Barry Asmus Ph.D. – 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.

NCPA | Daily Policy Digest

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Daily Policy Digest

OBAMA'S FAULTY TAX ARGUMENT

09 May 2008 08:16:58 CDT -

As the presidential campaign heats up, a key issue is whether to extend President Bush's 2001 and 2003 income tax cuts, which expire in 2011. Opponents of the tax cuts, Barack Obama in particular, point to spending programs that could be financed by the extra revenues. In reality, repealing the tax cuts would raise taxes far above Clinton-era levels, says Andrew Biggs, a resident scholar at the American Enterprise Institute. Due to quirks in the tax code, average taxes would be almost 25 percent higher than during the 1990s.

Tax revenues would skyrocket if the tax cuts expire, due to bracket creep. Average incomes are higher today than in the 1990s, but income-tax brackets aren't adjusted for the growth of earnings. As a result, Americans will shift into higher tax brackets and pay a greater share of their incomes in taxes.

For example:

If the tax cuts expire, income-tax revenues by 2018 will rise to 10.8 percent of the total economy from 8.7 percent today -- an increase of 24 percent.
Compared to the average over the last 50 years, allowing the rates to rise would increase tax revenues by 32 percent.

Income taxes will rise even if the tax cuts remain in place, because the revenue-increasing effects of bracket creep more than offset the lower rates, says Biggs:

With the lower rates, total income-tax revenues will increase to 9.3 percent of gross domestic product (GDP) by 2018.
This level is 7 percent higher than today, and 13 percent above the 1957-2007 average.

So even if the tax cuts are made permanent, future Americans will pay a greater share of their incomes to the government than in the past. But for some in Washington, that's not enough, says Biggs.

Source: Andrew G. Biggs, "Obama's Faulty Tax Argument," Wall Street Journal, May 9, 2008.

For text:

http://online.wsj.com/article/SB121029420845179505.html

For more on Taxes:

http://www.ncpa.org/sub/dpd/?Article_Category=20

BORROWING TO BUILD UNIVERSITIES

09 May 2008 08:16:57 CDT -

Arizona's public universities have proposed issuing $1.4 billion in bonds for a university building program. The universities have asked the legislature for this money for a few years, but the construction downturn provides an opportunity to market it as a "Construction Stimulus Plan." However, this plan is fundamentally flawed, says Byron Schlomach, director of the Center for Economic Prosperity at the Goldwater Institute.

Any stimulating effect will come too late:

Proponents of the program say it would immediately create 14,438 jobs for construction workers.
But the spending would be done over several years, so most of this work would occur long after the markets have corrected themselves.

The commercial construction industry doesn't need stimulating:

The value of new commercial building permits in the state is only down 2 percent compared to a year ago.
Meanwhile, the value of industrial permits is up, according to Arizona State University's Realty Studies Department.

The plan is based on Keynesian economics -- the idea that government can and should be responsible for stimulating a faltering economy. After decades of Keynesian policies that have proven to destabilize the economy, most economists have given up on such notions, according to Schlomach.

Research shows that cutting taxes and reducing regulation on business has a more stimulating effect on the economy than increased government spending. Perhaps the best thing the government can do in this down market is nothing. Cycles happen. Government overreaction and overcommitment of future taxpayer resources lays the groundwork for future economic downturns, says Schlomach.

Source: Byron Schlomach, "Borrowing To Build Universities Will Not Help Economy, Goldwater Institute, April 17, 2008.

For text:

http://www.goldwaterinstitute.org/AboutUs/ArticleView.aspx?id=2152

For more on State and Local Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=40

FEET, DOLLARS AND INCHES

09 May 2008 08:16:56 CDT -

Do taller people earn more? According to two recent studies, the tallest quarter of the population earns 9-10 percent more than the shortest quarter. Height gives adolescents self-confidence and helps them learn valuable social skills, according Nicola Persico and Andrew Postlewaite of the University of Pennsylvania and Dan Silverman of the University of Michigan. It is also argued that people who grow to their full potential are smarter, on average. Both brains and build depend on the care and nourishment a child receives, says Anne Case and Christina Paxson of Princeton University.

Height adds to income, income also adds to height:

In countries languishing at a real income of $4,000 per head (in 1985 dollars), boys average less than 145cm.
In places that are $6,000 a head richer, boys are 4cm taller, according to calculations by Richard Steckel of Ohio State University.
Likewise, Angus Deaton of Princeton University reports that Indian men of 20 are about 1cm taller than 40-year olds, partly because the country was substantially richer when they were born.

However, the relationship between dollars and inches is not straightforward:

Uganda, for example, is both poorer and taller than India, where almost half of children under five are stunted, according to United Nations figures.
Americans born in the 1880s, as the country's industrial revolution gathered pace, were both richer and shorter than their forebears.

What explains these enigmas? Height rises with prosperity, but at a diminishing rate, says Richard Steckel of Ohio State University. It traces an arc, not a straight line, as income increases. Otherwise, Bill Gates would be a giant. Earning enough to buy plentiful calories and protein makes a big difference to stature. But once a person has enough money to free himself from thin gruel and hard labor, extra income has less to add. Stature is a good measure of deprivation but not of opulence, says Steckel writes.

Source: "Feet, Dollars and Inches," The Economist, April 11, 2008.

For text:

http://www.economist.com/finance/displaystory.cfm?story_id=10958949

For Persico, Postlewaite and Silverman study:

http://www-personal.umich.edu/~dansilv/height.pdf

For Case and Paxson study:

http://www.nber.org/papers/w12466

For more on Economic Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=17

CLOSER LOOK AT STADIUM SUBSIDIES

09 May 2008 08:16:55 CDT -

Since 1990, construction of stadiums and arenas for professional sports franchises has occurred at an incredible pace, says Dennis Coates, a professor at the University of Maryland, Baltimore County.

For example:

Major League Baseball (30 teams) has opened 18 new stadiums and has four more currently under construction.
The National Football League (32 teams) has opened 17 new stadiums; done major renovations to four others; has three under construction; and has four more projects at various stages of planning and negotiations.
The National Basketball Association (30 teams) has opened more than two-thirds of its 30 arenas since 1990, and at least three NBA franchises are actively seeking new arenas.

In most cases, state and local governments have been closely involved in the financing, design, construction, and management or ownership of professional sports facilities.

For instance:

Depending on how one measures the public share of stadium costs, it ranges from 58 percent to 63 percent after 2000.
The average public contribution to the total of capital and operating cost is between $149 million and $161 million in 1995-99, and between $249 and $280 million in 2000-06.

The most basic question about stadiums, arenas and sports franchises is the extent to which they contribute to the vitality of the local economy. Professional sports environments -- which includes the presence of franchises in multiple sports, the arrival or departure of teams, and stadium construction -- may actually reduce local incomes, says Coates:

The overall sports environment reduced per capita personal income, a finding that was new in the economic literature at the time we published it (1999).
In many local economies, wages and employment in the retail and services sectors have dropped because of professional sports.

Source: Dennis Coates, "Closer Look at Stadium Subsidies," The American, Tuesday 29, 2008.

For text:

http://www.american.com/archive/2008/april-04-08/a-closer-look-at-stadium-subsidies

For more on State and Local Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=40

WIND POWER WHIPS THROUGH TEXAS

09 May 2008 08:16:54 CDT -

The Electric Reliability Council of Texas (ERCOT) recently estimated that billions of dollars in investment will be needed to transmit wind-generated electricity from the areas of Texas most suitable for wind generation, and the costs will be borne by Texas ratepayers, says Drew Thornley, a policy analyst at the Texas Public Policy Foundation.

Wind's percentage of total U.S. net generation was only 0.77 percent in 2007, while wind accounted for 2 percent of Texas total generation in 2007 according to the Energy Information Administration. Other hurdles:

ERCOT's estimates for transmitting West Texas wind energy, under four different scenarios, range from $3.78 billion to $6.28 billion.
ERCOT transmission costs were estimated using a best-case-scenario approach and, as such, should be considered the absolute (and unlikely) minimums.
Add to this ERCOT's estimates of $410 million to $1.03 billion for connecting wind generation to the new collection substations.

Wind's variability and its lack of correlation with peak demand highlight a major challenge for wind energy, says Thornley. Presently, there is no adequate storage system for wind-generated electricity -- though progress is being made on updating older technologies, and on refining newer ones.

Wind energy also comes with legitimate environmental concerns, says Sterling Burnett, a senior Fellow at the National Center for Policy Analysis:

Most of the fossil fuel power stations required to supplement wind turbines are not redundant,' but must run continuously, even if at reduced levels.
When combined with the CO2 emitted and pollutants released in the manufacture and maintenance of wind towers and their associated infrastructure, substituting wind power for fossil fuels does little to reduce air pollution.
Wind farms also require vast tracts of land, disrupting farming acreage and animal habitats; and, turbine blades kill thousands of birds each year, including protected species.

Source: Drew Thornley, "Wind Power Whips Through Texas," National Review, April 22, 2007.

For text:

http://planetgore.nationalreview.com/post/?q=MzM5MzFhNmFjZmQ2Nzk5NGQzYmNkMjI5ZDc4N2YyYTU=&p=1

For more on National Energy Policy:

http://eteam.ncpa.org/issues/?c=national-energy-policy

For more on Energy Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=22