Showing posts with label Competition. Show all posts
Showing posts with label Competition. Show all posts

Sunday, May 31, 2015

Socialism and not deodorant starves the poor

From the files of Jeff Jacoby at The Boston Globe

Will this deodorant aisle be history when Bernie Sanders is president?

What this country needs, says Bernie Sanders, is less deodorant.

The 73-year-old senator from Vermont, now running for the Democratic presidential nomination, told CNBC's John Harwood in an interview on Tuesday that because American consumers can choose from so many brands of personal-care products, kids are going to bed with empty bellies.

"You don't necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country," Sanders lamented. He didn't explain exactly how the profusion of toiletries and athletic footwear leads to childhood hunger, but for the only self-described socialist in Congress, it is no doubt a matter of faith that the abundance of capitalism must generate poverty and undernourishment.

In the real world, the opposite is true: Hunger and deprivation are rarest where markets and trade are freest. Food in America couldn't possibly be more plentiful; no one starves because too many economic resources are being channeled into marketing Old Spice instead of oatmeal. But in the socialist delusion, centralized control is always preferable to voluntary enterprise.

Better that government czars should decide what is produced, and impose their plan from above. After all, when buyers and sellers are left free to choose for themselves, grocery and department store aisles fill up with "too many" goods that consumers desire to buy. And that's not the worst of it: In the process of fulfilling those desires, some capitalists may be getting wealthy.

Sanders's suggestion that more kids would eat if only deodorant came in fewer varieties was roundly mocked. Wherever his collectivist ideology has been enforced, however, the consequences — shortages, rationing, bare shelves, long lines, grinding austerity — are anything but funny.

Unlike John F. Kennedy, who argued that a rising tide lifts all boats, socialist true believers care far less about growing the economy than about decreasing the gap between rich and poor. "If the changes that you envision ... were to result in a more equitable distribution of income but less economic growth," Sanders was asked in the CNBC interview, "is that trade-off worth making?" Yes, he said at once.

"The whole size of the economy and the GDP doesn't matter if people continue to work longer hours for low wages.... You can't just continue growth for the sake of growth in a world in which we are struggling with climate change and all kinds of environmental problems."

How easy it is to pooh-pooh "growth for the sake of growth" when you're an American politician who makes a good salary and never has to worry about where his next meal will come from. But for the world's destitute — for those who struggle daily just to hold body and soul together — economic growth spells salvation.

Sanders has spent decades railing against the rich and bewailing the plight of the poor. Yet for lifting hungry and needy people out of poverty, no force on earth comes close to the growth fueled by free markets and trade.

On Wednesday, one day after Sanders kicked off his White House campaign, the United Nations reported that hunger still afflicts about 795 million people around the globe, or about one out of every nine human beings. As great a challenge as that is, it represents an amazing decrease in the number of undernourished people over the past 25 years.

Even though the world's population has grown by 1.9 billion since 1990, there are 216 million fewer men, women, and children threatened by hunger today than there were then. For the first time, we can realistically envision the end of starvation as a global scourge.

Thanks to advances in agricultural science — especially the famous "Green Revolution" for which the American biologist Norman Borlaug was awarded the Nobel Peace Prize — it is possible to grow enough food to feed a world with 7 billion people. But it takes the dynamism and productivity of markets, and the prosperity ignited by trade, to make that food available and affordable to the great majority of the human family.

Perhaps Sanders doesn't grasp that, but the UN agency most concerned with feeding the hungry does.

Socialism empties food shelves. Free markets and trade fills them.
Above: A shopper in Venezuela finds little to choose from.

"Economic growth is necessary for alleviating poverty and reducing hunger and malnutrition," emphasizes the Food and Agriculture Organization (FAO) in the new hunger report. "Countries that become richer are less susceptible to food insecurity."

Blasting greedy billionaires and sneering at the multiplicity of deodorant brands "when children are hungry" appeals to a slice of the electorate. But populist rhetoric from a "humorless aging hippie peacenik Socialist" (as Sanders was once described in a New York Times Magazine profile) doesn't fill empty food bowls. Market economies do.

"Markets that function well are important for promoting food security and nutrition," the UN report says. "Markets ... ensure food availability."

From China to Tanzania, from North Korea to the Soviet Union, socialism over the past century condemned countless children — and their parents — to hunger, malnutrition, and famine. Deodorant never hurt a soul.
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Thursday, April 30, 2015

Strawberry field hands forever?

From the files of Jeff Jacoby at The Boston Globe


Immigration restrictionists often claim that there are no "jobs Americans won't do," if only US borders would be secured against economic migrants who are willing to work hard for low pay and few benefits. If the fruit-and-vegetable industry couldn't rely on seasonal farmhands from Mexico and Central America, for example, growers would perforce offer the higher wages necessary to attract American citizens to pick the country's fresh produce. What alternative would they have? Let crops rot in the field?

In reality, agriculture is no more of a zero-sum industry than any other, and there is no fixed number of people it must employ.

That point is strikingly made by recent stories on the development of new technology poised to transform the nation's $2.5 billion strawberry business.

While most grain crops in the United States have long been cut and gathered by giant combine harvesters, growers of strawberries have continued to employ human workers to pick a crop too delicate to be left to mechanized equipment. That was "partly to avoid maladroit machines marring the blemish-free appearance of items that consumers see on store shelves," as The Wall Street Journal noted last Friday. No less important was the "trained discernment" needed to select only the ripe strawberries from plants that also have immature fruit not yet ready for picking.

Traditionally a large pool of farmworkers, mainly foreign-born, was available to supply that "discernment," along with the backbreaking effort involved in gathering crops by hand. But the number of unauthorized immigrants in the United States peaked in 2007 and has fallen markedly since. The wave of immigration from Mexico in particular has reversed: For the first time in four decades, the Pew Hispanic Center reported in 2012, more Mexicans were leaving the United States than entering.

From the standpoint of strawberry farmers, it doesn't much matter whether the dwindling of migrant labor is due to tougher border enforcement in the United States, better economic prospects in Mexico, or some other factor. The farmers' overriding concern is that the fruit must be harvested, and they can no longer rely on immigration flows to get the job done.

Nothing to do, then, but boost the pay and perks for strawberry-pickers until they're high enough to induce more US citizens to work in the fields?

Far from it: With human workers harder to find, strawberry growers have become increasingly committed to finding a technological solution. The Journal story describes the Agrobot — a prototype of a 14-arm automated harvester that couples vision sensors and advanced software in a device capable of "pluck[ing] ripe strawberries from below deep-green leaves, while mostly ignoring unripe fruit nearby." When migrant labor was plentiful, the Agrobot's $100,000 price tag would have seemed exorbitant. Now it increasingly looks like a sound capital investment.

The Agrobot is only one entrant in the race to revolutionize the strawberry industry. Another competitor is Harvest CROO Robotics. The Florida-based engineering team is at work on a high-tech harvester able not only to pick ripe fruit at the rate of one per second per mechanized arm, but also to run continuously for an entire day.

Secure-the-border hardliners regularly claim that immigrants "steal" jobs that would otherwise go to US citizens. But if migrant workers reduce employment opportunities for Americans, don't robotic harvesters and every other labor-saving technological improvement? Shouldn't immigration restrictionists, so intent on protecting US workers from the competition of foreign immigration, seek just as intently to protect them from new technology?

Such an argument seems manifestly crazy today, when all around us is evidence of the myriad ways in which technology multiplies wealth and increases employment. Yet there was a time when Luddites smashed machines to prevent them from putting laborers out of work. We understand now that for every job technology makes obsolete, a dozen — a hundred, a thousand — new jobs are created, often in fields that until then never even existed.

Any society that cuts itself off from labor-saving technology needlessly harms itself. The same is true of a society that cuts itself off from an influx of willing and peaceful workers. Free minds and free markets constantly come up with innovative ways of accomplishing old tasks — even a task as old as picking fruit. Our best bet isn't to stifle those minds and markets, but to liberate them.

Strawberries and strawberry fields may be forever. But the strawberry industry, like every industry, changes. If those changes make it more productive, the whole economy stands to gain.
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Tuesday, April 28, 2015

Politicians - Profiteers - Public health

From the files of Jeff Jacoby at The Boston Globe

Naloxone isn't magic, but its power to rescue a heroin user from the brink of death can certainly seem miraculous. The anti-overdose drug, also known by the brand name Narcan, is easy to administer and has saved thousands of lives. First responders are often awestruck at how swiftly it can revive a dying addict.

"It's just incredible," the deputy fire chief of Revere, Mass., marveled in a public-radio interview last year. "There's somebody who's on the ground who's literally dead. They have no pulse. Sometimes they're blue, sometimes they're black. And you administer this stuff and sometimes in a minute or two or three, they're actually up and talking to you."

Free markets aren't magic either. Yet their ability to generate a life-saving drug like Naloxone, supplying quantities sufficient to make it widely available even when the need is great, can seem even more miraculous. That miracle is not enhanced when politicians rebuke the entrepreneurs who manufacture or distribute such wonder drugs for charging a price that the market will bear.

Politicians, for instance, like Massachusetts Attorney General Maura Healey. She lists opiate abuse among her most urgent public concerns, yet is going out of her way to pick a fight with vendors who actually help make things better.

In recent years, drug overdoses have surpassed automobile accidents as the leading cause of death from injury in the United States. According to the Centers for Disease Control, opiate painkillers alone account for 16,000 fatalities annually; deaths involving heroin have increased fivefold since 2001.

Amid this grim crisis of opioid overdoses, Naloxone has been a godsend. While public-health experts debate the causes of the epidemic, officials nationwide have been moving rapidly to expand access to the drug. The National Conference of State Legislatures reports that 30 states and the District of Columbia have adopted a variety of measures to facilitate the use of Naloxone.

Among those measures: allowing it to be administered by non-medical personnel, paying for police and firefighters to carry supplies of the drug, and permitting pharmacies to dispense Naloxone without a prescription.

Of course, with demand for the medication skyrocketing, the price has climbed as well. The workings of economics apply to pharmaceuticals just as they apply to housing, bourbon, iPhones, or tickets to NFL playoff games. When demand for a product or service rises, the price of that product or service can't help but rise in response. That is especially true when the growth in demand has come about quickly or in unexpectedly short order.

Heroin overdose rates have increased markedly since 2010, and only in the last year or two has there has been such a strong push by state and local authorities to equip first responders — police officers, sheriffs, firefighters, and even civilian bystanders — with Naloxone kits.

So it stands to reason that in Massachusetts, as in most other states, the price of Naloxone is up sharply. A 2-milliliter dose that used to cost the state $19.56 has more than doubled to $41.43. That's a sizeable increase, and it is putting a strain on public-safety and drug-treatment budgets.

Massachusetts Attorney General Maura Healey
The price spike may be unwelcome — no one likes to pay more for vital supplies — but it is hard to see anything unfair or unethical, let alone unlawful, about it.

That hasn't stopped Healey from demanding that companies selling Naloxone in Massachusetts provide detailed explanations for the higher costs of the drug, and account for "any changes in prices over time" since the opioid crisis was declared a public emergency. Healey's spokesman insists the attorney general "isn't suggesting anything nefarious," and is simply conducting "a fact-finding mission." But the innuendo is all too obvious.

Healey has said she is just being "aggressive" and wants to be sure "that nobody is out there unnecessarily profiteering from a public health crisis." Yet who is the real "profiteer" here? The drug maker who responds to an unprecedented surge in demand for a critical medication by raising prices to ensure that inventories of the drugs aren't immediately depleted?

Or the ambitious politician, who sees a chance to score political points by posing as a defender of the public against the very suppliers who are making available what the public needs?

Demand for Naloxone is way up; consequently the price of Naloxone is up. Eventually the price will fall, as new supplies come on line. In the meantime, thanks to the workings of the market, more lives are being saved.
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Sunday, December 14, 2014

We are number two

We're Number Two from Warning Signs by Alan Caruba at Facts-not-Fantasy

Know Caruba's Warning Signs
The U.S. was the world’s number one economy prior to World War II, but it took off bigtime after the war and there has not been a day of my long life in which we were not number one—until now.

The International Monetary Fund recently released its calculations regarding the world’s economy and concluded that China is the number one economy, producing $17.6 trillion in terms of goods and services, as compared with the U.S. producing $17.4 trillion. It’s not an overwhelming gap, but it is a warning that our economy is going in the wrong direction and has been before and since the financial crisis of 2008.

Writing in Market Watch, Brett Arends, put it succinctly. “As recently as 2000, we produced nearly three times as much as the Chinese.”

As discomforting as the IMF news is, the worst news has been significantly under-reported in the nation’s media. The U.S. is now $18 TRILLION in debt.

In February of 2014, CNS News reported that “The debt of the U.S. government has increased $6,666 trillion since President Barack Obama took office on January 20, 2009, according to the latest numbers released by the Treasury Department.”

Read the Warning Signs at Facts-not-Fantasy

President Obama has been responsible for more debt over the course of his two terms to date than all previous U.S. Presidents in the first 227 years combined.

Writing in the Daily Caller, Tracy Miller, an associate professor at Grove City College, noted that “Over the first five years of Obama’s presidency, the U.S. economy grew more slowly than during any five-year period since just after the end of World War II, averaging less than 1.3 percent per year. If we leave out the sharp recession of 1945-46 following World War II, Obama looks even worse, ranking dead last among all Presidents since 1932.”

Why was this man reelected in 2012? One is inclined to find common ground with ObamaCare “architect”, Jonathan Gruber, who called voters “stupid.”

I prefer to believe, however, that the voters have been subjected to a non-stop campaign in the national media to get the first black American elected President and then to ignore some truly horrible facts about his two terms in office thus far.

The voters are not stupid, but they have been deliberately misled by the careful exclusion of news about the actual state of the economy.

Reality caught up with Obama in the two midterm elections of 2012 and 2014. The voters shifted power in Congress to the Republican Party. In the most recent midterms thirteen of the Senators who had voted for ObamaCare were defeated.

As December began, CNS News reported that “The labor force participation rate remained at a 36-year low of 62.8 percent in November, according to the Bureau of Labor Statistics.”

The BLS measures the percentage of “non-institutional population” in the labor force, those 16 years or older who were not in the military or working in a governmental job, i.e. the private sector. In September, the rate was the lowest since February 1978!

To put this in perspective, by November, the number of beneficiaries on the Supplemental Nutrition Assistance Program—food stamps—had topped 46,000,000 for 36 straight months according to data released by the Department of Agriculture. The Census Bureau reports that there are 115,048,000 households in the nation as of August 2014. That means the number of households on food stamps equaled 19.75% of all the households in the nation; one out of five. Those on this program outnumber the entire populations of nations such as Poland or Argentina.

It doesn’t stop there. On December 3 CNS News reported “The total number of people in the United States now receiving federal disability benefits hit a record 10,982,920 in November, up from the previous record set in May, according to newly released data from the Social Security Administration.”

How bad is the U.S. economy? In August, CNS News’ Terence P. Jeffrey reported that “109,631,000 Americans lived in households that received benefits from one or more federally funded ‘means-tested programs’—also known as welfare—as of the fourth quarter of 2012.” The data came from the Census Bureau. That was the same year Obama was reelected and it represented 35.4% of the entire U.S. population at the time. By the end of 2012, it had increased to 49.5%!

Means-tested government programs include Social Security, Medicare, railroad retirement, unemployed compensation, worker’s compensation, Veteran’s compensation and Veteran’s educational assistance. The largest of these programs are Social Security and Medicare.

Why does the U.S. have an $18 TRILLION dollar debt?

Consider that, in fiscal year 2013, the federal government paid out more than $2 TRILLION in benefits and entitlements according to data from the Bureau of the Fiscal Services’ Monthly Treasury Statement. You don’t have to be a mathematician to conclude that, if more Americans were working, there would be less need for many of the benefits programs and the largest among them would be more financially sound.

News of new jobs is always welcome, but it hides the deeper problem of too many unemployed and while Congress continues to debate what to do about Obama’s effort to give work permits to illegal aliens and protect them from deportation, the Center for Immigration Studies announced in June that “Since the year 2000 all of the net increase in the number of working-age (16 to 65) people holding a job has gone to immigrants (legal and illegal).”

Should the U.S. make five million or more illegal aliens eligible to compete for jobs with its native-born and naturalized population?

The U.S. must pay billions in interest on its debt. The failure of Congress to address the need to reform the tax code, reduce the deluge of regulations negatively affecting the business and industrial sector, and get control over spending has dug the nation a very deep and dangerous hole.

Statistics can be daunting, but we all can feel that something is terribly wrong with the economy despite the news about a vigorous Wall Street. The fact remains that Main Street is in trouble. The nation requires an economy in which new businesses are created and existing ones can afford to expand. That is not happening.

That is why we are Number Two.
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Who cares if China's economy was number one?

China's economy isn't No. 1 — but if it were, so what? from the file of Jeff Jacoby at the Boston Globe

Read the Jacoby Files at the Boston Globe
Have you been lying awake at night, fretting over the news that China has surpassed the United States to become the world's largest economy? If so, let me offer some reassuring advice: Turn over and go back to sleep.

The International Monetary Fund's most recent compilation of global economic data isn't exactly a page-turner, but buried among its eye-glazing statistical appendices was a detail that had some financial writers hyperventilating.

In 2014, the IMF estimates, China's economic output will total $17.6 trillion, putting it slightly ahead of the United States, where GDP this year is valued at $17.4 trillion. That means China now exercises 16.5 percent of the world's economic clout, outranking the United State, with 16.3 percent.

Assuming the IMF's calculations are right, the flustered headlines aren't surprising. "It's official: America is now No. 2," announced MarketWatch. "China just overtook the US as the world's largest economy," a Business Insider story was titled. Vanity Fair's forthcoming issue proclaims this "The Chinese Century" — and illustrates it with an image of a panda crushing an eagle.

But what if those IMF calculations aren't right? Or to be more precise, aren't all that meaningful?

The standard yardstick for measuring and comparing different economies is to convert each country's data into a common currency (typically the US dollar), using prevailing foreign-exchange rates. By that benchmark, China's economy still lags well behind America's, by roughly $7 trillion as of 2014.

It is only by expressing each country's GDP in terms of what analysts call "purchasing-power parity," or PPP, that China can be portrayed as the foremost economic power on Earth. This is a way of adjusting the value of national currencies to account for different costs of living in different countries.

The intention is to yield a value that makes comparisons more realistic, at least in terms of buying power — "so a Starbucks venti Frappucino served in Beijing," as MarketWatch's Brett Arends puts it, "counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders."

But while purchasing-power parity is a useful theoretical concept, it isn't money in the bank. Theoretical concepts can't be spent. The Chinese can't use PPP currency to pay for airplanes and oil and computers. They have to pay, like everyone else, in real currency at prevailing exchange rates. And by that measure, the United States remains the most potent economic force on the planet.

More to the point, China is nowhere near outstripping America in per-capita terms, the most important gauge of a nation's economic strength.

With a population nearing 1.4 billion, China has a vast distance to cover before its economic output per person begins to resemble America's. According to the IMF, China's economic output this year — after adjusting for purchasing power — will amount to $12,893 per person.

The comparable value for the United States is more than four times as much: $54,678. Even a booming Chinese economy will need time to close such a yawning gap. It took Americans almost 75 years to pull it off. China's per-capita GDP stands today where America's stood in 1940.

In reality, China's per-capita economic output lags far
behind America's. Even a surging Chinese economy
will need many years to close that yawning gap.
In reality, China's per-capita economic output lags far behind America's. Even a surging Chinese economy will need many years to close that yawning gap. And China faces a daunting challenge. Its fertility rate has fallen sharply, and its population is aging. In 1980, its median age was 22; today it is 35; by 2050 it is likely to reach 49. With fewer children being born today, China's workforce will shrink tomorrow, even as its population of nonworking elderly swells. As the Economist observes, "China will grow old before it gets rich."

That isn't a prospect we should relish. There is no competition for the title of World's Largest Economy; with or without the "We're No. 1" bragging rights, Americans' quality of life will remain high.

We should welcome other people's progress up the economic ladder, just as we welcome their advances in democratic liberties and human rights. And we should regret any handicap that impedes their gains — whether that handicap is an authoritarian Communist government or a looming demographic collapse.

A world of burgeoning GDPs will be a happier, healthier, cleaner, and more educated world. Nearly one-fifth of the human race lives in China, and the better off those men, women and children are, the better off we're all likely to be. When other nations prosper, America isn't the poorer.

China ranks No. 1 in some things — population, exports, electricity, telephone use. By the most meaningful standard, however, its economy is still far from the world's most largest. Will it get there one day? Let's hope so.
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Monday, December 1, 2014

Two-parent families shrink ~ inequalites grow

As two-parent families decline, income inequality grows by Jeff Jacoby at the Boston Globe

Some children raised in fatherless homes succeed
spectacularly. But as one of those successes, Barack
Obama, has stressed, the data aren't in question:
"Children who grow up without a father are more likely
to live in poverty … more likely to drop out of school …
more likely to wind up in prison."
Few political debates in this country are as freighted with emotional, cultural, and ideological baggage as those that touch on the choices people make in forming families.

When public discourse turns to decisions about wedlock and child-rearing — think of Daniel Patrick Moynihan's 1965 report on "the breakdown of the Negro family," or the uproar over Murphy Brown during the 1992 presidential race, or the modern push for same-sex marriage — civility is too often swept away amid a storm of hurt feelings and self-righteousness.

All the more reason, then, to welcome two recent studies — one national in scope, one focused on Massachusetts — on the effects of single parenthood and the decline in marriage.

Both lay out the data with clarity, while avoiding moralizing or disapproval.

One report, aptly titled "For Richer, For Poorer," is by sociologist W. Bradford Wilcox of the American Enterprise Institute and economist Robert I. Lerman of the Urban Institute. It documents the profound links that connect family structure and financial well-being, and underscores what decades of empirical data have shown: Families headed by married couples tend to be much stronger economically than those headed by unwed single parents.
"Anyone concerned about family inequality, men's declining labor-force participation, and the vitality of the American dream should worry about the nation's retreat from marriage," the authors write.
The steady fall in the percentage of married two-parent households — from 78 percent in 1980 to 66 percent in 2012 — goes a long way toward explaining why so many ordinary families have trouble climbing beyond the lower rungs on the economic ladder.

Correlation isn't proof of causation, of course. But there is no refuting the strong association between growing up with both parents in an intact family and achieving higher levels of education, work, and income as young adults.

Wilcox and Lerman put dollar amounts to the "intact-family premium" reaped by those who are raised by their own biological or adoptive parents. By age 28 to 30, for example, men from such backgrounds are earning on average $6,500 more per year in personal income than their peers from single-parent homes.

And since growing up with both parents increases one's likelihood of marrying as an adult, men and women who were raised by married parents tend to enjoy much higher family incomes as well — in the case of that 28- to 30-year-old male, more than $16,000 higher, on average.
(Among all married adults who were raised in a two-parent home, the annual average "family premium" is higher still: $42,000 more when compared to their counterparts from single-parent families.)
To be sure, not all families headed by married parents are stable or successful, and not all children raised by single parents struggle economically or professionally. Barack Obama, who was two years old when he was abandoned by his father, is dramatic evidence of that.

But as Obama himself says, the data aren't in question. "Children who grow up without a father are more likely to live in poverty. They're more likely to drop out of school. They're more likely to wind up in prison. They're more likely to abuse drugs and alcohol."

As the second study documents, these unhappy trends haven't bypassed Massachusetts.

Infographic - American Enterprise Institute
In recent decades, the fraction of Bay State children in single-parent homes has risen to more than one in three. While the state's marriage rate has plummeted — there were 49,000 Bay State marriages in 1980 vs. fewer than 36,000 in 2011 — the rate of out-of-wedlock births has soared. The Massachusetts Family Institute, in a report replete with just-the-facts-ma'am statistics, lays out the economic and social costs.

"The increase in fatherless families is a significant contributor to income inequality," it notes. In 2013, the median Massachusetts income for married-couple households with children was $114,376. For households headed by single mothers, it was just $26,999.

Citing data from the National Survey of Children's Health, the report observes that only 6 percent of children in married-couple homes have no parent who works full-time. For kids being raised by never-married single mothers, the comparable figure is 46 percent.

There is no finger-wagging or blame in these reports, just the numbers — and compassion. The child poverty rate is so much steeper in single-parent homes than in two-parent homes, and it is heartbreaking that so many young people raised in fatherless families will have such trouble climbing out of poverty as they grow older.

Income inequality may or may not be "the defining challenge of our time," as Obama and others have proclaimed. But the most significant driver of that inequality — the biggest impediment to upward economic mobility — isn't hard to identify.

The higher the fraction of children not being raised by their married parents, the more of our fellow citizens for whom the American Dream is likely to remain beyond reach.
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Wednesday, November 19, 2014

Buy your health insurance out of state

Buy your health insurance out of state from the files of Jeff Jacoby at the Boston Globe

Read the Jacoby Files at the Boston Globe

The second open enrollment period for health insurance under the Affordable Care Act is underway, and the law is more unpopular than ever. According to Gallup, a record-high 56 percent of Americans now disapprove of the 2010 law.

Reasons to dislike ObamaCare have abounded from the outset, and on Friday the administration unveiled a new one: In large swaths of the country, the price of insurance sold on the federal health exchange is going up.

That will force many of those who bought coverage last year to scramble to find a new policy or fork over as much as 20 percent in higher premiums. How's that "affordable" health care working out for you?

Republicans in Congress — less inclined than some deep thinkers to sneer at "the stupidity of the American people" — unanimously opposed the Affordable Care Act when it was enacted, and were rewarded in the 2010 midterms for their steadfastness.

In the ensuing four years, Republicans repeatedly called for replacing ObamaCare with alternatives expanding choice, competition, and market reforms — and the voters just rewarded them again.

Of course, even with their new majorities in Congress Republicans will have to contend with President Obama's veto pen. So a bill "repealing every last vestige of ObamaCare," as Senator Rand Paul of Kentucky exuberantly proposed on Election Night, isn't in the cards anytime soon.

But that doesn't mean there is nothing to be done, particularly since the Supreme Court has agreed to hear a new challenge to the law, one that could potentially cause ObamaCare to topple under its own weight.

One way or another, changes in the law are coming. Not all of them have to be bitterly controversial, or provoke cries of Republican overreaching. Here's a suggestion: Allow individuals to buy health insurance from out of state.

In an age when consumers can purchase almost anything from vendors almost anywhere, government policies protecting insurance companies from interstate competition are indefensible. Lawmakers would be laughed out of office, rightly, if they insisted that the only CDs, cellphones, or ceramics their constituents could buy were those manufactured in the state where they lived.

All sorts of financial products are routinely acquired without to state borders proving an impenetrable barrier: life insurance, service warranties, stocks and bonds, bank accounts, credit cards. Why should a medical plan be any different?

How America Views the Patient Protection Affordable Care Act

There is no good reason to deny freedom of choice to Americans when it comes to buying health insurance. Yet licensing rules in virtually every state effectively prevent individual residents from shopping for health plans in any other state.

Consequently, there is no national market for health insurance. There are only autonomous state markets, many dominated by near-monopolies that can get away with offering lower quality insurance at ever-higher premiums.

As Michael Cannon of the Cato Institute points out, it isn't only insurance companies that are sheltered from the rigors of competition. Insurance regulators are insulated too. State governments, inveigled by special interests, can burden health insurance policies with more and more mandatory benefits, driving up premiums to cover services that many consumers would never willingly choose.

In Massachusetts, for instance, health insurance policies must cover at least 49 specified treatments and types of providers, among them midwives, infertility treatments, hair prostheses, and chiropractors.

But what if all you want is a plain-vanilla health plan akin to those sold by insurers in New Hampshire (only 38 state-required health-care mandates) or, better yet, in Michigan (24) or Idaho (13)? Tough luck. That's what it means when interstate commerce in health insurance is blocked.

Polls show broad public support for the idea — as high as 77 percent in a recent Rasmussen poll. Legislation to overhaul the Affordable Care Act, currently being drafted by Florida Senator Marco Rubio and Wisconsin Representative Paul Ryan, will reportedly include interstate choice.

"We want … every American to be able to buy the kind of health insurance they want at a price that they are willing to buy and from any company in America that will sell it to you," Rubio said in a recent radio interview.

Which isn't to say change can only come from above. One can envision a moderate, pro-reform governor championing such market choice at the state level — a just-elected Republican, say, with a deep knowledge of the health insurance industry.

How about it, Charlie Baker? Why not use that new bully pulpit to advocate for legislation freeing Massachusetts residents to buy a health policy from any properly licensed insurance company in America willing to sell it to them?

It's a fix long overdue. With the distortions imposed first by RomneyCare and then ObamaCare, Massachusetts could use it more than ever. The rest of the country could too.
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