October 18, 2018

by John McClaughry

Most Vermonters live within an hour’s drive of Quebec, Canada, yet it’s astonishing how little we know about events taking place in our northern neighbor.

There have been elections in the provinces throughout the year, and in almost every case provincial voters have chosen more conservative parties and candidates.

In Quebec there was a huge conservative win on October 1. Francois Legault and the Coalition Avenir Québec – Coalition for the Future of Quebec – won a huge parliamentary majority. This seven-year-old party has elements of conservatism and populism. It will form the first right-of-center government in Quebec since 1970.

As one Quebec pundit observed, “It remains to be seen how the CAQ will perform. The party seems intent on fiscal prudence and deregulation. But M. Legault was once a cabinet minister for the separatist Parti Quebecois, and the CAQ has expressed interest in Quebec nationalism.”

The CAQ doesn’t promise to undo Quebec’s single payer health care system, but it promises to attack its failures. Its website asks “What good is having a family doctor if it’s impossible to see him or her when you’re sick? The CAQ will ensure Quebecers not only have a family doctor but can benefit from a real team engagement within a reasonable timeframe. Better access to care without appointment, better access to healthcare in the evening and during the weekend … reduced waiting time in hospital emergency rooms and clinics”.

What he CAQ does to counter the unavoidable defects in Quebec’s single payer system could be worth watching.

— John McClaughry is vice president of the Ethan Allen Institute

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October 16, 2018

by Rob Roper

In their recent debate, Governor Scott and democratic candidate Christine Hallquist both expressed their policy preference for expanding government-run pre-k programs. Scott favored a smaller approach, using $7 million in new, anticipated sales tax revenue from internet sales to bolster existing programs. Hallquist endorsed spending at least $200 million to massively expand the size and scope of what the state offers. Neither is on the right track.

The debate in question was hosted by Let’s Grow Kids, one of the many organizations in the state that advocates for birth to five “early education.” In a 2016 report compiled by a Blue Ribbon Commission on Financing High Quality, Affordable Child Care outlined in their final report that the real, final cost of a comprehensive birth to five plan would actually cost $849,254,369. A year. Mostly on top of the $1.7 billion we already spend on education in Vermont.

So, Scott wants to crack the door to this budget buster, and Hallquist wants to really kick it open it, but neither is acknowledging the real and explosive implications for property taxes in in the long run.

Sadly, as more and more states adopt publicly funded and governed pre-k programs, the more evidence we have showing that these programs do not benefit children over the long term, and in some cases it appears that they actually do long term harm both academically and behaviorally. However, even more sadly, the pretense that these programs are “for the kids” is being displaced by the argument that they are really about getting young mothers back into the workforce, despite the negative impacts of separating children from their parents at such a young age. To put it another way, pre-k programs have become just another form of corporate welfare.

But, if Vermont really wants to attract more young families, we should focus on expanding our tuitioning system to all families, not just those lucky enough to live in non-operating school districts. School choice, where it exists, already brings young, entrepreneurial families to our state. As the Bernier family of Elmore explained in testimony regarding the Elmore/Morrisville merger, they are a couple working in jobs that can be done from anywhere in the world. They moved from Rhode Island to Elmore in great part because the town offered school choice. When Elmore lost school choice in an Act 46 merger, they moved to another town that still had choice.

Their story is not unique. In fact, after East Haven closed its public schools in 2011 due to declining enrolment and became a choice town, the number of students in the district nearly doubled in just three years from 11-20 at the elementary level and from 11-21 at the secondary levels. (VPR, March 2, 2015)

Statewide school choice is a highly marketable, highly valuable sales pitch that Vermont could own. No other state could offer anything comparable. It benefits children. It benefits families. And, as a solution that does not cost nearly a billion dollars a year to implement, it benefits taxpayers.

Rob Roper is president of the Ethan Allen Institute

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October 15, 2018 

By John J. Metzler

UNITED NATIONS—It didn’t have to be this way.  An oil rich, economically prosperous middle class country, once a stable Latin American democracy, is disintegrating into a socialist dystopia plagued by hunger, corruption, hyper-inflation and churning political unrest. And while petroleum remains Venezuela’s major export, now tragically it’s the people too who are fleeing this twice California sized country.

Although there’s general awareness of Venezuela’s dire economic situation and dizzying rates of hyper-inflation, there’s less knowledge concerning the short term consequences; a collapse of the middle class and a growing hopelessness among the poor.  While richer Venezuelans have already left for the USA or Brazil, those fleeing now are streaming across the land borders with Colombia and Brazil at rates of 5,000 daily.

More than two million refugees have fled Venezuela’s chaos and uncertainty in the past few years.  A million have gone to neighboring Colombia and many to Brazil, Peru and Ecuador. This year alone, 500,000 have entered Ecuador.  According to the UN High Commissioner for Refugees (UNHCR), one of the largest population movements in Latin American history is now under way from Venezuela.

Just weeks ago, U.S. UN Ambassador Nikki Haley warned, “Venezuela was once a wealthy country. It has vast natural resources. Something is very wrong when citizens of an oil rich country have to leave in order to beg on Colombian streets to feed their children. That something is the corruption of the Maduro regime. This is a man-made crisis. Period.”

She added that the roots of the crisis go back to the days of deceased dictator Hugo Chavez and his Cuban-backed revolution.  “Hugo Chavez’s perverse vision of a socialist paradise in Venezuela has transformed into a criminal narco-state that is robbing the Venezuelan people blind.”

Transparency International which track global corruption trends ranks Venezuela 166 out of 176 comparators!

Venezuela’s leader Nicolas Maduro told the UN General Assembly, “The Oligarchies of the continent, and those who rule them from Washington, want political control of Venezuela.”

His speech followed a press conference a day earlier when his Foreign Minister launched a tirade against the Monroe Doctrine and the Trump Administration for trying to control Venezuela.

Though the Venezuelan economy contracted by 30 percent since 2013, nonetheless President Maduro won a second six-year term in a May sham election amid opposition boycotts of the polls.  Nonetheless with a divided opposition, Maduro’s United Socialist Party is able to control the political spoils and hold on to power through the pulsating left wing populism driving the Bolivarian Revolution.

But with the economy in tatters and inflation reaching a tsunami rate on one million percent, a feat few countries have achieved in recent years except for Zimbabwe,  the Caracas government has taken to renaming the currency,  the Sovereign Bolivar,  and chopping five zeros off each banknote!

In parallel, Maduro has created a “virtual currency,” the Petro, linked to the country’s vast and profitable petroleum reserves.  Though there’s some logic to the move, the fact remains that massive corruption and government incompetence have undermined any confidence in virtually any plans for this country of 32 million people.

Amid a dizzying set of food subsidies, a raising of the minimum wage by 34 times, and a giddy blend of neo-Marxist initiatives are only set to deepen the malaise.

Yet Maduro’s comrades in Cuba and China remain key allies and enforcers and providers for the regime. The Cubans provide the security police assistance while People’s China offers loans.

During a recent visit to Beijing President Maduro made a rare visit to the mausoleum of the dictator Chairman Mao Tse-tung.  Later in meetings with the Chinese leadership, Maduro secured yet another $5 billion loan.  In the past decade the People’s Republic of China has given Venezuela up to $70 billion which is leveraged against petroleum exports.

Viewing the deteriorating human rights situation in Venezuela, five Latin American countries, Argentina, Chile, Columbia, Paraguay, Peru as well as Canada asked the International Criminal Court (ICC) to consider actions against top Caracas government officials for extensive human rights abuses. Significantly this is the first-time state parties to the ICC have referred another member to the court.

The Venezuelan crisis is creating both dangerous domestic discord and regional instability.

A refugee tsunami may destabilize neighboring countries in Latin America as well as spill over into the United States as the situation become ever more unpredictable.

Colombian President Ivan Duque Marquez told the Assembly, “The humanitarian crisis in the region was caused by a ‘dictatorship that annihilates liberties.’”  That’s tragically true.

John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism The Diplomacy of Separated Nations: Germany, Korea, China.

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October 11, 2018

Herewith are our comments on the Working Group’s draft product.

The legislature is concerned that with the repeal of the Obamacare insurance mandate, individual Vermonters, especially the young and healthy, will choose to go without insurance rather than pay exorbitant premiums out of limited incomes. Hence the legislature favors its usual remedy of force, to get them to comply with the state’s wishes under the threat of costly penalties.

That threat is motivated by the same idea that underlies community rating, which was enacted as a corporate welfare plan to bail out Blue Cross Blue Shield of Vermont (1991-2). At that time, BCBSVT was rapidly descending into insolvency. Thanks to intense lobbying, the legislature and two governors agreed to impose community rating for all individual and small group health insurance, thus driving out BCBSVT’s competitors and giving it a near-monopoly in the individual and small group health insurance markets.

Thanks to community rating, healthy young people are made to pay higher premiums to cover the elderly sick. This may seem charitable, but consider this: a young couple in their twenties is typically trying to pay for a home mortgage, cars, children, and often college loans. They are trying to meet these responsibilities when they are at the low end of their career income curve.

But their grandparents have long since typically paid off their educational loans, paid off their home mortgage, and seen their children grow into adulthood. A breadwinner with 40 years of work experience is usually earning his or her highest income.

So, the legislature changed the insurance law by outlawing age rating. Then statistically less healthy Grandpa and Grandma get lower, cross-subsidized insurance premiums, and their much healthier grandchildren pay the bill with higher premiums. Does this sound fair or reasonable? No, it sounds more like Robin Hood in Reverse – forcing the poor(er) to subsidize the rich(er). That’s exactly what Vermont community rating has required since 1992.

Because community rating drives up the price of insurance for young, healthy people, they often choose to decline insurance and take their chances. The individual mandate is designed to take away that choice and make them pay – because their overpriced premiums are needed to pay for their older, sicker grandparents, despite the fact that the older generation is statistically better able to pay those premiums.

A statement on slide 8 says that forcing resisters into the pool will “Spread risk throughout a larger population, enabling lower premiums for everyone.” This is only true in Lake Wobegon, where “every child is above average.” The name of this game is charging undeserved higher premiums on some (young, healthy) people. That emphatically does not “enable lower premiums for everyone” – just everyone else.

It is encouraging that some members of the Working Group balked at a Big Hammer mandate to force the uninsured to buy government prescribed health insurance, or suffer a financial penalty or other affliction.

Whatever Big Hammer is chosen to drive people into buying government-approved insurance, some will necessarily be exempted. The Obama administration, having designed the ACA, proceeded to create fourteen classes of exemptions. Some – incarcerated persons, foreign tourists, persons not liable to the income tax, armed forces, religious objectors, no plans offered in their market – are noncontroversial. The major ACA exemption was “hardship”. That term ended up informally being defined as “not enough money to buy a Bronze Plan even with ACA subsidies.”  If there is to be a mandate, the exemption level should be something like 400% of the FPL, to entrap as few working families as possible.

The ACA explicitly provided that families participating in four recognized Health Sharing Ministries were exempt from the ACA mandate. These voluntary networks of Christian concern do not offer insurance; instead, their participants agree to pay every month their calculated share of the medical expenses of all participants. These ministries are superb examples of a civil society of shared concern, whose members cooperate in meeting their health needs. These organizations ought to be strongly encouraged, and their enrolled participants exempted from any mandate. Blue Cross Blue Shield of Vermont’s disgraceful opposition to their exemption should be ignored.

At its second meeting the Working Group was presented with a completely different proposal for encouraging universal coverage. Their collective mind, focusing on designing The Big Hammer to tax or fine Vermonters into compliance, seemingly could not grasp any alternative method, which is regrettable. One such method, advocated by the Ethan Allen Institute for over twenty years, is this:

Faced with the steep cost of insurance, many people — especially healthy young people — choose to go without. Fine — but if they then incur high medical expenses, they ought to accept the primary responsibility for paying for the services they have received.

Consider this proposal: If an uninsured person incurs medical expenses and leaves an unpaid balance, the provider must try for 90 days to collect. At that point the unpaid balance is posted to an account in the patient’s name, managed for the government by a credit-card company. Each year the account manager reports to the patient his or her balance, on the equivalent of an IRS1099 form. When preparing that year’s taxes, the individual must include a stated fraction of that amount in his or her gross income.

The fraction reported would be graduated according to the patient’s income and the amount of the balance due. For a high-income taxpayer with a low account balance, the amount subject to tax the first year might be 100 percent of the balance. For a taxpayer with minimal income, the balance would carry over undiminished to the following year.

Thus the uninsured patient would be required to pay off the unpaid balance via income-tax payments year after year until it is retired. Whether the account balance would be adjusted upward annually to match the depreciation of the dollar, whether interest would be charged on the average balance, whether the IRS would have a claim on a decedent’s estate for the unpaid balance, and whether such liabilities would survive bankruptcy are questions for policy makers to decide. A further question is how much the government would deduct from the tax payments to cover administrative costs before remitting the remainder to the providers who weren’t paid for their services.

In sum, the proposal says to the person who prefers not to obtain insurance: “Your government will not fine you for failing to buy health insurance. But if you are unlucky enough to run up a big medical bill that you can’t pay from your assets, you will be paying a piece of it off every year at tax time, possibly for the rest of your life. Are you sure you wouldn’t prefer to invest in a high-deductible insurance policy with limited mandates and a cap on out-of-pocket payments, or if you’re uninsurable, buy into a high-risk pool, and make payments from your own tax-free Health Savings Account?”

It will be objected that it might be years — if ever — before an ordinary individual could pay off a large hospital bill through annual income-tax payments. That’s true. But the proposal at least fixes the economic responsibility for paying for services received upon the person benefiting from the services, and it sets up a virtually effort-free mechanism for paying.

To the extent the government returns the tax collections from this provision to the unpaid providers, the proposal will reduce the otherwise unavoidable cost shift to the premiums of insured persons.

This plan is a clear conceptual alternative to the government’s Big Hammer forcing every citizen to buy government-approved insurance. The uninsured patient will be spared an oppressive government mandate to buy coverage. But the patient will know that if he or she suddenly requires expensive medical care, the consequence of having failed to enroll in suitable coverage will be reduced after-tax income. That will emphasize that the unpaid bill remains the patient’s responsibility, not society’s.

No scheme is perfect. If expenses are incurred, somebody has to bear the burden. But by obviating the argument for an illiberal individual mandate, such an income-tax-based recapture plan has a lot to recommend it.

I would have been glad to present this alternative proposal, with its pros and cons, to the Working Group. Alas, fixated on The Big Hammer, they weren’t interested.

To make health insurance more affordable, in a free society, we should:

  • Strongly reinforce the principle that the primary responsibility for maintaining wellness and paying for health services rests with the informed individual and family, not with the government.
  • Spend public dollars to educate citizens – and especially young people – in the consequences of healthy and unhealthy lifestyle choices.
  • Stimulate, support and recognize a wide range of citizen-led initiatives for maintaining health and managing chronic illness, such as Operation Access (North Carolina), health care cooperatives, free clinics, Remote Area Medical clinics, friendly societies, church-based clinics, lodge practice, health sharing ministries, and facilitated networks.
  • End the notorious practice of the State declaring more and more people eligible for free health care, then failing to pay the full costs of that care, thus forcing the providers to shift those costs onto private insurance premiums.
  • Offer the acute care Medicaid population a Healthy Indiana plan, where patients purchase care with their contributions to their own POWER accounts, supplemented with matching Medicaid dollars, with performance incentives and state-provided catastrophic coverage.
  • Repeal Certificate of Need review, a process that strengthens monopoly power and produce higher patient and insurer costs.
  • Repeal age-based community rating that forces young healthy people to cross subsidize premiums for their older, sicker, but richer grandparents.
  • Replace guaranteed issue with a state high risk pool – preferably like Maine’s “invisible” pool –  to pay the exceptional costs of the one percent of the population that is uninsurable
  • Reduce insurance coverage mandates especially for pregnancy, substance abuse, and ill-defined mental health conditions, especially those that consumers don’t want or will likely never use.
  • Install an income tax based recovery requirement for persons who get medical care, are able to pay for it, but won’t.
  • Encourage use of modern health management technology, including remote health monitoring devices.
  • Enact medical malpractice reforms, such as a pre-trial medical review board, creating a patient negligence formulary, and imposing fines for bringing frivolous cases.
  • Scrap the Big Hammer approach of fines, taxes and penalties to drive people into coverage that may not meet their needs.

One final thought: Gov. Scott, taking note of the demographics of Vermont’s future work force, asked the 2017 legislature to fund several relocation enticement programs – “Think Vermont/MOVE” – to attract healthy working age immigrants into the state. Said he, “First, we’ll focus on those most likely to move to Vermont: People who lived here but left, who came here for college, who vacation or do business here, and maybe even those who haven’t been here before, but share our values and want to raise their family in the safest and healthiest state in the country.”

Now, assuming the legislature adopts a Big Hammer to force everyone into minimum essential coverage , let’s add a candid extension to that appeal:

“For those of you who are young and healthy, choose to come here, and want to create your own company or take part in the gig economy, I should remind you that unless you go to work for an employer who offers approved coverage, you will have to purchase government-approved health insurance offering “minimum  essential coverage”.

“The premium rates you’ll pay don’t take into account that you’re young and healthy. In fact, our community rating rule taxes people like you to subsidize the old and sick, even though the older generation is notably wealthier than yours. Why? Because the legislature wanted to subsidize the medical bills of the older and more politically influential generation, and decided to send the bill to you via much higher premiums, instead of to older voters who don’t like high insurance costs or taxes.”

“What happens if you don’t buy the required insurance? Don’t worry – you won’t go to jail. You’ll just be hit with a tax or fine sufficient to make you reconsider your choice not to buy coverage (or your choice to come to Vermont in the first place).”

“Please check our website for prospective immigrants who want to join ‘our socially responsible culture’. It lists the dates and places of our “immigrant mixers”, where you’ll get a block of cheese, a quart of maple syrup, a free ice cream cone, and the price list for health insurance policies you can select from to avoid the annoyance and expense of the penalties provided for dissenters.”

“PS: There are other states with lower taxes, fewer regulations, a warmer climate, lower energy costs, and no insurance purchasing mandate, but they can’t offer our socially responsible culture!”

 

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by John McClaughry

For a century or more politicians and economists and have argued about the relationship, if any, between economic freedom and human wellbeing.  The Fraser Institute, Canada’s leading market-oriented think tank, has just released its 2018 report on Economic Freedom of the World (EFW) to provide hard data to answer this question (fraserinstitute.org/economic-freedom). These reports have been issued annually since 1980.

Fraser’s authors write “The EFW index provides a comprehensive measure of the consistency of a country’s institutions and policies with ‘economic freedom’”. They measure that using 42 data sets for calendar year 2016, mostly drawn from international organizations like the World Bank.

“The index is designed to measure the degree to which the institutions and policies of 162 countries are consistent with economic freedom. … Governments enhance economic freedom when they provide an infrastructure for voluntary exchange, and protect individuals and their property from aggressors using violence, coercion, and fraud to seize things that do not belong to them… The country’s legal institutions must protect the person and property of all individuals from the aggressive acts of others and enforce contracts in an even-handed manner.”

“Access must also be provided to money of sound value. But governments must also refrain from actions that restrict personal choice, interfere with voluntary exchange, and limit entry into markets. Economic freedom is reduced when taxes, government expenditures, and regulations are substituted for personal choice, voluntary exchange, and market coordination.”

The index measures the degree of economic freedom using indicators in five areas: [1] Size of Government (spending, tax rates, transfers and subsidies), [2] Legal System and Property Rights (judicial independence, law enforcement, contracts), [3] Sound Money (inflation rate), [4] Freedom to Trade Internationally (tariffs and other trade barriers), and [5] Regulation of credit, labor, and businesses (market entry, labor participation, licensing). Fraser selected the data sets through an intensive process involving economists from several different countries.

Lest one should conclude that countries with very minimal governments will thus score higher on the index, the authors write “small fiscal size of government is insufficient to ensure economic freedom. The institutions of economic freedom, such as the rule of law and property rights, as well as sound money, trade openness, and sensible regulation, are also required.”

Critics will point out the EFW doesn’t include environmental protection, civil rights, education, health care and “quality of life”. True, but the rejoinder is that increased economic freedom almost certainly correlates with better outcomes on those criteria as well.

And now for the results: The 15 most economically free countries are, in order, Hong Kong, Singapore, New Zealand, Switzerland, Ireland, the US, Georgia, Mauritius, UK, Australia, Canada, Taiwan,  Estonia and Chile. Of our other trading partners, Germany is 20, Japan 41, France 57, Mexico 82, Russia 87, and China 108.

The US ranked well except on size of government, where it came in at 86. Some might also wonder why we rank 3rd in “sound money”, when our central bank’s policy is to allow a dollar’s purchasing power to shrink to 98 cents a year from now, and the country has a $22 trillion national debt, plus three times that much in unfunded obligations. The answer is that banks, businesses and people all over the world prefer the US dollar over other currencies available to them, notwithstanding its annual 2% shrinkage.

The five most economically unfree countries are Syria, Algeria, Argentina, Libya and – far below these four – rapidly collapsing socialist Venezuela. Sadly, four of these five, other than Argentina, have petroleum wealth, and Algeria and Argentina are fairly stable politically. They are poor because their government policies have strangled the efforts of their people to produce wealth.

The authors observe that the United States returned to the top 10 in 2016 after an absence of several years. Our highest ranking occurred in 2000 at the end of the Clinton presidency. “During the 2009–2016 term of President Obama, the US score initially continued to decline as it had under President Bush”. From 2013 to 2016, however, the US ranking increased to its present 6th position.

Here are some other interesting conclusions from the index. Economic freedom is directly linked to higher per capita incomes. The difference in life expectancy between the top quartile and bottom quartile is twenty years. There is more gender equality in economically free countries, and much less poverty, less infant mortality, more political rights, and more civil liberties.

These findings will displease socialists, but it’s hard to avoid the conclusion that more economic freedom, as thus defined, is a powerful propellant for economic and social wellbeing.

John McClaughry is vice president of the Ethan Allen Institute (ethanallen.org)

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October 5, 2018

by Rob Roper

With institutional racism becoming an increasingly discussed topic in Vermont, it is ironic that some of our legislators are again promising to pass a very high state minimum wage of $15/hour. After all the origin of minimum wage laws were rooted in institutionalized racial discrimination.

Early minimum wage laws were adopted specifically to keep black laborers from competing on price – and winning! — with their white counterparts. For example, around the turn of the 20th century, as Dr. Walter Williams points out, “On some railroads — most notably in the South — blacks were 85–90 percent of the firemen, 27 percent of the brakemen, and 12 percent of the switchmen.” The response from unionized, white laborers was to first try to outright legally ban blacks from doing these jobs. When that failed, they settled for the next best thing: a high minimum wage to be applied equally to all. That may sound racially sensitive, but the motivation and the effect were to keep blacks unemployed. The motivations may have  changed today, but the effects have not.

As economist Thomas Sowell, who also happens to be an African American, points out in his book Discrimination and Discrepancies, before the real impact of The Fair Labor Standards Act law kicked in “…there was no significant difference in the unemployment rates of black and white teenagers in 1948, [each being around 10 percent]…. After the effectiveness of the minimum wage law was restored by recurring minimum wage laws in later years, not only did teenage unemployment rates as a whole rise to multiples of what they had been in 1948, black teenage unemployment rates became much higher than the unemployment rate for white teenage males, usually at least twice as high for most years between 1967 on into the 21st century.” A similar story plays out for labor force participation rates.

The reason for this is that in a competitive labor market, employers face a real cost if they discriminate against minority workers: they pay more for labor than their non-discriminating competition. This creates a positive Darwinian dynamic of survival of the least-racist. But, creating an artificially high wage that all employers have to pay has the effect of removing that economic pressure to not discriminate, and actually enables a racially biased employer to let racial considerations drive hiring decisions.

People will (and should) say that hiring minorities for less than whites is a form of discrimination and an injustice in and of itself, and that’s true. But using the minimum wage as tool to solve this problem is counter-productive, exacerbating and perpetuating race-based disparities.

Rob Roper is president of the Ethan Allen Institute.

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September 4, 2018

by Rob Roper

Amazon just announced that it will be implementing a $15 minimum wage for all of its North American employees. Bernie Sanders is crowing that the political pressure he brought to bear on Amazon CEO Jeff Bezos is responsible for this policy change, and in fairness he deserves some credit – or blame, as the case may be.

Here’s the whole story of what’s actually happening with Amazon… Yes, they are adopting a $15 minimum wage, but in order to pay for it the company is eliminating incentive bonuses and employee stock option awards. In other words, the overall compensation package for employees isn’t really changing, it’s merely a rearranging of the deck chairs. It costs Amazon nothing to do this. Employees don’t get any real benefit. But, the company gets the political and branding benefit of virtue-signaling to the world that they are so “woke.”

But there’s injury to add to the above insult. Amazon will (Bezos said they are going to do this) use that political/social capital to lobby congress to mandate a national $15 minimum wage on everybody. Or, strategically speaking, hang an unaffordable financial burden on their small business competition. These little guys are screwed. They’ll either have to raise prices, lose profits, or go out of business. Any and all of these options benefit the mega-company Amazon.

So many Vermonters say they hate the big box stores and national chains and proclaim their love for the mom and pop’s on Main Street, but then the support these high cost regulations that drive small businesses out of business and give the deep pocketed, large corporations a significant competitive edge.

Take your bow, Bernie! You got played.

Rob Roper is president of the Ethan Allen Institute. 

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October 3, 2018

by Rob Roper

Gubernatorial candidate Christine Hallquist and Democratic leaders promised to revive and, if they win the additional seats they need in the house and senate this November, pass the legislation for a $15 minimum that was vetoed by Governor Scott this spring.

In a recent post I pointed out how a $15 minimum wage would cause serious financial pain for senior citizens living on fixed incomes. But a $15 minimum wage would also cause financial problems for families with young children in childcare via a wicked one-two punch.

As we know, childcare in Vermont is extremely expensive and, in some places, hard to find at all. Artificially raising the wages of childcare workers as much as 40 percent will cause that already prohibitive price to skyrocket, making the cost crisis worse. And, in cases where childcare businesses cannot recoup the costs of those higher wages through higher prices, they will go out of business, making the childcare availability situation worse. Even the child advocacy group Let’s Grow Kids warned that the wage increase “might even exacerbate the [childcare] situation…”

That’s the first punch. The second has to do with the “benefits cliff.”

A minimum wage increase is supposed to help the most vulnerable workers, but parents who currently earn minimum or low wage salaries stand to lose more in benefits then they might gain in wage increases under this new law. The Joint Fiscal Office calculated that a couple working full time in minimum wage jobs with one school-aged child would see an annual income increase by $1,155 in the first year of proposed minimum wage increases, but they would lose $1,334 in benefits.

So, the overall impact of the $15 minimum wage on the young parents would be that they will be left with fewer resources to pay for a more expensive service that is at the same time harder to find. “Brilliant!” as the beer ad says.

Rob Roper is president of the Ethan Allen Institute.

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By Rob RoperRob Roper

Following the Janus vs. AFSCME Supreme Court decision that ruled public sector unions can no longer force non-members to pay agency fees, both the unions and Vermont’s teachers have some questions to reflect upon. The big one for teachers is, are my union dues really worth it?

According to statements made to the media by VTNEA spokesperson Darren Allen, the difference between the agency fee charged to non-members by the teachers’ union ($454) and the full union dues ($629) was just $175.  Before Janus, the question potential members had to ask themselves was, if I’m going to be forced to pay $454 anyway is the extra $175 worth it to be a full voting member of the union. Now the question is, is that worth over $600, or am I better off just pocketing all that cash?

The unions, on the other hand, have to figure out ways to refocus their priorities and create real and perceived value for potential members.

Teachers’ unions now operate primarily as political entities focused on influencing elections with a specific partisan bias toward Democrats, which not all of their members necessarily agree with. That didn’t matter when workers of all political stripes were forced to pay up regardless. It matters now.

The union sees its power as coming from the ability to raise money and mobilize people to the polls. As such, the union benefits most by advocating for policies and legislation that expand its membership. More members mean more dues and more voters. But this model isn’t necessarily in the best interest of teachers. In their quest to expand membership, “teachers’” unions have evolved into what would more accurately be described as district employee unions, which incorporate not just teachers, but administrators and other staff. As such, the focus on teachers’ interests are diluted.

For example, most people think that classroom teachers (and, when most people think of “teachers” they think of the people in the classroom) deserve more pay. Anyone who’s spent eight hours trying to get one kid to concentrate on a task that he or she would rather avoid can sympathize with the challenge of getting twenty kids up to speed on how to multiply fractions or diagram a sentence. The ones who are really good at this – the ones we can all look back upon as having changed our lives – are highly valuable members of society and should be so compensated. In Vermont, we spend roughly $20,000 per pupil. Think of that number this way: if there are twenty kids in the classroom we are spending $400,000 a year on that classroom. Where does all that money go? Not the classroom teachers’ salary. Those resources are being used to expand the number of employees outside the classroom.

Over the past few decades, the national trend has seen the number of non-teaching staff in public schools skyrocket, well out of proportion to increases to student population. The number of classroom teachers, on the other hand, has remained steady with student population growth. In Vermont we have the lowest staff to student ratio in the nation at 4-1. Total pending on K-12 has exploded too. This is good for the union – more people equals more dues and more voters – but, it’s not necessarily in the best interest of teachers. Or students, or taxpayers, for that matter.

Teachers (and, again, students and taxpayers) would benefit more from policies that directed resources into the classroom. Unfortunately, this is a low-to-no growth proposition for the unions because there are only so many adults you can put into a classroom and only so many kids to serve. But, you can fill skyscrapers with backroom staff, so that’s the priority. From the union’s perspective, ten low to moderately paid members is better than five highly paid members. Those whose compensation is being held back by this dynamic may disagree.

By putting unions in the position of having to work harder and prove value to their membership, teachers, students and taxpayers will benefit. Unions, if they’re up to the challenge, will benefit too. After all, a membership made up entirely of people who have enthusiastically volunteered to take part in an organization will be stronger than one in which a large proportion of its members were dragged in against their will.

— Rob Roper is president of the Ethan Allen Institute.

 

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September 27, 2018

by John McClaughry

Before long the State Treasurer will receive the 2018 report of the auditors of the state’s two retirement funds – the state employees and teachers – including the Other Post Employment Benefits, mainly health insurance, for retired workers and teachers.

This is going to be a very rude shock for the Treasurer, Governor, and legislature. The Government Accounting Standards Board, called GASB, has toughened the rules for fiscal soundness, and Vermont, and probably almost all other states, will find itself even deeper in liability.

As of a year ago, the two pension funds were $2.2 billion in the hole. The two health care funds are another $2.3 billion in the hole. Together, the state is on the hook for $4.5 billion dollars over the next thirty years. That’s $7,300 for every person in Vermont, and the amount is increasing every year. In fact, it increased by 25 percent over 2016.

The actuary finds that amortizing the unfunded liability in 2019 will require an appropriation of $177 million, up from the $130 million predicted for next year back in 2016. The two pension funds, leaving aside the health care promises, are 65% funded, and 35% not funded.

How will this enormous liability ever be paid off, when we’re getting in deeper every year? That’s the four and a half billion dollar question.

There are ways to tackle this, but they are not popular with politicians who created the problem starting decades ago.

John McClaughry is vice president of the Ethan Allen Institute

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