Tag: jobs

Health Care in America

It is hard to get our arms around the issues raised by health care in America. Indeed, President Trump was telling the truth (for a change) when he said that health care “is so complicated.” There are a lot of trees in that forest, and each one matters, but it is helpful to see the forest first, which is my modest objective for this note.

Cost

Americans spend twice as much on average for healthcare as do Europeans and with poorer results. To take one example, the U.S. has an infant mortality rate of 5.8 deaths per 1,000 births while in South Korea it is 3.0. How the delivery of medical services is paid for is a critically important part of why healthcare is so expensive in the U.S., but it is not the only factor. Most health services in the U.S. are provided by the private sector. Government and professional regulations and restriction on how these services may be delivered play a very important role in their cost.

These regulations govern the extent to which technology and medical experts with less training than MDs (e.g. nurse practitioners) may be used to provide routine medical advice. The use of computer diagnostics, either to assist MDs or directly accessed via the Internet by patients; phone consultations, assisted by Internet delivered medical metrics; and nurses for routine medical treatment, will significantly reduce costs while improving the average quality of service. Some of this is already happening, but the American Medical Association, the union for doctors, like most unions, has historically “protected” the incomes of doctors by restricting completion in providing their services. In this instance, I believe that technology, when allowed will make a major contribution.

Improved transparency with regard to the cost of alternative treatments would help reduce the shocking disparity between the costs of the same treatment from different providers. How medical services are financed (the subject of the next section) profoundly influences whether patients care about and monitor costs and what doctors provide and charge for.

Financing

The provision of health care services in the U.S. can be divided into five categories – five separate systems. Data reported here is for 2014 as reported by the U.S. Census Bureau. https://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-253.pdf

U.S. military veterans receive care through the Veteran’s Administration. The VA program covers 14.1 million people or 4.5 percent of the population. The VA health service is a single payer (government), government run program, which is regularly condemned for its poor service and corruption.

Medicaid and Medicare are single payer (government) programs for the poor (Medicaid) and the elderly (Medicare) that finance privately provided medical services. The single payer, the government, sets the service standards and their costs for the health services financed by these programs, but they are delivered by the private sector, though the government determines which doctors may participate and thus must be used by the program’s beneficiaries.

In 2014 Medicaid covered 62 million people or 19.5% of the population and currently covers 68 million. Quoting from government websites: “Medicaid is an assistance program” (i.e. not insurance). “It serves low-income people of every age. Patients usually pay no part of costs for covered medical expenses. A small co-payment is sometimes required. Medicaid is a federal-state program. It varies from state to state. It is run by state and local governments within federal guidelines…. In all states, Medicaid provides health coverage for some low-income people, families and children, pregnant women, the elderly, and people with disabilities. In some states the program covers all low-income adults below a certain income level.”

In 2014 Medicare covered 50.5 million people or 16% of the population, a number that is growing rapidly as the U.S. population ages. “Medicare is an insurance program. Medical bills are paid from trust funds that those covered have paid into. It serves people over 65 primarily, whatever their income; and serves younger disabled people and dialysis patients. Patients pay part of costs through deductibles for hospital and other costs. Small monthly premiums are required for non-hospital coverage. Medicare is a federal program. It is basically the same everywhere in the United States and is run by the Centers for Medicare & Medicaid Services, an agency of the federal government.” This program seems broadly to have been operating satisfactorily. Hence the often-heard demands from older Republicans of “don’t touch my Medicare.”

In addition, 208.6 million people or 66% of the population had private health insurance plans in 2014. Of these, most (175 million or 55%) had insurance plans offered by their employers. The rest (47 million) bought their health insurance directly. Employer provided plans are subsidized because their premium payments are not taxed as part of an employee’s remuneration while the income from which people buying their own policies pay their premiums is taxed (including the amount they spend on insurance). This has created several serious problems.

Employee provided insurance policies are not portable, i.e. when a worker leaves that employer (fired, resigned, or retired) she cannot take the policy with her. This creates the preexisting condition problem. But first a time out for a quick look at the nature of insurance.

Insurance is a mechanism by which a group of people (the insurance pool) shares the costs of expenses (heart operation, car repair from an accident, home repair from a fire, etc.) that are expected to fall only on a few of them. Those who are lucky enough not to incur such costs help pay for those not so lucky. The group as a whole pays the entire cost of what ever was insured, but the lucky help out the unlucky. This means that the over all aggregate cost, and thus each person’s share of it, depends on who is in the insurance pool. If the pool is the entire population of a country, city, or company, then (if we are discussing health insurance) there will be more healthy people than unhealthy and the average insurance cost per person will be lower than if only unhealthy people are in the pool. Any one who knows that he will not get sick or have an accident (and who doesn’t care about sharing the cost of the less fortunate) would have no reason to join the pool and buy insurance. But of course no one can know that for sure.

If in the course of your employment you acquire or learn that you have a liver disease, the costs of your treatment will be covered by your company insurance plan. But if you change jobs and must take out a new insurance policy with your new employer (or as self employed) your condition will be known in advance and no insurance company would want to insure you at their normal group rates knowing that they would lose money by adding you. This is the origin of the pre existing condition problem. Anyone who acquires an insurance policy in his or her youth and is able to keep it continuously will not face a preexisting condition problem.

At the end of 2014, 33 million people (10.4 percent of the population) were uninsured. This dropped to 27 million people at the end of 2017. The Congressional Budget Office expects that number to rise modestly under Obamacare to 28 million by 2026. This group on average receives less medical care and relies more on emergency room services.

Two major objectives of Obamacare were: a) to forbid insurance companies from denying policies to people with preexisting medical conditions or to charge them more for coverage, and b) to reduce the number of uninsured in part to increase the size of the insurance pool with more healthy members to help cover the costs of the unhealthy. It also expanded eligibility to Medicaid to all able-bodied adults below 138 percent of the federal poverty level and initially covers 95% of the cost to each state for its expansion of enrollees.

To encourage the uninsured (those not eligible for Medicaid choosing not to have insurance) to join the insurance pool, thus helping to pay for the sick, Obamacare subsidizes the premiums of policies purchased on health insurance exchanges established under Obamacare in most states for anyone whose income is less than 400% of the federal poverty level. However, the number those uninsured that have acquired health insurance under Obamacare has fallen short of expectations. Those who have signed up have often had preexisting medical problems. As a result the cost of insurance acquired on these exchanges has risen more than expected. The rising cost of insurance is discouraging more people from acquiring it, a phenomenon referred to as a “death spiral.”

American Health Care Act

The House GOP’s American Health Care Act (AHCA) proposal to “replace” the Affordable Care Act (Obamacare) tweaks many of the costs and subsidies in Obamacare in an effort to improve the structure of incentives for cost effective care but this would take us from the forest to some of its individual trees.

The GOP proposal would eliminate Obamacare’s penalty for those choosing not to insure and allow people to keep their policies (portability) when they change jobs or become unemployed. If there is a gap in coverage, a person would have to pay a one time penalty over standard insurance rates of 30%. Republican leadership argues that these incentives are sufficient to encourage more people to get and retain health insurance thus solving the prior condition problem and provide for a large enough pool of insured to keep premiums down.

The assessment of the Congressional Budget Office, on the other hand is “that 24 million fewer people would have coverage a decade from now than if the Affordable Care Act remains intact.” Obamacare-revision-would-reduce-insured-numbers-by-24-million/2017/03/13/. The Washington Post titled their report on the CBO’s findings “Affordable Care Act revision would reduce insured numbers by 24 million, CBO projects”. Readers would be forgiven for thinking that the GOP proposal would take away or eliminate coverage by that amount, when in fact the CBO estimate reflects their expectation of the number of people who would choose not to insure given the terms proposed by the Republicans. The Wall Street Journal gave a more balanced headline to its report on the CBO assessment: “CBO Sees 24 Million More Uninsured, $337 Billion Deficit Cut With GOP Plan”

Whenever costly services are provided free of charge, they are not allocated and rationed by price. In place of market price allocation, the mechanism by which almost everything else in a free market is allocated, services provided “free” must be allocated and rationed by regulations. Whoever pays for the medical care received determines the care options chosen and thus has a major impact on its cost. Currently for most people (other than the poor and elderly who qualify for Medicaid and Medicare) the payer is the insurance policy they chose plus the copay that it requires. For a single payer insurance program such as Medicaid and Medicare, the payer is largely the government, which determines by regulation the quality, choice and cost of service. Democrats generally favor a single payer approach and the government regulation of the health service industry that that would require, while Republicans generally favor government financing only for the poor and disabled (safety net) and reliance on greater individual choice in a more competitive market for both insurance and medical care. This reflects the more general preference by Democrats for government regulation of products, services and markets and by Republicans for primary reliance on individual consumer choice.

An alternative Approach

In my opinion, the public policy goal for the provision of health care should be to provide satisfactory care to those who cannot afford it (the poor) in a cost effective manner, to provide everyone else with as much choice as possible and the information that would be helpful in making such choices, and to open medical practice to as much flexibility and competition as possible. The tax proposals I have made earlier would lay the best foundation on which to build such policies: My political platform for the nation-2017.  I would replace all business and personal income taxes and payroll taxes with a flat consumption tax (Value Added Tax—VAT) and introduce a per person minimum guaranteed income (tax credit) that varies with age but not income and is sufficient for a minimum level of healthy existence. US federal tax policy, Cayman Financial Review July 2009 A mandatory health savings account contribution (in place of Medicaid and Medicare and any other insurance subsidies) and a mandatory retirement account contribution (in place of Social Security) would be made from the monthly minimum guaranteed income payments in amounts sufficient for satisfactory health care insurance and retirement. Saving social security. The administrative requirements for such a simple system would be minimal.

I do not wish to suggest for a second that providing everyone with a satisfactory guaranteed minimum income will deliver the good life to everyone. In fact, most people are not happy—do not feel fulfilled and whole—without a decent job. Most people want to work. The recent spike in suicides and opiate overdose deaths seems related to the idleness of those who have given up looking for work. Nicholas N. Eberstadt points out that:

“According to [Alan Krueger’s] work, nearly half of all prime working-age male labor-force dropouts—an army now totaling roughly 7 million men—currently take pain medication on a daily basis…. But how did so many millions of un-working men, whose incomes are limited, manage en masse to afford a constant supply of pain medication? Oxycontin is not cheap…. One main mechanism today has been the welfare state: more specifically, Medicaid, Uncle Sam’s means-tested health-benefits program.

“By the way: Of the entire un-working prime-age male Anglo population in 2013, nearly three-fifths (57 percent) were reportedly collecting disability benefits from one or more government disability program in 2013. Disability checks and means-tested benefits cannot support a lavish lifestyle. But they can offer a permanent alternative to paid employment, and for growing numbers of American men, they do. The rise of these programs has coincided with the death of work for larger and larger numbers of American men not yet of retirement age. We cannot say that these programs caused the death of work for millions upon millions of younger men: What is incontrovertible, however, is that they have financed it—just as Medicaid inadvertently helped finance America’s immense and increasing appetite for opioids in our new century.” Commentary Magazine, Our miserable 21st century February 15, 2017.

Getting the incentives in government assistance programs right is difficult. But better jobs are needed as well. The government’s stifling regulations of too many aspects of the private economy have reduced investment and growth in productivity (the basis of increases in our standard of living) to a crawl. The medical care industry is only one of many in which a better balance between government and market regulation of economic activity and smarter policies with better structured incentives for those making decisions are badly needed.

Post Script

PS: The Republican leadership has chosen to put forth its American Health Care Act (AHCA) in the form of a budget “reconciliation” bill. This allows its adoption by simple majority rather than the usual 60% majority, but it limits the scope of the act to what might be considered budgetary aspects. This is behind the rush and the limited range of changes that are possible for the AHCA. There are pros and cons to such a process, which was also followed for Obamacare.

The advantages are that the bill can be passed with a lower level of congressional support and that the sectors of the economy adversely effected (a bill that changes anything will necessarily have winners and losers) will have less time to mount a fight to save or promote their special interests. The disadvantages are that the potential to improve the bill by hearing and considering all views will be limited and that the opportunity to build broad support via compromises will be missed. In my opinion such important and fundamental legislation should obtain broad support. The failure to do so was one of the flaws of Obamacare.

PPS. When new rules change the outcomes for some, fairness dictates an as painless as possible transition from the existing rules to the new ones. Some of the debate among House Republicans concerns transition issues, such as from current Federal financing of state expansions of Medicaid coverage to Federal block grants meant to give states more flexibility in how they use these funds.

Keystone Pipeline, Jobs, and Confusion

Perhaps “haste makes waste” explains the jumble of contradictory statements coming from President Trump with regard to the Keystone XL and Dakota Access Pipeline projects. Or maybe not?? Trump gives green light to Dakota Access Keystone XL oil pipelines. Trump’s trade and jobs rhetoric continues to alarm free market conservatives as well as our trading partners abroad (see the comments coming from a bewildered Germany wondering how to best protect their interests as Trump pursues what he—mistakenly—considered America’s interests).

The pipelines will save jobs (yes save jobs), improve safety, and reduce environmental risks compared with the existing alternatives of rail and trucking. Obama’s State Department reviews, which cleared the Keystone XL project multiple times, concluded in its final review that the Canadian oil in question was coming out of the ground with or without the Keystone XL pipeline and thus there would be no significant impact on greenhouse gas emissions from the pipeline. https://keystonepipeline-xl.state.gov/documents/organization/221135.pdf

The same is true for the Dakota Access pipeline, the final 1,100 feet of which (of the 1,171 mile project) have been stopped because of objections by the Standing Rock Sioux tribe that it would “disturb sacred burial and archaeological sites.” WaPo.

On Tuesday, Trump said: “From now on, we’re going to be making pipeline in the United States. We build the pipelines, we want to build the pipe. We’re going to put a lot of workers, a lot of skilled workers, back to work. We will build our own pipeline, we will build our own pipes, like we used to in the old days.” WaPo

I am increasingly inclined to think that Trump’s blatant misrepresentations of the impact of his “Buy American, hire American” mantra is sinister demagoguery. TransCanada, the Canadian project owner had already planned to buy 65% of the steel pipe from U.S. manufacturers as a purely business decision. Replacing the remaining 35% with American made pipes would increase the cost of the project. It would also redeploy American workers from their current, presumable more productive, employment to make these pipes. It is hard to see what Trump doesn’t get about efficiency and productivity as a source of our wealth. If he insists on doing it “like we used to in the old days,” he will make us poorer as “in the old days.”

“Opponents of the pipeline dismissed the job numbers and economic impacts, arguing that pipelines will create only “a handful” of permanent jobs.

“But the fact that pipelines only have a handful of permanent workers simply conveys how remarkably efficient pipelines are. The high output of labor generates value and wealth and frees up Americans to be more productive elsewhere in the economy.” http://dailysignal.com/2017/01/24/trumps-pipeline-approvals-are-a-win-for-the-economy-and-environment/?utm_source=TDS_Email&utm_medium=email&utm_campaign=MorningBell&mkt_tok=eyJpIjoiT0RJeFlqaGpNamt3TkdOayIsInQiOiJTSnpZZExnVUdLOThQdW5ESnNPNDlIUHByWXFXNSs3bEFDa0VFOHVCbnhTOUtnbTBMWnd6MEkxTkdhRHpCVjU5a0JhQ2EraVZWTVVOcXlJVzVpMkVQVm9OWkJcL29VOEpkdG93RllJeldNNVBpem9KbHlPTWlOOFRJSkVEM3FyR1QifQ%3D%3D

 

 

President Trump and manufacturing jobs

President Trump intends to bring back manufacturing jobs. How might he do that and what would it mean for our economy and our workers?

Keeping in mind that our manufacturing output has steadily increased over the years and is now at an all time high, though the number of manufacturing jobs has steadily declined. Bringing back manufacturing jobs means rolling back and undoing the technical advances that made manufacturing workings more productive. But if we increase the number of workers in manufacturing by making each worker less productive (shelving some of the productivity enhancing technical advances), where will these workers come from? Presumably not from Mexico. They will have to give up what they were producing before in order to take the new manufacturing jobs.

Looking more carefully at such a policy reveals that it would make us poorer. Without Trump’s arm twisting (carrots and sticks—tax breaks, i.e., bribes, and/or tax or other penalties), the workers in question would be employed doing things that were more profitable (i.e. more productive and contributed more to our income) than in manufacturing. Trump would have those workers move from where they are more productive to where they would be less productive. I assume that such a policy reflects ignorance rather than malice, but what ever his motivation, the result of Trump’s protectionist threats would be to lower our standard of living.

If President Trump intends to return power from the government to the people, as he claimed in his inauguration speech, he will have to stop threatening companies to produce things in the U.S. when they would otherwise find it more profitable (cheaper) to produce them abroad and import them. Anything and everything that adds to our economy’s productivity (specializing in what we are best at and exporting it to pay for imports that other countries are better at making) increases our incomes. Trump should stop interfering with our private economic decisions and get on with the other aspects of his promises (tax and regulatory reform) that will increase our well-being.

Econ 101 – Jobs and Income Growth

At long last the economy has more or less reached full employment. The December 2016 unemployment rate was 4.7 percent while the Federal Reserve’s assessment of normal full employment (NAIRU—non-accelerating inflation rate of unemployment) is 4.8 percent. More over, wage growth has picked up, increasing 2.9 percent over a year earlier. The producer price index increased 0.3 percent in December (4.3% annualized). The economy is heating up. The Federal Reserve raised its overnight interbank interest rate target (Fed Funds rate) from 0.5 to 0.75 percent in December.

What does this mean for PEOTUS Trump’s goal to create jobs and increase the economy’s growth rate? At his press conference January 11, 2017 he claimed to be: “The greatest jobs producer God ever created.”

A new job is created when a company demands an additional worker for some reason or other and the desired worker is supplied. More jobs (by which I mean more new ones than the loss of old ones, i.e., a net increase in jobs) can come from any of three sources: a) an increase in the labor participation rate (more people looking for work from those of working age who are physically able to work); b) more young people entering the labor force than retiring old people leaving it; and c) a net immigration of working age foreigners. An increase in the demand for workers that cannot be filled will put upward pressure on wages and ultimately on prices.

In December the labor participation rate rose to 62.7 percent from its low in November of 62.6. It had been around 66 percent in the years just before the great recession of 2008. While we don’t really understand why so many people have dropped out of the labor force, there is scope to increase employment if some of them return. Some of the new jobs are filled by immigrants, especially those jobs requiring information technology skills, which creates additional jobs to feed, cloth, and entertain the new residents. http://wapo.st/2irYDYW. While 7.4 million people were looking for work in November 2016 (latest available), there were 5.5 million unfilled vacancies. If you like data: 5.1 million were hired in October while 4.9 million left their jobs for a net increase in employment of 0.225 million. Of those leaving their jobs 0.372 retired or died.

In short, the economy does not lack jobs and the number of jobs is growing at about the rate of growth of the working age population. If the government increases employment for infrastructure projects, those workers must be attracted away from their existing jobs, which will require higher wages. Increasing employment at much faster rates would be inflationary. Higher inflation would undermine the real value of excessive nominal wage increases.

The problem—issue or challenge—is that the new jobs offered often require skills that do not match those of the workers looking for work. Most layoffs and discharges result from automation and other productivity improvements (not from trade), which increases the wages offered for the new jobs needed as a result. This process—increased worker productivity—is the source of per capita income growth, i.e. of our increasing standard of living. However, the benefits of increased productivity will only be broadly shared if workers are trained (or retrained) in the new jobs needed. In addition, the increased income inequality in the U.S. since the 1970s is largely the result of increased rent seeking from government as government regulations have expanded to protect the established companies from outside competition.

Faster income growth, therefore, will depend on improving productivity and its rate of growth over time (not creating more jobs). Improved and simplified regulations will free up some of the large armies of compliance officers to work in jobs that actually produce things we want. It will also increase market competition by reducing regulatory capture and related rent seeking. The same is true for any reforms in the provision of medical services that lower their cost (e.g. from greater transparency of costs of treatment options and patient responsibility for and interest in those costs). This is a different issue than who pays for medical care (insurance) but the nature and structure of medical insurance profoundly influences the incentives patients and doctors have to choose cost effective medical services. Tax reforms that lower the cost of investing in the U.S. will also increase productivity and income growth.

Investments in plant and equipment and new technology increase labor productivity and income in the future but require workers and materials to build them in the present. In an already more or less fully employed economy the resources used for investments must come from giving up other uses, primarily from producing consumption goods and services. To finance investment people will need to consume less and save more.

If none of the resources and their financing come from the government (and Trump plans the opposite), interest rates will need to rise in order to encourage more savings and to moderate the increase in investment. The Federal Reserve will have to raise its interest rate targets just to stay neutral (i.e. to keep inflation rates near their 2% per year target) as the tightening labor market puts upward pressure on wages and equilibrium interest rates. Thus interest rates will need to increase even more to encourage the additional savings needed to finance additional investment.

The new government has yet to propose its budget for the coming year, but Trump cannot simultaneously increase military spending and infrastructure spending and leave entitlement commitments unchanged (which imply significant increases in actual social security and medical outlays because of an ageing population and increased retirements relative to new entrants into the labor force) even if his tax reforms are revenue neutral (which current proposals are not). We don’t know yet which of his plans will have to give and to what extent. None of this takes into account the large impact not so far down the road of unfunded fiscal liabilities (unfunded social security, Medicare, and Medicaid obligations). https://wcoats.wordpress.com/2013/03/16/the-sequester/ https://wcoats.wordpress.com/2011/04/23/thinking-about-the-public-debt/ http://tinyurl.com/yjos2ed. Thus it is difficult to forecast how much interest rates will need to rise in order to keep inflation in check while crowding out private investment to finance the growing public debt.

Higher interest rates will also tend to strengthen (appreciate) the dollars’ exchange rate, which will increase our trade deficit unless Trump totally destroys our trade flows in a misguided effort to balance our trade account (balance imports and exports). A larger trade deficit would result in some of the increased investment being financed by foreign saving (capital inflow) and to that extent would reduce the upward pressure on interest rates. So far I have not taken account of possible changes in the economic conditions of the rest of the world. However, an appreciated dollar would improve the exports and thus economic activity of other trading partners but would increase their local currency cost of any borrowing their firms and citizens have done in dollars.

The bottom line is that any increase in economic growth in our fully employed economy will come from increases in productivity not increases in employment. Tax and regulatory reform should improve the allocation of our labor and capital resources to more productive uses. They should also lead to increased investment, which will enhance future productivity. Jawboning or pressuring the allocation of these resources into less productive uses (e.g. domestic production of goods that could be more cheaply imported) will reduce economic growth. Increased investment will require higher interest rates in order to generate the savings needed (reduction in consumption) to finance the additional investment. However, continued fiscal deficits will divert that amount of savings away from investment. Without significant cuts in future entitlement commitments (and/or defense spending) these deficits will grow larger at the expense of economic growth. New trade tariffs threatened by Trump or other new impediments to trade will also reduce our productivity and growth. While the Trump administration could increase our economic growth rate in the coming years, this outcome depends on it resolving existing internal contradictions in its proposed policies.

Competitive capitalism vs. the other kinds

Free market capitalism requires the rule of laws that apply equally to everyone. This is an important foundation for the enormous efficiency and productivity of free market capitalist economies as well as for their fundamental fairness. What PEOTUS Trump did with Carrier and promises/threatens to do with any other company that behaves in ways he does not like does not meet this test.

As the powers of feudal lords were restrained by laws, they and their friends used laws to protect their special interests when ever possible. Judged by modern standards such uses of the law have undermined both the efficiency and fairness of economies dominated by them. The United States has prospered more than most other economies in part because it has generally been freer of such misuses of the law. The idea that publicly spirited technocrats can make better decisions about the allocation of our productive resources, even if they could somehow avoid the inevitable rent seeking pressures of market players, has been firmly repudiated by history. “Trumps carrier deal is the opposite of conservatism”

Professions, and other service providers often, if not always, attempt to use laws and regulations to protect themselves from open competition. Labor unions are an obvious example, but professional licensing requirements for doctors, lawyers, electricians, plumbers, etc. often go beyond certifying basic competence in order to restrict competition that might force them to lower the cost of their services to the public. Disruptive new ways of packaging and offering services, such as we have seen recently with Uber and AirBNB, that challenge, as well as complement, established cab and hotel business models are often resisted by the incumbents. These challenges have little to do with public safety and product quality and everything to do with preserving quasi-monopoly rents to the incumbent firms. Free Markets Uber Alles

The recent case of auto dealers vs Tesla provides a good example of this behavior. A recent Washington Post article on this dispute began with: “Don Hall, president of the Virginia Automobile Dealers Association, was making the hard sell. Staring directly into the camera, using the language of war, he urged car dealers to unite against a force that he said threatened their livelihoods: electric-car-maker Tesla…. The reason that Hall was sounding the alarm: Tesla, which sells its cars directly to consumers rather than through franchise dealers, is trying to open a second store in Virginia.” Auto dealers sound alarm as Tesla pushes for second Virginia store

Mr. Hall defends “the franchise system that they say protects consumers as well as their own business interests.” Perhaps he is right, but if franchise dealers served consumers better than direct sales by the manufacturer they would be preferred by customers and would not need special protection from laws that prohibit alternative arrangements for selling cars. The simple issue is whether we are better off allowing the market to determine which products and retailing and servicing arrangements are best or giving that power to bureaucrats, who have rarely been able to resist the “pressures” of the entrenched firms. “Over the past decade, VADA [Virginia Automobile Dealers Association] has given Virginia politicians $4 million in campaign contributions” (Washington Post). What Mr. Hall is really concerned about is the “business interests” of the franchise dealers.

President elect Trump’s Carrier deal is a more blatant retreat from the free market. When combined with Trump statements and appointments that seem to give more power to markets, it is very difficult to see where Trump is going. It is shocking to hear Republicans say: “’The free market has been sorting it out and America’s been losing,’ Mr. Pence added, as Mr. Trump interjected, ‘Every time, every time.’” “Trump carrier pence jobs”

In negotiating deals with individual companies to keep specific operations in the U.S. or to continue operations a company planned to reduce or end, Trump is engaging in a form of industrial central planning that is contrary to our tradition of free markets. It should be strongly opposed and I was pleased (and rather surprised) to see Sarah Palin speak out against it. While we do not yet know the details of the Carrier deal (aside from the $7 million in tax subsidies from the state of Indiana that Carrier had earlier rejected) the knock on effects are difficult to track. For example, we don’t know what the effect on Carrier jobs will be of its loss of competitiveness from more expensive output produced in Indiana?

It would be highly objectionable if Trump used “the threat of pulling federal contracts from Carrier’s parent, United Technologies…. Mr. Trump,… said he did not directly raise the $5 billion to $6 billion in federal contracts United Technologies receives, much of it from the Pentagon.” (NYT) It would not be objectionable if Carrier’s decision reflected Trump’s pledge to lower corporate income tax rates and reduce costly regulations, as these would apply to all similar firms.

Evaluating the specific economic effects of the Carrier deal is also made difficult by Trump’s loose relationship with the truth. According to Chuck Jones, the union leader representing the Carrier workers whose jobs Trump claims to have saved, Carrier announced in February that it would “would move 1,300 jobs to a plant in Mexico.” After Trump got involved he “said he’d saved 1,100 jobs, he hadn’t. Carrier told us that 550 people would get laid off.” “Im-the-union-leader-donald-trump-attacked-im-tired-of-being-lied-to-about-our-jobs”

If you wondered why out of the blue Trump tweeted that: “Chuck Jones, who is President of United Steelworkers 1999, has done a terrible job representing workers. No wonder companies flee country!”, the answer seems to be that Trump was angry that his job numbers were being challenged by Mr. Jones. If this explanation is correct, it reflects shockingly immature behavior by the President elect.

On the other hand, Trump’s attack on the projected cost of a new Air Force One being planed for 2020 is of a totally different nature. Putting aside the inaccuracies of Trump’s tweet—at this point Boeing only has a $170 million contract to design the plane—it is totally appropriate for his administration to be concerned with the cost of the planes they are ordering and to negotiate the best possible deal. It may be that Trump’s dramatic tweets are part of his bargaining strategy. At this point, who knows? I am not competent to evaluate such a strategy, but Trump as President-elect has taken us where we have never been before. His behavior is wholly inappropriate for an American President. Hopefully he will realize this before too much serious damage is done.

” Donald J Trump@realDonaldTrump

Boeing is building a brand new 747 Air Force One for future Presidents, but costs are out of control, more than $4 billion. Cancel order!”

Globalization and Nationalism: Good and/or Bad?

Globalization is under attack and nationalism is on the rise. The evidence includes the election of Donald Trump. But what is this globalization these people are so opposed to?

After 1945—after the Great Depression and two world wars—Western nations established an international system of rules that honored national sovereignty, facilitated the flourishing of global commerce, and encouraged respect for human rights and liberties. This liberal international order resulted in the longest period of peace among the world’s major powers the world had ever seen, broad-based economic growth that created large middle classes in the West, the revival of Europe, growth in poor countries that lifted hundreds of millions of people out of poverty, and the spread of freedom across the globe. Fareed Zakaria, Washington Post/2016/11/17/. This is the liberal international order that I largely support.

What exactly is under attack and what is on the rise? In a very insightful article in the National Review, Michael Lind characterizes the globalist view as follows: “In the 1970s and 1980s, libertarians made all of the major arguments heard from globalists since the 1990s: Favoring citizens over foreign nationals is the equivalent of racism; national borders impeding the free flow of labor and goods are both immoral and inefficient; the goal of trade and immigration policy should not be the relative security or relative wealth of particular countries, but the absolute economic well-being of all human beings.” Michael Lind, National Review, Sept 15, 2016

What about the rise of nationalism in relation to globalism? I believe strongly in the economic benefits of the freest possible global trade, but it would be a mistake to overlook or ignore the concerns of those who oppose it. In this note I attempt to restate the case for freer trade in terms that should appeal to economic nationalists who wish American trade (and other) policies to reflect the interests of Americans first (before taking into account the benefits to the rest of the world). I also reflect on the international rules of trade from the perspective of the sovereignty concerns of nationalists, or what economist Larry Summers calls “responsible nationalism.” Voters deserve responsible nationalism not reflex globalism

I was forced to think more carefully about the case for freer trade by the opposition to globalization expressed by many of Trump’s supporters. But I quickly discovered that my friend Michael Lind has been there before (see above) as has the brilliant social psychologist Jonathan Haidt who noted that: “those who dismiss anti-immigrant sentiment as mere racism have missed several important aspects of moral psychology related to the general human need to live in a stable and coherent moral order.” Jonathan Haidt: “When and why Nationalism Beats Globalism”, The American Interest, July 2016

Haidt’s closing words succinctly summarize our challenge: “The great question for Western nations after 2016 may be this: How do we reap the gains of global cooperation in trade, culture, education, human rights, and environmental protection while respecting—rather than diluting or crushing—the world’s many local, national, and other “parochial” identities, each with its own traditions and moral order? In what kind of world can globalists and nationalists live together in peace?”

Immigration and trade are intimately linked – if Mexicans can make it in Mexico and export it to the U.S. they will be less interested in moving to the U.S. in order to build it there (in fact, net Mexican migration to the U.S. has been negative for the last few years)—and thus I will look at both.

The most promising starting point in my view is with the sovereignty of each American citizen. Unlike the Magna Carta, which wrested more autonomy for the people from the King, the free men and women of revolutionary America gave up a limited amount of their autonomy to a new state in order to better protect their property and individual rights. The direction of delegation was the exact opposite of what the world had ever seen before. It is not without profound significance that our Constitution begins with “We the people.”

Thus it is quite appropriate to judge governmental authority and policies by the standard of how well they serve our individual sovereign interests. In evaluating those interests, it is appropriate to do so from the perspective of John Rawls’ veil of ignorance, i.e. principals of fairness—rules of the game—that we accept as fair without knowing which positions in society we will occupy. This is the perspective of free market, competitive capitalists and is opposite to the perspective of crony capitalists who exploit the power of government for their personal benefit.

We have surrendered limited (enumerated) powers to our governments (local, state, federal, etc.) in order to enjoy greater security and protection of our property but also to support and protect our freedom to trade and to enjoy its benefits. No one really needs to be convinced that being able to specialize in what we make best and trade it for other things we need has enormously increased our wealth over being self-sufficient (no trade). No one needs to be convinced that by investing in tools and better technologies we have been able to produce more for trade and thus become wealthier. But investing and trading require common understandings with those with whom we trade—the rules of trade. We have long ago understood that we all benefit from giving up some of our sovereignty to our government to negotiate and enforce the agreed rules of trade, protect our property, and mediate disputes over whether the rules were followed.

The simple act of entering into a contract with someone involves giving up the freedom to act as we want each moment in exchange for a similar commitment by our counterparty for the mutual benefit of both of us. Where the mutual benefits of such rules are greater than the cost of the forgone freedom of action, the agreement is a positive sum arrangement—win-win. Conforming to international product standards, e.g. adhering to standards of weights, measures, voltage, labeling, etc., facilitates trade. The key policy issues in this area are the nature and details of the rules of trade that best serve our personal interests (in the Rawlsian sense) and thus our community and national interests, and the extent of the market in which we are able to trade (village, province, nation, world). “Free Markets Uber Alles,” Dec 2014

The more widely we can trade, the greater is our opportunity to specialize in what we produce and to develop and apply more productive technologies.

“Trade and Globalization,” Aug 3, 2016. Our founding fathers were rightly concerned about the power of the new American government to limit the right of its citizens to trade. In fact, the U.S. Constitution prohibited the States from interfering with trade across State borders (interstate commerce). Article I, Section 8, Clause of the Constitution states that the United States Congress shall have the power “To regulate commerce with foreign nations, and among the several States, and with the Indian Tribes.” While Congress has occasionally used this power to impose restrictions on trade across national borders, the majority of Americans still believe that cross border (international) trade has been mostly good for the U.S. (65% in 2015). The wrong-headed effort to save American jobs during the Great Depression with high tariffs imposed by the Smoot Hawley Tariff Act of 1930, precipitated retaliatory tariffs around the world and a disastrous collapse of global trade and employment. U.S. imports and exports fell by more than half and the whole world was made poorer by it.

As noted above, the resulting increase in the world’s wealth from technical progress and trade has been enormous. But the incentive created by trade in a large market to innovate new products and more efficient ways to produce them has also meant that some of the existing products and/or technologies lose out and must give way to the improved ones. Those producing the old products and services are forced to find new ones and if necessary new productive skills.

The United States has generally grown economically faster than most other countries, in part, because its citizens have not been willing to allow those who lose out in such competition to block progress by the “winners” by protecting their products and jobs. The ultimate willingness of Americans to accept and protect the dynamic economics of competitive national and global markets rests, I think, on the three pillars: maximum wealth creation, maximum opportunity for everyone (the chance to win at a fair game), and help for those who lose out.

Americans should only be willing to give up some of their personal sovereignty to their government when they gain more in exchange in the Rawlsian sense of a positive sum, fair game. We should impose the same conditions on the extension of the rules of trade beyond national boundaries. This is the standard by which bilateral, regional and global trade agreements should be judged. They have the largest potential for win-win expansions of mutual trade and the greater income and wealth that expanded trade can produce. The Bretton Woods institutions created after World War II (the IMF, World Bank and World Trade Organization) established the institutional arrangements for such international cooperation. It is important to insure that such agreements do not increase the protection of “privileged” industries or sectors of the economy. In fact, they should diminish such protections where they already exist, which is why many European industries and interests oppose the Transatlantic Trade and Investment Partnership (TTIP). Much of the Trans Pacific Partnership (TPP) has this positive character. American leadership in creating the international institutions through which we interact with others abroad, i.e., through which the rule of law is established and enforced internationally, has ensured that the international order has remained true to the values on which America was founded.

The evolution of man established the family as the unit of first and primary concern. The well being of one’s family stands above the interests of all others. However, the process of civilization has been one in which mechanisms of trust and mutual assistance have convinced individuals to yield some of their sovereignty to larger units (village, state, etc.) under conditions that strengthened the security and well being of family units. Globalization is the logical conclusion of such a process. It is the development of laws of cooperation and the mechanisms of their enforcement (i.e. the rule of law) that potentially raise the welfare of everyone. But the details of the expanding circles of cooperation are important and must not violate genuine national and family interests.

In listening to the views of many Trump supporters I concluded that their anger and demand for big change derives from feelings that their government—especially the federal government—is not serving their legitimate interests and in fact is interfering with their lives without commensurate benefits. “The reason Mr. Trump won, [Mr. Bannon] says, ‘is not all that complicated. The data was overwhelming: This is a change election. People weren’t happy with the direction of the country. So all you had to do was to give people permission to vote for Donald Trump as an agent of change, and make sure he articulated that message.’” steve-bannon-on-politics-as-war-WSJ

So what are the Trump supporters mad about? What do they want to change? To the extent that they are concerned about the same things I am, it is that too much of our individual sovereignty has been taken by an overweening government, which has become a big brother who attempts to make our decisions for us for our own welfare. Our personal choices have increasingly been taken away from us and with them our opportunities. The “elites” have arranged the rules for there own benefit. It is no longer a fair game.

The weaknesses of current arrangements at the national level that seem to anger Trump supporters largely concern: a) regulatory capture of an over extended regulatory state, b) inadequate provision of a level playing field and c) an inefficient and poorly designed safety net for the losers in the competitive game. Very briefly:

  1. a) The crony capitalism reflected in President Eisenhower’s famous concerns with the risks of a military industrial complex, have metastasized into a much broader capture by legacy industries of a much more extensive government intrusion into the economy. Wherever government regulates (and some are actually helpful), the most affected, established firms are best placed to insure that such regulations benefit rather than hurt them, usually by protecting themselves from the competition of new comers. Wall Street comes to mind. Changing direction on bank regulation, Cayman Financial Review April 2015
  1. b) A level playing field. Good quality education (especially K-12) is one of the most important ways for the poor and initially disadvantaged to get into the productive economy and to rise as far as their talents and energy will take them. But the education provided to this group is often of poor quality. The iron grip of teachers’ unions has often served the interests of teachers at the expense of their students. School choice (tuition vouchers) would introduce badly needed competition in the provision of education to all – the poor as well as the rich (who all ready enjoy considerable choice).
  1. c) An efficient safety net. When jobs disappear to technological advancements (e.g., increased automation) the affected workers and capital need to be reallocated to more productive uses. But this is economist speak. The workers involved often lose their human capital (i.e. their existing skills lose value in the market place) and need to retrain for new tasks. Older works might never rebuild new skills sufficient to restore their previous incomes. Government policy should give more attention to vocational training (and retraining). But the ultimate safety net should be strengthened and redesigned by replacing existing welfare programs and social security with a guaranteed minimum income for each and every citizen (in the spirit of Milton Friedman’s negative income tax). US federal tax policy, Cayman Financial Review July 2009

Responsible Nationalism and Globablization

As Michael Lind observed earlier, America has been dividing into liberal internationalists like myself who live in the big urban centers and civic nationalists, who live in the rest of the country. The civic, economic, responsible and just plain old nationalists seem to be reacting against their sense of a loss of control over their own lives. Big brother seems to be regulating more and more what we can do, say, produce, or buy. Their opportunities are being thwarted by an unfair game—crony capitalism for the well-placed elites. This sense of a loss of control is compounded by concerns over the lack of control of our borders against undesirable immigrants and potential terrorists. While the assimilation of different cultures into the framework of basic American values of personal freedom and responsibility can be touchy and challenging at times, the finger pointing and pressure from the American left for full cultural integration feeds the fears of many of a loss of cultural, ethnic, and religious identity.

When some groups receive preferential treatment some other groups are necessarily discriminated against. While I have tried hard to accept the logic of “Black Lives Matter,” it always rubbed my sense of fair play the wrong way. All lives matter. Thus while I am saddened that it seems necessary to some white males (I am guessing they are males because that is what the press always says) to carry signs saying “White Lives Matter,” I can understand. If we need to say the one, we need to say the other if we still have any sense of fairness.

So there are plenty of things for Trump supporters to be angry about and to want to change. But now that we have him, what changes should we push for? I am particularly interested in changes that will reassure Trump’s angry voters to support American participation in the liberal global order. In evaluating what is in our national interest, we need to consider the long term rather than immediate benefits of a rule based, freely competitive world order.

We should push for a thorough reform of our tax system (see my article above), strengthen our safety net for those displaced by technology (by far the major source of job losses in the U.S.) and trade, and shift more of the regulation of commerce to the market (to consumers and owners) thus significantly reducing government regulation. We must also fashion an immigration policy that meets the needs of our economy without overwhelming the capacity of our society to absorb new members. Existing long term, undocumented residence need to be offered a realistic path to legal status. But most of all, in fashioning these and other changes we need to listen carefully and constructively to each other’s concerns and take them into account.

Emigration and Immigration

During the height of the Cold War, the Berlin Wall was built to keep the citizens of East Germany from leaving. We cheered as it and similar barriers to emigration from the Soviet to the Free World fell in 1989. But the right to leave awkwardly confronts the right of countries to choose who may or may not enter. The right to leave has little meaning if you have no place to go.

Immigration, especially in the U.S. and Europe, has become a very divisive and difficult public policy issue. Individual freedom and economic efficiency call for the free movement of people. The common market of Europe (the European Economic Community) requires the free movement of labor, capital, goods, and services among its members. This is a desirable and worthy goal, but in typically “take no prisoners” fashion, the European Union has applied this requirement without serious attention to the needs and sensitivities of recipient countries with regard to who enters and works in their country.

During the cold war, when our sympathies were with those behind the Iron Curtain wanting to get out, the East-West participants in the CONFERENCE ON SECURITY AND CO-OPERATION IN EUROPE in Helsinki in 1975 agreed to:

“Make it their aim to facilitate freer movement and contacts, individually and collectively, whether privately or officially, among persons, institutions and organizations of the participating States, and to contribute to the solution of the humanitarian problems that arise in that connection,

Declare their readiness to these ends to take measures which they consider appropriate and to conclude agreements or arrangements among themselves, as may be needed,…”[1]

The emphasis at that time was on “cultural exchange” and cross border employment. The right to emigrate, however, was a step too far.

Aside from the political dimension of a “right to migrate,” there are clear economic efficiency benefits from the free movement of labor, supplementing those of the free movement of goods and capital.[2] Leaving aside the special case of war refugees, people generally move, whether within their own country or to a new one, in order to take better jobs. One exception is the Brits who vacation or retire to sunnier parts of Southern Europe. They obviously bring their pension incomes with them. The Polish plumbers in England and the Filipina nurses throughout the world increase their own incomes but fill worker needs in their host countries as well. In short, immigration is generally a win win scenario.

Within the overall annual limits the U.S. has placed on immigration, the number of H-B1 work visas (those requiring high skills or education) has been squeezed by preferences to extended family members of existing green card holders, thus depriving American industries of the skilled workers they need. If foreign workers are not allowed to immigrate here, capital will tend to move abroad in order to produce what is needed overseas and import it. Opposition to immigrants by workers who fear that they will lose their own jobs are generally misinformed or motivated by other concerns.

Immigration can also ease the economic problems associated with an aging and shrinking population. Japan’s population is now smaller than it was in 2000 but more problematic is that it is also older. The percentage of those over 65 in Japan’s total population has increased from 17% in 2000 to 24% now. Its working age population has declined 9%. As a result, a growing share of income from those working is required to support those who have retired. This problem has been partially addressed by an increase in the number of Japanese women entering the labor force, but it has not been enough. Relaxing Japan’s very restrictive immigration laws would also help. As a general rule most Japanese are quite insular and not comfortable living and working with foreigners. According to The Economist: “The country has remained relatively closed to foreigners, who make up only 2% of the population of 127m, compared with an average of 12% in the OECD.”[3] But Japan’s demographic crisis is leading to a gradual liberalization of immigration requirements.

Workers who worry about immigrants taking their jobs are generally confusing the impact of technology on some existing jobs and job skills, and to a lesser extent the impact of increases in cross border trade. The disruptive, but income enhancing, impact of ever changing technologies does impose costs on those who must learn new skills, but it is the relative openness of Americans to such innovation and growth that has made America the wealthy country that it is.

However, there are limits to the pace of change (and the pace of immigration) that societies can comfortably absorb. The backlash of public concern with immigration, which played an important role in Britain’s recent vote to leave the EU, seems to reflect the upsurge in the pace of immigration in recent years. It also seems to have reflected misinformation about the extent of British control over that pace. While EU membership carried an obligation to accept the free flow of labor into the UK from other EU member countries, only half of the UK’s immigration was from that source. The UK government fully controlled the other half.

Donald Trump has linked his anti-immigration rhetoric to public concern with terrorism. His campaign website states that: “Trump is calling for a total and complete shutdown of Muslims entering the United States until our country’s representatives can figure out what is going on.”[4] This statement, dated December 7, 2015, has been followed by increasingly nuanced (if that word can be used for Trump) formulations of Trump’s anti-terrorist immigration “policy” proposals. On April 16, 2016, “Donald Trump’s speech on foreign policy Monday focused in large part on his proposal to suspend immigration from dangerous parts of the world and impose a new system of ‘extreme vetting’ that would subject applicants to questions about their personal ideology.

“We should only admit into this country those who share our values and respect our people,” said Trump, proposing what he called an “ideological screening test.”[5]

Typical of Trump’s campaign, he is either ignorant of existing visa requirements or deliberately misleading his audience. At least since 9/11, visa applications from all but a few countries, whether work or tourist, require an extensive background check.[6] All green card recipients swear to uphold the American Constitution and its laws. These are reasonable and appropriate requirements and they have been in place for a long time.

And then there are concerns about the preservation of a country’s culture, a legitimate goal. And then there is plain old racism and protectionism (the protection of monopoly returns to jobs from entry restrictions via closed shop unions or licensing requirements and to firms from import tariffs).

So what should a country’s immigration policy be? Aside from war refugees, whom the U.S. and most countries have taken a moral/humanitarian obligation to accept,[7] a country’s immigration policies should serve the economic needs of the country and respect the cultural traditions and security concerns of its citizen’s. The United States has benefited enormously and famously by accepting all people seeking a better life who are committed to our laws and values. However, pragmatism calls for regulating the rate of immigration to numbers that can be readily assimilated and limiting it to people of good character committed to abiding by our laws and values.[8]

U.S. immigration laws suffer from a number of defects. The overall number of immigrants permitted per year has not kept pace with the growth in our population and economy. But more important, as noted earlier, the number of actual workers, and especially high skilled workers, has been seriously crowded out by a preference for extended family members of existing residents (not core family, but extended family).

The U.S. has a special problem because of a relatively large number of illegal immigrants who have become an important part of our labor force for some time. It is important for our laws to effectively limit immigration to legal channels while enlarging those channels. It is also essential to resolve and normalize the status of those who came here illegally in the past. Several years ago a bipartisan group of U.S. Senators, the so-called Gang of Eight, fashioned immigration reform legislation that addressed these issues. Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 No one was happy with every provision of the draft law but it enjoyed broad support as a compromise and was passed by the Senate. It was never brought up in our dysfunctional House of Representatives.

The Senate immigration bill is a good basis upon which to renew the discussion of immigration reform in the U.S. Hopefully, following the November elections in the United States its Congress can return to the important business of fashioning laws that promote economic growth, well being, and fairness. This should include adopting a comprehensive immigration reform law.

[1] CONFERENCE ON SECURITY AND CO-OPERATION IN EUROPE FINAL ACT concluded in Helsinki, Finland, August 1, 1975, Page 38.

[2] https://wcoats.wordpress.com/2016/08/03/trade-and-globalization/

[3] The Economist, August 20, 2016, page 31.

[4] https://www.donaldjtrump.com/press-releases/donald-j.-trump-statement-on-preventing-muslim-immigration

[5] The Washington Post: https://www.washingtonpost.com/national/trumps-immigration-plan-raises-many-unanswered-questions/2016/08/16/754fba76-6382-11e6-b4d8-33e931b5a26d_story.html

[6] Some countries, such as England and German and other parts of Europe do not require a US visa to enter the US, though they should have criminal checks when applying for a Passport in their own country.

[7] Of the 4,812,993 Syrian refugees registered outside of Syria (several million displaced Syrians remain inside Syria) as of March 2016, only 7,123 have settled in the U.S as of July 2016. Germany has accepted 600,000 and about 4.5 million have been registered in Turkey, Lebanon, and Jordan. It is estimated that there are an additional 2 million Syrian refugees that are unregistered. https://en.wikipedia.org/wiki/Refugees_of_the_Syrian_Civil_War

[8] Six years ago I wrote these proud words about our immigrants. Please note the last sentence: https://wcoats.wordpress.com/2010/06/10/a-nation-of-immigrants/ My comments on Syrian refugees almost a year ago are also worth rereading (in my humble opinion): https://wcoats.wordpress.com/2015/11/19/what-to-do-about-syrian-refugees/ as are my comments on immigrants and terrorists two months ago: https://wcoats.wordpress.com/2016/06/11/the-challenges-of-change-globalization-immigration-and-technology/

Remove the Barriers to Work

Most people, and I mean almost everyone, would rather work than receive welfare. Earning your own living is an essential element of happiness and self esteem. These are the well-documented conclusions of Phil Harvey and Lisa Conyers in their new book The Human Cost of Welfare. You can watch their discussion of their book at Cato last month here: http://www.cato.org/events/human-cost-welfare-how-system-hurts-people-its-supposed-help.

Dozens of welfare programs attempt to help the poor and disadvantaged with mixed results. We would do well to replace most of these programs with a guaranteed minimum income (from which the government should deduct funds dedicated to health insurance and old age pensions of the recipients choice) as I proposed several years ago as part of a major tax reform: http://www.compasscayman.com/cfr/2009/07/07/US-federal-tax-policy/

Some of these programs discourage work by imposing financial costs for working as the result of reduced income from lost benefits. These welfare design flaws should be fixed (as the proposed guaranteed minimum income would), but governments have also thrown up many other barriers to getting jobs in the form of regulatory requirements and restrictions. Unnecessary or overly burdensome licensing requirements for many jobs protect incumbents and discourage job seekers.

According to the Washington Post: “Last year, a White House report documented the startling fact that 1 in 4 U.S. workers need a license to do their jobs, a fivefold increase since the 1950s.”

One of thousands of examples is the “license to blow” in Maryland. The state of Maryland has just bravely reduced the amount of training required for a license to wash and dry hair from 1,200 hours to 350 hours. “The new Maryland bill creates a “limited” cosmetology license for workers in blowout salons; it can be obtained after 350 hours of training. Previously, you had to be licensed as a stylist or cosmetologist, which require 1,200 and 1,500 hours of training, respectively” Washington Post May 18, 2016 https://www.washingtonpost.com/opinions/maryland-blows-away-a-hurdle-for-workers/2016/05/17/fc61cb36-1c50-11e6-9c81-4be1c14fb8c8_story.html

Most people want to work and we should make it easier for them to do so.