Month: September 2013

Cascade in the Capitol: Testimony Regarding Grand Bargain Small Business Tax Cuts

Steve Buckstein presented the following testimony to the Joint Interim Committee on Special Session prior to the September 30th special session. The audio of the hearing is here. Steve’s testimony begins at 1:09:22. He was the first member of the public to testify on Legislative Concept 3, the revenue raising part of the so-called Special Session Grand Bargain. Each person was limited to two minutes of oral testimony:

Testimony Before the Joint Interim Committee
on Special Session in Favor of
Small Business Tax Cuts
by Steve Buckstein

Good morning, Co-chairs Courtney and Kotek and members of the Committee. My name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, which is a non-profit, non-partisan think tank based in Portland. Cascade’s mission is to develop and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity.

While I do not support the revenue raising portions of this legislation, reducing tax rates on small businesses is a very positive step that I urge you to take.
There was an instructive exchange on this topic on June 20th before the Senate Finance and Revenue Committee.* One tax cut opponent noted that he didn’t believe the person who fixes his washing machine was going to buy another truck and get another employee for his small business because of a reduction in his tax rate.

I then told the committee that while this one repair man may not change his economic behavior, a tax cut just might be the deciding factor for some entrepreneur to locate a new washing machine manufacturing plant here, hiring dozens or hundreds of Oregonians.

We need to understand that in this modern world, people and capital are mobile. Investors and businesspeople change their behavior based on the incentives and disincentives they face. Oregon’s high tax rates shine like a big STOP sign at every border, warning high-income people and many businesses that the cost of staying here or coming here may be too high compared to other states.

So, rather than rely on taxing others more to generate revenue, rely on the fact that lowering small business tax rates will make Oregon more business friendly, thus generating jobs and more tax revenue.

I have it on good authority that each of you would like to take credit for creating more jobs in this state. Here’s your chance.

Thank you.

* June 20th Hearing audio. The tax cut opponent’s repair man story begins at 1:25:40. My full testimony begins at 1:45:37 and my repair man story rebuttal starts at 1:47:40.

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Seven Steps to Replace ObamaCare with Something That Works

By Sally C. Pipes

Under the Affordable Care Act, state health insurance exchanges open for business October 1 (although the executive director of Cover Oregon has admitted Oregon’s exchange will experience some delays). While ObamaCare remains a controversial―as well as logistically catastrophic―law, President Obama took a shot at its opponents recently, saying, “There’s not even a pretense now that they’re going to replace it with something better.”

Au contraire. Ideas for “something better” abound—but the president hasn’t shown interest in them. He has instead remained devoted to his eponymous law, which promises higher costs and worse care. At this point, ObamaCare’s critics have to play the long game―and press for delays in the law’s implementation, whether by rolling back certain parts of the law or defunding it through a continuing resolution, until the White House has a new occupant.

Here are seven provisions that should be part of a replacement agenda that would ensure that all Americans have affordable, accessible, quality health care.

First, change the federal tax code so that individuals can purchase insurance with pre-tax dollars, just like businesses can. Most Americans don’t realize the full cost of their health care because they get employer-subsidized insurance. Consequently, they over-consume health care. That drives up costs. To offset the cost of insurance for those who don’t get coverage through work, Congress could institute a refundable tax credit.

Second, it’s long past time to expand the availability of health savings accounts, where patients can save pretax dollars for health services. And, HSAs must be combined with catastrophic coverage. Doing so would encourage Americans to shop smartly for their care, as they’d be spending their own money.

Third, Congress should allow the purchase of insurance across state lines. Insurance policies issued in Rhode Island cost 2.5 times what they do in Alabama. People should be able to purchase a plan that suits their needs. Such a move would increase competition and lower costs.

Fourth, policymakers need to increase funding for high-risk pools. Such pools were functioning well in many states before ObamaCare―providing affordable coverage to those with pre-existing conditions without raising premiums for everyone else.

Fifth, federal electronic health records (EHR) mandates have to go. The average initial cost of an EHR system is $44,000 per physician, with ongoing maintenance estimated at $8,500 annually. Those costs are passed on to patients. Instead, let providers implement EHR systems when it makes financial sense for them to do so on their own.

Sixth, Congress should scrap the essential health benefits mandates that require all policies to cover a battery of health services. Such mandates can raise the cost of insurance anywhere from 10 to 50 percent.

And seventh, state-level medical malpractice reform is long overdue. Each year, more than $100 billion in health care expenditures are driven by doctors’ and hospitals’ worries about medical liability. Common sense tort reform that immunizes providers from frivolous lawsuits would usher in lower costs for patients.

Of course, all these reforms are contingent on repealing ObamaCare. The House of Representatives has certainly tried to move that effort forward, voting 40 times to do so.

Death by a thousand cuts may be more realistic, at least in the short term. In June, the House voted to repeal ObamaCare’s medical device tax, with 37 Democrats joining Republicans to pass the bill.

And in the past three months, 22 House Democrats have signed onto legislation repealing the Independent Payment Advisory Board (IPAB)―ObamaCare’s doomed plan to have 15 unelected bureaucrats dictate Medicare spending with no real congressional oversight or control.

Public opinion and legislative momentum favor ObamaCare’s delay, if not its outright repeal. And contrary to the president’s assertion, there is a plan to replace ObamaCare with something better. Once the president is no longer standing in the way, Congress should implement that plan―and fix American health care for real.

But if lawmakers allow ObamaCare to stand, the next stop will be a single-payer system, where government controls the health care system entirely. Senate Majority Leader Harry Reid has admitted as much. When asked in August if he felt the United States should abandon insurance as a means of accessing the health care system, Reid replied, “Yes, yes. Absolutely yes.” This will put America on the road to serfdom, and there will be no off-ramp.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute in San Francisco. She is a guest contributor for Cascade Policy Institute. A version of this article was originally published by The Washington Examiner.

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Right to Work is Right for Oregon

Please join us for Cascade’s monthly Policy Picnic led by Cascade Founder Steve Buckstein on Wednesday, October 16th, at noon.

Since the U.S. Supreme Court Beck decision in 1988, no American must join a union to hold a job. But in 26 states, including Oregon, workers still have to pay union dues. The plaintiff in that historic court case, Harry Beck, is now an Oregonian. He recently told Cascade that “Beck Rights are not enough. No one should be forced to pay dues to a union they choose not to join.” Come join Steve Buckstein to discuss this situation, and what Oregonians can do now to grant workers more employee choice.

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early. To RSVP, please fill out the ticket form below.

 

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“Free Speech” at Modesto Junior College Means “Take a Number”

Free speech is not allowed on the sidewalk at Modesto Junior College in California. Students must represent an official organization in order to pass out materials or engage in conversation with other students passing by. Even if what they want to distribute is just the U.S. Constitution.

Robert Van Tuinen proved this last week, when he gave out copies of the Constitution to fellow students in honor of Constitution Day. College employees notified Robert that students have to start an official club to engage in free speech on campus, and they must stand in the “free speech area.” Robert was welcome to engage in free speech there, but unfortunately it was mostly booked until October.

According to a FOX News report, Robert Shibley, senior vice president of the Foundation for Individual Rights in Education, “said the very idea of speech codes on campus ought to be troubling to Americans.” “They are imposed in an attempt to sanitize the public space of anything that might offend somebody,” he said. “The fact is, no school specifically needs a speech code….If people are too loud, harassing people, or blocking traffic, they have the means to address that.”

Hopefully, Robert Van Tuinen will plan ahead, and Modesto students will find him and his stack of Constitutions in the “free speech area” on Constitution Day next year. Maybe he could even arrange a group reading of the Bill of Rights.

Kathryn Hickok is Publications Director at Cascade Policy Institute, Oregon’s free market public policy research organization.

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As the Expense of ObamaCare Sets In, Companies Cut Health Benefits

By Sally C. Pipes

Implementation of the Affordable Care Act continues this fall and winter, and employees of shipping giant United Parcel Service recently got an unexpected delivery. The company announced that it would stop offering health coverage to the spouses of 15,000 workers.

UPS’s workers and their families can thank ObamaCare for this special delivery. And UPS isn’t alone. American businesses are discovering that the president’s signature law will raise health costs for them and their employees in short order.

In a memo explaining the decision to employees, UPS stated that increasing medical costs “combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost.”

One day before UPS’s big announcement, the University of Virginia announced that it would cut benefits for spouses who have access to health care through jobs of their own. The rationale was similar. Delta Airlines recently revealed that ObamaCare will increase its direct health costs by $38 million next year. After taking into account the indirect costs of the law, the company is looking at a 2014 health bill that’s $100 million higher.

Increasingly, large employers who aren’t dropping spousal health benefits are requiring their employees to pay monthly surcharges in the neighborhood of $100 per spouse. Many small businesses are dropping family coverage altogether because they expect that ObamaCare’s new tax on insurers will be passed on to them in the form of higher premiums. One Colorado-based business received notice from its insurer that the tax would increase premiums more than 20 percent.

The story is similar in Massachusetts. One new report concludes that over 45,000 small businesses in the Bay State will see premium increases in excess of 30 percent. In all, more than 60 percent of firms in the state will see their premiums go up.

Last month in California, the largest insurer for small businesses, Anthem, declared that it would not participate in the state’s small-business health insurance “marketplace,” Covered California. Only two years ago, Anthem covered one-third of small businesses in California. Anthem’s exit represents one less choice for consumers—and a sign that competition may not be as robust in the exchanges as the Obama Administration promised.

Small businesses are responding to these higher premiums by trimming their labor costs in other ways. That’s not good news for workers. Seventy-four percent of small employers plan to have fewer staff because of ObamaCare, according to a recent U.S. Chamber of Commerce survey. Twenty-seven percent are looking to cut full-time employees’ hours, 24 percent to reduce hiring, and 23 percent to replace full-time with part-time employees.

One in four small companies say that ObamaCare was the single biggest reason not to hire new workers. For almost half, it’s the biggest business challenge they face. These findings are consistent with a recent Gallup Poll showing that 41 percent of small businesses have already stopped hiring because of ObamaCare. Another 19 percent intend to make job cuts because of the law.

All this tumult in the labor market is fueled by more than the increase in premiums engendered by ObamaCare. The law effectively encourages companies to cut full-time jobs. ObamaCare requires employers with 50 or more workers to provide health insurance to all who are on the job for 30 or more hours per week. The law originally called for this “employer mandate” to take effect in 2014, but the Administration decided in July to delay enforcement of the mandate until 2015.

Employers are responding by doing just enough to avoid ObamaCare’s dictates. Administrators at Youngstown State University in Ohio recently told adjunct instructors, “[Y]ou cannot go beyond twenty-nine work hours a week….If you exceed the maximum hours, YSU will not employ you the following year.” A week prior the Community College of Allegheny County in Pittsburgh made a similar announcement.

Hundreds of employees at Wendy’s franchises have seen their hours reduced for the same reason. And part-time employees of Trader Joe’s, which has eight locations in the Portland area, are losing their company-sponsored health insurance. Trader Joe’s has offered health and dental coverage for years, but now part-time workers are being directed to the state health insurance exchanges.

Meanwhile, companies with fewer than 50 employees are thinking twice about expanding—and thus being ensnared by ObamaCare’s requirement that they provide health insurance. The cost of each additional employee could be staggering. A firm with 51 employees that declined to provide health coverage would face $42,000 in new taxes every year—and an additional $2,000 tax for with each new hire. Providing coverage, of course, would be even more expensive.

As private firms large and small grapple with ObamaCare-fueled cost increases, one large employer—the federal government—has been quietly exempting itself from portions of the law. Top congressional staffers like their current benefits under the Federal Employee Health Benefits Plan (FEHBP), wherein the government pays up to 75 percent of the premiums. But the law requires those who work in lawmakers’ personal offices to enter the exchanges. And in many cases, staffers make too much to qualify for health insurance subsidies through the exchanges. So they’d be facing a hefty cut in their compensation.

Fearing a mass exodus of congressional staffers from Capitol Hill, the Obama Administration fudged the law to permit lawmakers’ employees to receive special taxpayer-funded subsidies of $4,900 per person and $10,000 per family. Yet only three months ago, Senate Majority Leader Harry Reid (D-Nev.) claimed that Congress wouldn’t make exceptions for itself.

President Obama no doubt knows that these congressional favors won’t go over well with ordinary Americans. So he’s called on his most popular deputy—former President Bill Clinton—to try to sell the law to the public once again. But unless the former president can lower employer health costs with little more than the power of his words, his sales pitch will likely fall flat.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute in San Francisco. She is a guest contributor for Cascade Policy Institute. A version of this article was originally published byForbes.

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The Trouble with ObamaCare Is…Parking?

By John A. Charles, Jr.

Oregon is scrambling to open its new federally mandated health insurance exchange, dubbed Cover Oregon, on time October 1st.  Since the commodity being marketed is health insurance, one can only imagine the number of things going wrong: price quotes, online application forms, privacy protection, etc.

But when Cover Oregon’s Chief Operating Officer went on a recent multi-state conference call with President Obama to discuss the problems various states were having with their exchanges, she didn’t mention any of those issues. She said the number one problem for her organization was parking.*

When asked by the President to clarify, she said, “We have 150 employees at our Tualatin office, and only 96 parking spaces.” The President had to tell her that even the vast powers of the Oval Office did not extend to solving local parking shortages.

This was a classic Oregon moment. In a conversation about how the state will ration health care―an industry covering roughly one-seventh of the economy―we discover that management can’t even successfully ration parking for their own employees.

ObamaCare is already collapsing under its own weight. Things are likely to get much worse before they get better. 

* The source of this story was testimony by Rocky King, Executive Director of Cover Oregon. He told it on Sept. 16th in testimony to a joint hearing of the interim House and Senate health care committees in Salem. The hearing audio wasn’t posted immediately but it is now online here:
http://www.leg.state.or.us/listn/archive/archive.2013i/HHC-201309161400.ram.

The parking story begins at about 59:35 and ends at about 1:00:35 into the hearing.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Outlawing Private Backyards in the Portland Metro Area

Please join us for Cascade’s monthly Policy Picnic led by Cascade President and CEO John A. Charles, Jr. on Wednesday, September 18th, at noon.

The Metro Council insists we all must live closer together in order to “protect” undeveloped land on the suburban fringe. As a result, virtually all new residential development in the Portland region will have to be built at densities of 7-15 units/acre, with the majority of dwellings being apartments or condos. Has the government outlawed private backyards, and if so, how did this happen? Charles will share research conducted this summer which sheds light on this important topic.

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early. To RSVP, please fill out the ticket form below.

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Take That First Job

A week after Labor Day, The Oregonian published a front-page story about Oregonians who rely on public assistance and how state officials want to help them transition into the workforce. What the article doesn’t mention, however, is that in 13 states, including Oregon, being on welfare can pay more than $15 per hour. The level of public assistance currently available to welfare recipients, compared with the wages they might earn for entry-level work, can act as a severe disincentive to taking a first job and breaking the cycle of long-term dependence.

According to a new study by the Cato Institute, welfare currently pays more than a minimum-wage job in 35 states. That’s more than $31,000 per year, tax-free. Instead of helping people to transition into the workforce, ever-expanding government programs―and the tax disincentives of earned income―can trap the poor at the bottom of the economic ladder just as they are trying to begin the climb.

In The Work Versus Welfare Trade-Off: 2013, authors Michael Tanner and Charles Hughes compare welfare benefits available to a “typical welfare family” (which they define as a single mother with two children) with the wages the adult would need to earn to take home an equivalent dollar income. The authors note that reports on welfare commonly focus on the cash-benefit program Temporary Assistance for Needy Families (TANF), giving the impression that welfare benefits provide families with “a bare subsistence level of income.” “In reality,” Tanner and Hughes write, “the federal government currently funds 126 separate programs targeted toward low-income people, 72 of which provide either cash or in-kind benefits to individuals.” This being the case, a more accurate assessment of the value of welfare “is likely to be far higher than simply the level of TANF benefits.”

The conclusion? In many states, a welfare recipient would lose money by accepting full-time work instead of continuing to rely on public assistance. Welfare benefits are tax-free, so they can exceed the take-home pay a typical recipient could expect to earn entering the workforce. According to the Cato study, “[i]n 11 states, welfare pays more than the average pre-tax first year wage for a teacher. In 39 states it pays more than the starting wage for a secretary. And, in the 3 most generous states a person on welfare can take home more money than an entry-level computer programmer.”

With disincentives like this, it’s hard for people with few skills to give up the security of a welfare check for any kind of paid work. For those with tenuous work habits, or who are very young, it may take even more motivation to forgo welfare (and the leisure time they have while not holding a job) in favor of the hard work, inconvenience, and discipline involved with earning that first entry-level wage. But it is precisely by working that people gain the skills and experience needed to progress in a job, get promoted, earn raises, receive further education or training, create professional networks, think in longer timeframes, build assets, and be in a place where new doors of opportunity can open.

Both research and common sense clearly demonstrate that work is crucial to escaping poverty, beginning with a low-wage, entry-level, or even part-time job if necessary. The U.S. Census Bureau reported in 2010 that only 2.6 percent of full-time workers and 15 percent of part-time workers are poor, according to Federal Poverty Level standards. In contrast, 23.9 percent of adults who do not work at all are poor. A widely cited 2009 Brookings Institution study by Ron Haskins and Isabel Sawhill likewise asserted that three key factors in avoiding poverty in adulthood (and becoming middle class) are to finish high school, to work full time, and to marry before having children. Only two percent of people in the U.S. who do all three of those things live in poverty.

Unfortunately for those who want to leave welfare and become wage earners, the short-term financial consequences are not in their favor while they have few skills, limited education, or little work experience. If young people at the point of entry to work, and people who currently rely on public assistance, lose the belief that earning a paycheck is better in the long term than drawing a benefit check, the cost to their futures will be significant. The workforce participation rate for men 16-24 has dropped from 80% in the 1970s to about 58% today. Young men, especially with less education, are increasingly opting out of the workforce, and not just due to a weak economy. An enabling factor is that with all the government entitlements available, work doesn’t seem to pay.

Many welfare recipients do want to work and are trying to find employment. But many others will continue to make what seems to them to be a rational choice to stay on welfare if it pays more. If policymakers want to reduce dependence and reward work, they should strengthen welfare work requirements and resist allowing the cumulative benefits of welfare to continue to outpace earned income. Tax reform allowing low-wage workers to keep more of their own money (such as the recent temporary reduction in the FICA tax) would be a great boost for people leaving welfare for work. Taking a paying job is and always will be the on-ramp to the road to the middle class.

Kathryn Hickok is Publications Director at Cascade Policy Institute, Oregon’s free market public policy research organization.

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“Field of Dreams” Is No Strategy for TriMet

September 12 will be the 15th anniversary of the opening of Westside MAX. Unlike most transit projects, Westside light rail was deliberately routed through vacant land with the expectation that it would be a catalyst for “Transit-Oriented Development” (TOD). Planners stated, “The success or failure will be determined in large part by what happens around its 20 stations.”

Fifteen years later, the record is disappointing. There have been thousands of housing units built near light rail, but very little retail or office space. In at least two cases, ground-floor retail near light rail was such a flop that it was later ripped out and converted to residential. Most projects have been under-built for parking, causing problems for both residents and neighbors.

Most importantly, light rail did not magically change travel behavior in Washington County. Extensive field monitoring by Cascade shows that for a quarter-mile or half-mile radius around MAX stations, more than 85% of all trips to and from the area during the morning peak period take place in a motor vehicle. Light rail use rarely exceeds 8% of all trips, and the ratio drops even more on weekends.

The “Field of Dreams” strategy was fun for a movie, but it hasn’t worked for transit planning. TriMet should learn from this experience and pull the plug on any more light rail projects.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Vincent Vernuccio Talks on Worker Freedom

Mackinac Center for Public Policy’s labor expert Vincent Vernuccio came to Portland in September to discuss how Michigan secured the freedom for employees to choose whether or not they want to pay for union representation. Here is his talk before the Executive Club on September 4th:

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