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Archive for March 5th, 2010

As usual, Tom Sowell uses basic economics to explain a confusing topic. His core insight is that government has undermined market forces, which is leading to rising costs. Obama and the other statists somehow think more government will make things better:

…policies based on political hype over the years are what have gotten us into what is most wrong with medical care today– namely, the way it is paid for. Insurance companies or the government pay directly for most of the costs of most medical treatment in the United States. That is virtually a guarantee that more people will demand more medical treatment than they would if they were paying directly out of their own pockets, instead of paying indirectly in premiums and taxes. Since people who staff either insurance company bureaucracies or government bureaucracies have to be paid, this is not bringing down the cost of medical care, but adding to it. What also adds to the costs are politicians at both state and federal levels who mandate additional benefits to be paid for by insurance companies, thereby driving up the cost of insurance. If medical insurance simply covered risks– which is what insurance is all about– that would be far less expensive than covering completely predictable things like annual checkups. Far more people could afford medical insurance, thereby reducing the ranks of the uninsured.

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The geniuses in Washington have come up with a great idea to attact more tourists to the United States. Yes, you guessed correctly. The politicians are going to impose a tax! Normal readers are probably scratching their heads about the logic of attracting visitors by making them pay more, but it all makes sense when you realize Washington is a town where politicians claim that a giant new healthcare entitlement is going to reduce the budget deficit. USA Today reports:

President Obama signed the Travel Promotion Act into law Thursday, which aims to reinvigorate the tourism industry but will require many international visitors to pay a fee to enter the U.S. …Under the new law, visitors from visa-waiver countries — most European countries, Australia, Brunei, Japan, Korea, Singapore and New Zealand — will be required to pay $10 prior to arriving in the U.S. …The USTA estimates the requirement will result in about $8 million collected from tourists each month. …European countries have opposed the bill, saying that it could result in retaliatory fees for Americans and fewer tourists to the U.S.

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In addition to being in favor of more spending, increased regulation, bailouts, and protectionism, President Bush also saddled the economy with a big minimum wage increase. A new study shows that this pernicious policy has destroyed more than 500,000 part-time jobs. One of the most interesting insights in the report is that the economy (prior to Bush’s awful law) had reached a point where the minimum wage wasn’t doing much damage because the competitive wage for entry-level work had risen about the government-mandated minimum. But by boosting the required wage by 14, 12, and 11 percent over three years, that is no longer the case. As a result, hundreds of thousand of people have been priced out of the job market.

Economic theory is clear in its understanding of the minimum wage – it unambiguously reduces the demand for labor, but only if the minimum wage is above the market wage for unskilled entry level labor. In practice, the minimum wage has been far beneath the going wage for unskilled, entry level workers. Increasing the minimum wage at these levels would have no effect on employment or wages. As a consequence, research findings have ranged from zero to modest job losses as the minimum wage increases. Unfortunately, the latest round of minimum wage increases, which occurred in late July 2007, 2008 and 2009, occurred from the peak through the trough of the recession. These increases were, at 14, 12 and 11 percent respectively, the largest since 1978 and the largest three-year percentage change since 1950. …the minimum wage increase accounts for roughly 550,000 fewer part-time jobs now than would otherwise be the case without the most recent three minimum wage increases. …Abandoning the minimum wage would have little or no adverse economic effects. Indeed, it would most likely boost employment.

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