of the first half of the 20th century was the 1920s, when President Calvin Coolidge adopted a hands-off approach to the economy.

After the defeat of Hitler and the Axis, America moved back towards its free market traditions. The results were predicable: an economic boom which lasted the remainder of the century.

The Progressives never understood the vision of the Founders, and didn't trust that the people were capable of governing themselves. They believed they knew what was best for all, and that they needed the power to enforce it.

Gradually and incrementally, they began to expand government reach that sought to solve every problem, always in the name of the "common good." No problem was too big or too small for federal intervention, and precedent was piled atop precedent, to the point where now almost every aspect of our individual lives and our activities in the pursuit of happiness is regulated, prohibited, compulsory, or criminal.

These interventions and burdensome regulations have hampered the economy and busted our budget. The federal debt is now in excess of $16 trillion, and it continues to grow at an astonishing rate.


To put it in perspective, if you had won that record-high, $640 million Mega Millions lottery and taken it all in one lump sum, the federal government would have spent the taxes you would have paid (around $300 million) in just under 15 minutes.

The good news is there is a way to correct the course. It is found in the spirit of risk-taking, entrepreneurism, and invention, which are still alive and well in spite of, not because of, government meddling in the marketplace.

Our job creators—small, medium, and national—can solve the problem of unemployment, of want, of lack of opportunity, and unchecked government spending. But it must take the following actions:

  • Reduce federal spending to 20 percent of the GDP, which is the average level of spending for the past 50 years.
  • Reduce the corporate tax rate to 20 percent paid on all income worldwide.
  • Reduce regulation to common sense levels.
  • End the Federal Reserve's mandates to manipulate rates and the marketplace; their only concern should be ensuring a sound dollar.

Allow the free market to produce the energy needed for economic expansion, including clean-burning natural gas, shale petroleum, expanded offshore and Arctic exploration, and viable, unsubsidized alternative energies.


Our job creators will drive down unemployment, increase wages and prosperity, and expand our national wealth when we are freed from the yoke of excess regulation and taxation. The free market is the most effective, most efficient, and fairest allocator of capital, evidenced by our extraordinarily high standard of living.

For America to prosper, we must unleash our entrepreneurs, inventors, and job creators to provide employment, economic opportunities, freedom, and a resurgence of America, as the economic leader of the world.
Last Edited by Robert L. Luddy at 12/19/2012 12:01 PM Comments (1)

Evidence of a fragile recovery at best

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Anemic growth in small business lending so far suggests weak prospects for economic expansion. In fact, it's only a step away from flat-lining.

According to Reuters, lending to small businesses -- where the vast majority of jobs are created -- barely grew in February.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, edged up to 98.3 in February from 98.2 a month earlier.

Taken with a slowed growth rate in the first quarter of 2 to 2.5 percent, down from a 3 percent annual rate in the previous quarter, it's simply not enough to bring down the country's 8.3 percent jobless rate.

There's only one logical way to read these tea leaves; there's caution on the part of small business owners.

And more bad news -- December and January readings for PayNet's lending index were both revised downward.

Last Edited by David Park at 4/25/2012 10:35 AM Comments (0)

Grid-scale energy storage: Lux predicts $113.5B in global demand by 2017

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The formula for prosperity and therefore job creation remains the same…allow the free market to determine the optimal growth path - whether its energy or any other product, service or commodity. Free markets develop the technology to clean existing fossil fuel, pollution, build a more efficient energy infrastructure, move soundly towards new energy technologies when they are proven, and not subsidized.

What Lux is seeing in the marketplace is on the right track.

From the report:

Last month Lux Research released a bottom-up evaluation of the cost effectiveness of eight energy storage technologies in six grid-scale applications throughout 44 countries, including all 50 U.S. states. Their report titled "Grid Storage under the Microscope: Using Local Knowledge to Forecast Global Demand" predicts that annual global demand for grid-scale energy storage will reach an astounding 185.4 gigawatt-hours (GWh) by 2017 and represent a $113.5 billion incremental revenue opportunity for an industry that currently generates sales of $50 to $60 billion a year.
 
In the grid-scale sector alone, Lux predicts an average year-on-year demand growth of 231% from 2012 through 2015 when the growth rate moderates to 43% per year for 2016 and 2017. The forecast is tempered, however, by a cautionary note that demand of that magnitude can't be satisfied because "Believe it or not, the grid storage market will be supply-constrained in 2017."

To read the full report, click here.

Last Edited by Susan Story at 4/5/2012 10:13 AM Comments (0)

I like my entrepreneurs with seasoning, please

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“Entrepreneur” means “young”. “Entrepreneur” means “energy.” “Entrepreneur” means “new.”

Right?

I was sent an article by The Economist that cites various studies showing that:

· There are more successful entrepreneurs over 50 and 60 than commonly thought.

·         The ratio of older to younger successful entrepreneurs is about 2-to-1.

·         Flexibility of mind seems to be present at higher age-brackets than in the past.

·         Creativity, when it involves complex problems across disciplines, is emerging later.

Here is a key excerpt from the article which I have broken up for easier reading:

Research suggests that age may in fact be an advantage for entrepreneurs.

Vivek Wadhwa of Singularity University in California studied more than 500 American high-tech and engineering companies with more than $1m in sales. He discovered that the average age of the founders of successful American technology businesses (i.e., ones with real revenues) is 39. There were twice as many successful founders over 50 as under 25, and twice as many over 60 as under 20.

Dane Stangler of the Kauffman Foundation studied American firms founded in 1996-2007. He found the highest rate of entrepreneurial activity among people aged between 55 and 64—and the lowest rate among the Google generation of 20-to 34-year-olds. The Kauffman Foundation’s most recent study of start-ups discovered that people aged 55 to 64 accounted for nearly 23% of new entrepreneurs in 2010, compared with under 15% in 1996.

My take is that there are two intersecting factors at work here:

1. Outdated mental pictures.

People’s energy level and health are extending highly productive life far longer than mental pictures internalized in our youth have led us to expect.

2. Handling complexity benefits from experienced pattern-recognition.

Our world is dishing up more complex problems. They cut across more and different swaths of life – whether you’re in politics, business, investing, science, medicine etc. Having a brain with bigger pattern-recognition software as a result of experience can be a deciding resource in solving such problems – including problems where you have to know if their solution lies inside, or outside, the box.

Last Edited by John Allison at 12/19/2012 12:00 PM Comments (0)

Hiring is about which way the wind blows

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A new economic discipline seems to have emerged over the past several months: econometeorology, the explanation of the economy through weather patterns.

Each month, jobs numbers are adjusted to account for seasonal variations. For example, there is typically a spurt of temporary hiring during the holiday season in retail, and there is typically a slowdown in construction over the winter months as snow and inclement weather prevent work. The seasonally adjusted number that we see every month helps smooth out those variations to make an apples-to-apples comparison of how the economy is doing. The effects of these seasonal adjustments can be seen in the chart below.

In the context of this seasonality, economists have been looking at this year’s warm winter.  Goldman Sachs has estimated that the warm weather added between 50,000 and 70,000 jobs to the January number.  If this proves to be the case, we would expect to see an overestimation of jobs growth in the winter, with a return to the “normal” slightly lower trend as spring takes hold.

But while econometeorology has been an interesting sidebar to jobs growth of the past several months, what we are really seeing is economists seeking to explain a significant one percentage point drop in the unemployment rate with more modest actual GDP growth; what Fed Chair Ben Bernanke called a “far from normal” job market.

As we have noted previously, much of the speculation for these abnormalities has focused on the shifts in participation rate.  Barclays has projected that the participation rate decline is largely due to ongoing demographic shifts.  Morgan Stanley has said that the participation rate decline is due in part to significant increases in disability claims.  Goldman Sachs has pointed to short-term behavioral changes that they expect to reverse, holding participation steady for the year. The New York Fed has been looking at this issue and others in a series of analyses.

If we think that the participation rate will hold steady for the remainder of the year, the President needs 184,000 jobs per month to get below 8 percent unemployment by Election Day. However, last month, we actually saw participation start to come back up.  If that returns to demographic trend over the coming two years, the President would need a much more aggressive 284,000 jobs per month.

With eight employment reports left until Election Day, there is still time for job growth to strengthen more or fall back yet again.

Matt McDonald is a partner at Hamilton Place Strategies and a veteran of two Presidential campaigns and the White House.  Prior to joining HPS, Matt worked for McKinsey and Company.  He holds an MBA from MIT’s Sloan School of Management and a degree in economics from Dartmouth College.

Last Edited by Matt McDonald at 4/4/2012 8:51 AM Comments (0)

Private incentives and markets even benefit endangered species

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Regardless of your personal feelings about hunting, one can't ignore that three African antelope species went from a few dozen worldwide in the late 1970s to more than 17,000 in Texas because of market incentives rather than government regulation.

After all, cows, too are a commercial product and no one thinks they are going extinct anytime soon.

The antelope are magnificent: limber, with large, almost undulating horns, different on each species. There's the scimitar-horned oryx, the addax and the dama gazelle, whose horns have a gentle, rising S-curve. 

They're nearly extinct in their native habitats of the African savanna. But because of an unusual exemption under the U.S. Endangered Species Act, these animals have thrived into the thousands by being hunted legally on sprawling ranches in the United States. In all, there are more than 5,000 such ranches in Texas, mostly in the south-central region known as Hill Country. 

Alongside the antelope exist exotic animals of every stripe, including zebra, African bongos, kangaroo and regal rare Pere David's deer, which are extinct in the wild. 

This particular exotic 3,000-acre ranch, like many in Texas, is for sport hunting, what Morani River Ranch owner and master bow-hunter Kevin Reid calls "re-creating the African experience." 

The Texas game ranches have the cachet of the wild, providing hunters with the experience, game and trophies of endangered and extinct-in-the-wild animals they want without leaving the United States. A successful trophy hunt can cost up to $15,000, depending on the beast. 

Reid is an architect and developer who led safaris to Africa for five years. The name Morani, which came from Reid's time in Tanzania, is Masai, meaning "hunter and protector." 

The exotic-ranch owners are in a furious fight with the U.S. Fish and Wildlife Service — and animal rights groups — over having to get permits as of next Wednesday for the three endangered species of African antelope. 

The ranchers argue, forcefully, that they've saved the antelope because they haven't had to abide by the Endangered Species Act, which imposes paperwork and accounting requirements, since 2005, giving them the incentive to raise the animals for sport hunting.  

Animal activists counter that conservation doesn't mean raising an animal to kill it and put its head on the wall. 

"The hunting helps provide the revenue that allows us to purchase these species and feed them," said Reid, who's among a small group of ranchers who are sticking with the antelope through the permitting.


Read the full story here.

 

Last Edited by Art Pope at 4/2/2012 9:43 AM Comments (0)

President Obama’s Results are Wearing Thin with Hispanics

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The Hispanic and Latino community has an indomitable spirit, a weatherworn resiliency borne from generations of hardship, scarcity and political under-representation. It is a developed trait that enables our community to work hard, bide our time patiently, push persistently for self-improvement, and to be grateful for the breaks we do get.

You see it in the grit and resolve of the business owner who works 18 hour a day; the dishwasher who toils in the steamy and sticky backroom of a busy restaurant; the dependable dairy farm worker who cleans the stables with a noble smile day in and day out, and the farm-worker who sends a portion of his small paycheck to his family in Mexico. You see it in the store-owner who dreams of passing on his business to his child, and in the university student driven “to make it” so that his parents can be proud of his/her achievements.

My community all looks past their current condition dreaming someday they will go from subordinate to foreman, from employee to employer, from student to professional, or even from farm-worker to White House staffer (as it was in my case).

Americans award persistence and hard work. Unwearyingly, the Hispanic and Latino community pushes against all obstacles and limitations of cultural and language differences - and in many cases a lack of education - because the evidence of others like themselves reaping these awards abounds. I remember someone once said Hispanics are “the people of someday” – patiently enduring all because they know better days are just around the corner, and so they go through life “siempre aguantando”.


This persistence, this forbearance, has also been evident in the how much we have been willing in the past to wait on elected leaders to deliver on promises.

For some time now I have been leading The LIBRE Initiative, a national non-profit, non-partisan organization working to develop and advance ideas and policies that will best empower the U.S. Hispanic and Latino community  to grow, thrive, and help them lead America to a healthier and freer economic future. It is my contention –and that of a majority of Americans—that until Washington’s reckless and wasteful spending is controlled; we will not see a marked improvement of the current economic crisis.

This past week, I had the opportunity to hear from a group of Hispanics from Albuquerque, N.M. discussing their sentiments on matters dealing with the nation’s economic situation, in particular, public spending. Though this group was economically and socially diverse, the recurring frustration was that they saw the political partisanship and the party-first culture in Washington as the primary culprit for keeping the American people from the sound and effective policies they want and deserve.

Further, this group commented on a failure to reconcile political bickering which has made approving a responsible budget – one with no gimmicks, accounting tricks, and empty promises – an impossible fantasy to achieve. The group of Hispanics and Latinos broadly agreed with one participant who said that all Americans have had to tighten their belts and learn to do more with less, while the federal government has failed to make similar difficult choices. “They’re giving 500 million dollars to failed companies like Solyndra while many of us don’t have jobs” added the middle aged Latina woman markedly frustrated by the spending culture in Washington.


While the group was frustrated by Congress’ inability to reverse the spending, deficits and the growing national debt, only a scant few placed the blame directly on President Barack Obama even though he his budgets continuously compound the problems. “He’s trying” said a twenty something male participant, “but the Republicans want him to fail” he added exasperated. “The other side needs to stop playing politics and begin cooperating with the president so that he can make the changes he promised.”
  
Yet, others were showing signs of fatigue: “I have been disappointed in the way the President has failed to deliver on the promises he made” said one of the most senior participants of the group, “Instead of handing out favors to special interests, he should have done more to focus his efforts on allowing businesses to grow.”

It is noteworthy that about 23 of the 25 participants in the group admitted they had voted for President Obama in the last election, and although 8 to 10 said they were reconsidering their vote, the rest said they would be voting for him again. The same 22, 23 or so admitted they had voted for Sarah Martinez, a Republican, for governor of New Mexico because “she was not part of the good ol' boy system” said one. “She’s like one of us” said another.

Like the majority of U.S. Hispanics and Latinos, the group from Albuquerque was clear they like President Obama, they genuinely like him personally and many are still pulling for him to do well. They like him so much many will continue to wait for the promised change and say they are willing to overlook his inaction on immigration policy, the 10% unemployment rate for Hispanics, the spike in gas prices causing major pain and hurt, the 4 straight years of massive deficit spending, and the accused cronyism shown with his friends and supporters from Wall Street, green energy companies and lobbyists.

Patriotism and Respect for Military High among Latinos, Fox News Latino Poll Shows

But that’s just it: How long can the lack of real results, ill-conceived policies which grow the burden on the private sector and inaction on past promises (Immigration?) continue until voters say enough? How long will Hispanics be patient with an Obama Administration focused more on paying off political favors to friends and supporters than on helping the small business owner?

Results from polling of the U.S. Hispanic and Latino community we will announce in Miami, FL next month indicate that despite the personal affection Hispanics have for the President it is becoming clear their patience is beginning to wear thin, and they are not willing to “aguantar” much longer.

Early results of the polling and focus groups tell us Hispanics are weary of the spending, the borrowing, the unfettered culture of cronyism in Washington, and the broken promises.

While we are exceptionally patient, like other Americans, we’re not patient forever. President Obama may soon learn the consequences of promising more than you can deliver, and not delivering more than what you promised.

Daniel Garza was formerly Associate Director at the Office of Public Liaison for The White House. He is currently the Executive Director of The LIBRE Initiative. You can learn more about The LIBRE Initiative by visiting their website at www.thelibreinitiative.com, liking their Facebook page “The LIBRE Initiative” or following them on twitter @libreinitiative

Read more: here 
Last Edited by Daniel Garza at 4/4/2012 11:32 AM Comments (0)

How ObamaCare hurts job creation

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A lot of attention in Washington and around the country has been focused on the Supreme Court as it has considered the constitutionality of the Patient Protection and Affordable Care Act—or, Obamacare. Business owners have also been watching closely, if not nervously, because of the sheer implications that the law has on their ability to keep their doors open during these difficult economic times.

Any business owner can tell you that the rising cost of healthcare has been one of their top concerns for years—but what has them really worried is the increased layers of cost, regulation, and uncertainty stemming from Obamacare. Instead of making the problem of healthcare costs better, it makes it much worse.

[See a collection of political cartoons on healthcare.]

According to the nonpartisan Congressional Budget Office, Obamacare will reduce the labor force by 800,000 over the next decade and estimates that the cost to American businesses due to inability or failure to comply will be $52 billion. The last thing our economy needs is even more hurdles to job creation, yet that is precisely what the healthcare law represents.

For a small-to-medium sized business, the prospect of having to comb through the 2,700 pages of Obamacare to figure out which of the $525 billion in taxes, or $26 billion in penalties, or hundreds of new regulations and mandates apply to them is daunting, to say the least. Is it any surprise that healthcare costs have risen already? Fifty-seven percent of employers nationwide say that healthcare costs have risen due to Obamacare, and in my home state of North Carolina, premium costs are projected to increase by 5.2 percent over last year's costs.

[Photo Gallery: Supreme Court Hears Healthcare Reform Arguments.]

The problem with Obamacare isn't the purported purpose of the law—to reform our nation's health insurance system—the problem is the way in which the law attempts to achieve its goal: bigger government, more bureaucracy, and a top-down approach that is Washington-centered. What the American Institute for Growth believes is that there are consumer-centered solutions that could bring free-market dynamics to bear in containing healthcare and insurance costs.

Things like expanding health savings accounts, making health insurance portable, or allowing health insurance to be bought across state lines are just a few commonsense, modern reforms that would be important steps in the right direction.

Regardless of what the Supreme Court ultimately decides, the need for real reform remains and the American Institute for Growth will continue to advocate for an approach that does not dampen free enterprise or disincentivize economic growth.

Last Edited by Steve Zelnak at 4/4/2012 8:28 AM Comments (0)
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