NCPA - National Center for Policy Analysis
NCPA - National Center for Policy Analysis
Barry is a Senior Economist with the National Center for Policy Analysis, one of the most influential think tanks in America today.

The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care, taxes, Social Security, welfare, criminal justice, education and environmental regulation.

NCPA Motto - Making Ideas Change the World - reflects the belief that ideas have enormous power to change the course of human events. The NCPA seeks to unleash the power of ideas for positive change by identifying, encouraging, and aggressively marketing the best scholarly research.

Daily Policy Digest

Provided courtesy of: NCPA

Daily Policy Digest

America's Shale Boom Not Over Despite Low Petroleum Prices
22 May 2015 07:00:58 CDT -

With petroleum prices down 50 percent over the past year, many analysts and pundits are predicting the end of America's shale oil boom. High prices, shale skeptics argue, created a bubble of activity in unsustainably expensive shale fields. As shale-related businesses contract, consolidate, and adjust to the new price regime, a major shale bust is inevitable, they add, with ghost towns littering idle fields from Texas to North Dakota.

It is true that the oil-price collapse was caused by the astonishing, unexpected growth in U.S. shale output, responsible for three-fourths of new global oil supply since 2008. And as lower prices roil operators and investors, the shale skeptics' case may seem vindicated. But their history is false: the shale revolution, "Shale 1.0," was sparked not by high prices — it began when prices were at today's low levels — but by the invention of new technologies.

John Shaw, chair of Harvard's Earth and Planetary Sciences Department, recently observed: "It's fair to say we're not at the end of this [shale] era, we're at the very beginning." The technology deployed in America's shale fields has advanced more rapidly than in any other segment of the energy industry. Shale 2.0 promises to ultimately yield break-even costs of $5-$20 per barrel — in the same range as Saudi Arabia's vaunted low-cost fields.

The transition to Shale 2.0 will take the following steps:

  • Oil from Shale 1.0 will be sold from the oversupply currently filling up storage tanks.
  • More oil will be unleashed from the surplus of shale wells already drilled but not in production.
  • Companies will "high-grade" shale assets, replacing older techniques with the newest, most productive technologies in the richest parts of the fields.
  • And as the shale industry begins to embrace big-data analytics, Shale 2.0 begins.

Source: Mark P. Mills, "Shale 2.0: Technology and the Coming Bid-Data Revolution in America's Shale Oil Fields," Manhattan Institute, May 16, 2015. 

For more on Environment Issues:

States vs Local Hydraulic Fracturing Bans
22 May 2015 07:00:57 CDT -

In the past few years, hydraulic fracturing/frac bans have become increasingly common in communities opposed to the drilling practice that extracts oil and natural gas from shale rock by injecting sand, water and chemicals into the ground. Such bans focus on either the actual drilling methods or the transportation of waste from the hydraulic fracturing process.

State legislatures are now finding themselves in a fight against local authorities for control of hydraulic fracturing regulations in their own states. While Vermont and New York have already implemented state wide bans on hydraulic fracturing, Texas has banned local bans and Oklahoma is considering banning local bans on the practice as well.

Current hydraulic fracturing ban legislation:

  • Over 470 local measures have passed in towns, cities, and counties.
  • Nearly half of the states and Washington D.C. have seen at least one such local measure passed.
  • Oklahoma introduced legislation imposing a ban on local frac bans.

The debate has sparked questions over who has the right to regulate oil and gas activity in the state, state agencies or individual communities. For New York, the state-wide ban followed a court decision that town zoning laws allowed the banning of hydraulic fracturing. In an attempt to achieve a compromise between state and local control, state legislation banning cities and counties from outlawing hydraulic fracturing opens the door for local oil and gas regulations, specifically where it concerns health and safety.

Texas House Bill 40, signed into law this week by Governor Greg Abbott, includes a four-part test for determining city drilling regulations while prohibiting hydraulic fracturing bans throughout the state.

Source: Lauren Aragon, "States vs Local Hydraulic Fracturing Bans," National Center for Policy Analysis, May 20, 2015. 

For more on Environment Issues:

OPEC Struggling to Keep Up The Pace in Old Price War
22 May 2015 07:00:56 CDT -

Some market watchers, such as Cornerstone Analytics (CA), have consistently stated that the underestimation of demand, coupled with over-estimation of supply, will mask the growing call on Organization of Petroleum Exporting Countries oil in the second half of this year. CA noted that global demand outstripped supply by 4 million barrels in April. This comes in addition to the mounting evidence that the oil market, via rig count declines, slowing production growth, higher demand and huge API crude inventory declines, is starting to readjust.

Be that as it may, Goldman Sachs (GS) seems to believe oil must fall to $45 by October to clear the market and rebalance. In fact, there is growing evidence that not only are we slowly rebalancing but the world may actually be running short of oil. According to Reuters, Saudi Arabia has turned down requests from China for more oil, as they are using it for their own domestic refining needs.

In other words, asset prices continue to be set by central bankers, and not free markets, so the GS call does make sense if you believe fundamentals do not matter at all. Rather than being based on the fundamentals, GS, like others, have consistently been off the mark when it comes to oil prices, but refuse to acknowledge it.

Oil companies indicated that rigs could begin to be added back into operation when prices reach around $70 per barrel. Producers hurt themselves by providing a set price, which affects how oil is traded. But to be clear, we know for sure rigs will not be added at $50, never mind $45. Once you factor in the natural depletion of existing wells, production will have to eventually go down ― another reason why the GS call will be wrong.

Source: Leonard Brecken, "OPEC Struggling to Keep Up The Pace in Oil Price War," OilPrice, May 20, 2015.

For more on Environment Issues:

U.S. Big Business Outpacing U.S. Economy
22 May 2015 07:00:55 CDT -

Over the last two decades, the largest U.S. companies have grown faster than the economy as a whole. And it's the biggest of big businesses that are making up a larger and larger share of the growth.

The best list of "big" businesses is the Fortune 500, which ranks the 500 largest U.S. companies by how much money they take in. The overall revenues of Fortune 500 companies have risen from 58 percent of nominal GDP in 1994 to 73 percent in 2013. While that ratio of big business revenue to GDP has ticked down over the last two years, the upward trend over two decades is clear.

As big business gets bigger, the biggest businesses are growing even faster. The Fortune 100, or the 100 companies with the highest revenue, have seen their proportion of nominal GDP rise from about 33 percent in 1994 to 46 percent in 2013. As a share of all Fortune 500 revenues, revenues for these top 100 companies were up to 63 percent in 2013 from 57 percent in 1994.

It is not clear exactly what is fueling the overall growth of top Fortune companies, but there are a number of popular views.

  • With a slew of mergers and acquisitions, big businesses might be snapping up or joining with rivals, and that corporate consolidation may have led to a concentration of market power. That is the skeptical-of-business view.
  • Alternatively, big U.S. companies might just be riding a streak of legitimate success. That is the pro-business view.
  • And there is a third explanation, which does not point to growing monopoly power nor to pure excellence: globalization. Global trade has exploded in the last two decades. And these giant U.S. businesses might just be leveraging their already large scale to grow further in overseas markets.

Source: Andrew Flowers, "Big Business Is Getting Bigger," FiveThirtyEight, May 18, 2015.

For more on Economic Issues:

Gov. Kasich's Tax Reform Proposal Can Boost Growth in Ohio
22 May 2015 07:00:54 CDT -

Ohio Governor John Kasich has already eliminated Ohio's estate tax and cut income tax rates, and now he was proposed a tax reform plan that will put Ohio onto a new trajectory of strong economic growth.

The plan includes across-the-board income tax rate cuts of 23 percent, tax cuts for small businesses and an increase in the state's sales tax rate.

Income taxes are problematic for a number of reasons.

  • First, they are levied on the base of taxable income, which becomes narrower and narrower as you travel up the income scale and through the various rates of Ohio's progressive income tax schedule.
  • Second, since state and local income taxes are levied on top of federal income taxes, state and local income taxes provide great incentive to evade, avoid or otherwise not report taxable income.
  • Third, income taxes reduce the marginal incentive to work and produce.

Comparing the average of the nine states with the highest state and local marginal personal income tax rates to the average of the nine states without earned income taxes over the 2002-2012 decade, the zero income tax states crush the high income tax rate states in population growth (14.6 percent to 6.3 percent), employment growth (8.9 percent to 1.7 percent), personal income growth (58.7 percent to 46.4 percent), gross state product growth (62.0 percent to 46.4 percent) and even state and local tax revenue growth (82.0 percent to 52.2 percent).

Consumption taxes are preferable to income taxes because sales taxes are broad-based by default and do far less harm to incentives to work and produce. Additionally, because sales taxes are less dependent on the gyrations of the business cycle and the stock market, they can provide revenues necessary to fund government in a very stable manner.

Source: Arthur B. Laffer and Nicholas C. Drinkwater, "Gov. Kasich's Winning Proposal For Ohio: Lowering Income Taxes," Forbes, May 18, 2015.

For more on Tax and Spending Issues:

Gross Domestic Income: A Look at How Americans Are Paid
21 May 2015 07:00:53 CDT -

Gross Domestic Income (GDI) is the lesser-known cousin of Gross Domestic Product (GDP). Both figures measure the value of all production in a year, so their final totals are virtually identical. However, they differ in how they arrive at that final total. While GDP measures what gets purchased, GDI measures who gets paid.

GDI, therefore, is a very useful measure for determining how Americans earn their incomes and maintain their standards of living. Using this data series has some distinct advantages. Unlike almost any other income data, it is complete; it adds up to the total value of all economic production. Additionally, the Bureau of Economic Analysis (BEA) has put together data on American GDI going back to the start of the Great Depression, making it a very long-running data series.

  • About half of all income is labor compensation, in the form of wages, salaries and benefits.
  • Benefits account for a growing share of labor compensation.
  • A quarter of income goes to business-level taxes and the replacement of worn out machinery.
  • A quarter of income is returned to owners of capital, including business owners and private homeowners.
  • The shares of income returned to workers and to owners of capital remain constant over time once benefits, taxes and depreciation are properly accounted for. Two-thirds of net income goes to labor and one-third goes to capital.

Study of inequality should focus on the distribution of income within labor compensation, rather than the distribution of labor and capital. Labor and capital are complements, not opposing interests.

A comprehensive look at the history of income in the U.S. is a worthwhile endeavor in itself. However, it has important implications for policy debates as well.

Source: Alan Cole, "A Walkthrough of Gross Domestic Income," Tax Foundation, May 2015. 

For more on Economic Issues:

Health Policy Digest

Provided courtesy of: NCPA

Consumer Driven Health Care

Health Care Reform Tax Will Hurt Franchisees
04 Oct 2011 12:43:58 GMT - When the employer mandates go into effect in 2014, many franchised businesses will be motivated to reduce the number of locations and move workers from full-time to part-time status...


Saving Jobs from Health Reform's Harmful Regulations
04 Oct 2011 12:43:58 GMT - If the rate of health care cost growth had not exceeded general inflation, a typical family would have had $545 more per month in spendable income instead of $95 -- a difference of $5,400 per year...


Does Health Insurance and Seeing the Doctor Keep You Out of the Hospital?
04 Oct 2011 12:43:58 GMT - Gaining health insurance and using more primary care services leads to more hospitalizations as a result of physicians' discretionary decisions regarding aggressive and intensive treatment...


The Case for Competition in Medicare
04 Oct 2011 12:43:58 GMT - A well-functioning marketplace would set in motion the forces needed to transform American medical care into a model of efficient patient-centered care...


Potential Effect of Health Care Reform on Emergency Department Utilization Not Clear
04 Oct 2011 12:43:58 GMT - In 2010, 71 percent of emergency physicians said that they expected emergency department visits to increase due to the implementation of the Affordable Care Act...


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