Cagle World

The United States is in the process of destroying its health care system via lockdown. By ordering that all but emergency medical treatments and procedures cease in the name of preserving health system capacity, we have emptied out hospitals to gird for a wave of COVID patients that never came.

Now hospitals are laying off and furloughing by the tens of thousands – and liberal opportunists see this, somehow, as a market failure that would justify government directly seizing control of the medical system through a Medicare-for-all plan. Liberals look at the virus response in Italy, Spain, France, and the United Kingdom and think – somehow – that’s what we need here. But we don’t have to look to the catastrophic failures of systems abroad as a cautionary tale, because here in America the two biggest failures in our coronavirus response were failures of centralized government control.

The slow start in the American health response was caused by a failed testing rollout, due to incompetent bureaucracy that prohibited private sector testing in favor of a CDC test that didn’t work and was contaminated by live virus. When it did finally work, there were severe capacity constraints – a problem caused not by too little centralized government control, but by too much.

As government loosened its grip and allowed private labs to conduct testing, capacity scaled up dramatically. This is a lesson we could have learned from South Korea’s experience, where their widely praised testing program was developed not by their national health system, but by private companies that were promised fast regulatory approval.

The second major policy failure was a decision that crippled our health system capacity and likely significantly increases deaths from all causes. It was a directive from Medicare – the very program liberals now seek to expand to everyone to the exclusion of all choice and competition.

On March 18, the Centers for Medicare & Medicaid Services (CMS) “announced that all elective surgeries, non-essential medical, surgical, and dental procedures be delayed” during the coronavirus outbreak.

With few if any exceptions, every health system in America implemented the directive, emptying out hospitals and doctors’ offices and crippling health system capacity everywhere the anticipated wave of coronavirus patients failed to materialize. The Mayo Clinic, for instance, is furloughing 30,000 employees.

Emulating the fully government-controlled National Health Service in Great Britain, Medicare made the call that denied cancer patients care they need, ended more transplant surgeries, and sent a panic through the country that caused heart attack and stroke victims to tragically die at home under the mistaken impression that the empty hospitals were too busy to help them.

In the face of this Medicare-caused catastrophe, liberals have floated the new argument that in a fully government-run system, hospitals wouldn’t suffer crippling revenue loss from canceling nearly all of their non-COVID medical services – because they would have direct taxpayer funding.

As if disconnecting revenue from the provision of actual medical care is somehow a virtue, they are taking the lesson that we should look at the catastrophic misallocation of resources by government we are currently seeing and institutionalize it permanently. Not to mention that for the math of the Bernie Sanders plan to even pretend to be realistic, he assumes that all providers would accept current Medicare rates, which are about 40 percent lower than what private insurance pays.

The only solution under Medicare-for-all would be even more massive, economy-crippling tax hikes than have already been proposed, possibly doubling every existing federal tax or more. Most likely we’d end up in the middle – with a smaller health system with less capacity, fewer ICU beds that would leave us less prepared for a future pandemic like Italy, Spain, and France – as well as steeply higher taxes.

Political or bureaucratic allocation of resources can never perform as well as a decentralized system that aggregates the decisions, preferences, and needs of millions of people. Every helpful action by the federal government during the crisis has taken the form of waiving or relaxing regulatory requirements, like telehealth and phone consult restrictions that never should have existed in the first place.

A more free market health system could avoid not just the catastrophic miscalculations like the one we are experiencing with the unnecessary collapse in non-COVID care, but also the everyday distortions caused by Medicare rules and petty federal regulations that tie the hands of doctors and patients. That’s the real policy lesson of the current crisis.

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Copyright 2020 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Phil Kerpen is the president of American Commitment and the Committee to Unleash Prosperity. Kerpen can be reached at [email protected].

Not even a global pandemic can keep us from another battle in the long, bitter, and ever more disconnected from reality net neutrality wars. The FCC just closed yet another comment period in this seemingly never-ending saga, and the usual left-wing groups used it to beat their usual drums.

But as millions of Americans bunker in their homes typing away on laptops, smartphones, and tablets while watching their smart TVs in between their streaming video calls, we should take stock in the marvelous fact that the Internet is holding up just fine while an enormous surge of formerly offline activities move online.

For two glorious years the left achieved their goal of reducing the Internet to a regulated public utility – and nothing they said would happen did. There was no nirvana for users or rebirth of political freedom. There was a deficit of investment and a boom in paperwork and bureaucratic nonsense, and that’s about it.

Then net neutrality was repealed by President Trump’s pick for FCC chairman, Ajit Pai – in the face of a hyperbolic pitched political mobilization exercise in which the media and left wing groups claimed the world would end without the Obama regulations that had existed for all of two years. The hyberbolic mania reached new levels of extremism – up to and including death threats leveled at the young children of members of Congress and Chairman Pai, and a bomb threat called into the FCC on the day of the vote.

Of course nothing the angry net neutrality obsessives alleged would happen came to pass. Instead, we saw an incredible increase in network capacity, speed, and resilience as ISPs felt confident that their network investment would not be divested from them in the fever dream of the Marxist leaders of the net neutrality movement, like Free Press founder Robert McChesney.

It is hard to think of any greater enhancement to public safety, quality of life, and simple sanity during a period of prolonged home confinement than having reliable, fast, high quality network connectivity. The current pro-investment, pro-market policy has produced that outcome.

Europe – which has taken a more heavy handed regulatory approach than the Pai FCC – is having a different experience, with many countries throttling video traffic to prevent networks from breaking down.

Even Tom Wheeler, the former titular FCC chairman who adopted the Obama net neutrality order at the direction of the White House, has been forced to acknowledge the stunning outperformance of U.S. broadband networks compared to Europe. “Credit is due to the nation’s broadband providers. The fact we can work from home is the result of hundreds of billions of investment dollars and construction and operational skill,” he said.

What he didn’t mention is that the Obama order he rubber-stamped was referred to as “the nuclear option” for its devastating negative effects on investment. He praised companies for a success that depended on the reversal of his most significant policy.

Of course, that won’t stop the latest shrieks about the need for government to assert control over ISPs, a tenet of faith on the political left.

The rest of us, who are making do as best we can with the current lockdown situation should live in daily appreciation of the Pai FCC’s commitment to fixing the ideologically motivated, economically ignorant actions of the Obama administration.

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Copyright 2020 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Phil Kerpen is the president of American Commitment and the Committee to Unleash Prosperity. Kerpen can be reached at [email protected].

Price controls don’t work, cause shortages, and have precipitated economic disaster in every sector and jurisdiction that has attempted to impose them on any significant scale. But their braindead simplicity – something is too expensive, so we’ll mandate that it be cheaper – makes them forever seductive to politicians looking for easy political talking points.

So they remain in vogue, from proposals for national rent control to prescription drug “negotiations” in which government sets the price under threat of seizing all profits. It also includes financial services, where Bernie Sanders and Alexandria Ocasio-Cortez have proposed an annualized interest rate cap of 15 percent. Maybe they’re trying to make House Financial Services Chair Maxine Waters, who has proposed a 36 percent cap, appear reasonable.

Either version would have severe negative consequences for the availability of credit to consumers, especially people with lower credit scores that represent higher default risks.

The Waters cap is hardly reasonable. First of all, the headline number of 36 percent is deceptive because the “all-in” calculation includes all fees, making it equivalent to a retail annual rate cap of about 26 percent. An industry analysis found that would price at least 34 million consumers out of the credit card market – and that’s at a time of historically low interest rates. When and if the Fed tightens and the prime rate rises, the cost of capital for lenders will go up and millions more consumers will be priced out of credit cards.

Waters and her bill sponsors, Democrat Chuy Garcia and token Republican Glen Grothman, have justified their bill by saying it extends the 36 percent cap, already imposed by the Military Lending Act to veterans, to all consumers. But the actual results of the MLA should serve as a warning.

According to a Harris Poll: “Military Lending Act (MLA) borrowing restrictions have resulted in a majority of active duty military households being turned down for credit (51% turned down due to the MLA) and these households have higher usage of non-bank credit or debt.”

Of course, if we accept the logic of a federally imposed annualized rate cap, there will be relentless political pressure to ratchet it down over time.

Democratic presidential contender Bernie Sanders is already there. His legislation with AOC would impose a 15 percent annualized cap, which would affect hundreds of millions of credit card customers, some of whom would lose access to credit entirely and most of whom would lose popular rewards programs.

Pre-empting even liberal states like California and Virginia that have strictly regulated but allowed them to operate, the Waters and Sanders bills would effectively ban payday, vehicle title, and other small-dollar loans. These loans are inherently short-term and therefore cannot be priced on an all-in annualized basis, because most default risk is taken as soon as money is out the door. That means people in desperate circumstances will find themselves with no lawful options.

As Nobel prize-winning economist Paul Samuelson famously testified in 1969: “The concern for the consumer and for the less affluent is well taken. But often it has been expressed in a form that has done the consumer more harm than good. For fifty years the Russell Sage Foundation and others have demonstrated that setting too low ceilings on small loan interest rates will result in drying up legitimate funds to the poor who need it most and will send them into the hands of the illegal loan sharks. History is replete with cases where loan sharks have lobbied in legislatures for unrealistic minimum rates, knowing that such meaningless ceilings would permit them to charge much higher rates.”

Sanders tacitly admits that his rate cap could crush private sector consumer lending. His bill welcomes that possibility by authorizing government lending via the U.S. Postal Service. That would put taxpayers ultimately on the hook for substantial losses, because the lending would inherently be at rates that are insufficient to cover default risks.

I give it about one election cycle between when postal lending begins and when Democrats start calling for blanket postal loan forgiveness – at taxpayer expense.

Congress should do the right thing for taxpayers and consumers and reject price controls on consumer credit.

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Copyright 2020 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Phil Kerpen is the president of American Commitment and the Committee to Unleash Prosperity. Kerpen can be reached at [email protected].

President Trump has presided over a booming economy and stock market, and trillion-dollar tech companies are leading the way.

“For 144 days, we set a record stock market. It means 401Ks, it means jobs. Four trillion dollar companies: Apple, Amazon, Google, Microsoft,” President Trump recently explained. “You have MAGA. The trillion dollar club.”

These four companies account for about 16 percent of the total value of the S&P 500. Tack on $600 billion Facebook and the MAGA Five account for more than 18 percent of the index – nearly a fifth of the value of those popular funds in 401(k) accounts the president was referring to.

The two largest MAGA companies – Apple and Microsoft – are each at $1.4 trillion, larger than four entire sectors.

Since Trump was elected, the S&P 500 is up 58.0 percent – but the MAGA Five are up 141.9 percent while the other 495 companies are up only 44.5 percent, according to Strategas Research Partners

While the MAGA companies have powered the Trump boom, they have also come under increasingly withering attack from both ends of the political spectrum. Liberals like Elizabeth Warren and Bernie Sanders have been bashing them as too big and powerful in keeping with their anti-corporate philosophy, while conservatives like Josh Hawley and Ted Cruz have set aside free-market ideology to call for government crackdowns to satisfy conservative base anger at these companies. State attorneys general across the country also see these companies as attractive financial and political targets and have opened antitrust probes.

If these political headwinds result in actions that break up or hobble the MAGA companies, the consequences will be profoundly negative for millions of Americans whose retirements are heavily invested in them via popular index funds – whether they realize it or not.

President Trump’s new MAGA nickname for these companies should lower the volume on the attacks from the right. But the companies also need to do their part to calm the backlash against them from the president’s conservative base, and it doesn’t help when Google does things like fund the hard-left Young Turks channel on YouTube without balancing that with investment in comparable center-right productions.

Facebook seems to understand this best, with a remarkable speech from CEO Mark Zuckerberg defending the value of free speech and standing against an onslaught of calls from the left to censor, block, or “fact check” into oblivion political speech and advertising.

The best possible show of good faith would be for the MAGA companies to drop their longstanding call for public utility regulation of Internet Service Providers – their far smaller potential competitors for advertising business and the providers of the essential physical infrastructure that makes their own core businesses possible. It’s hard to defend companies from big government attacks when those companies are themselves wielding big government as a weapon. A statement that they now recognize it was a mistake to call for government regulation and now support a level playing field approach to issues like net neutrality and privacy for themselves as well as the ISPs would go a long way toward calming skeptics on the right.

The left, on the other hand, is so infused with an anti-business, anti-capitalist impulse that it is unlikely anything these companies do will stop Democratic calls to break them up, shut them down, regulate or nationalize them in the service of silencing conservatives and restoring a mainstream media choke point on political news and advocacy.

That gives President Trump a great opportunity to present voters with a stark contrast this fall: vote for him and keep the MAGA companies strong, the stock market and economy booming, and your 401(k) accounts growing, or vote for Democrats intent on stifling America’s most successful companies.

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Copyright 2020 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Phil Kerpen is the president of American Commitment and the Committee to Unleash Prosperity. Kerpen can be reached at [email protected].

In a mad dash to expand all their favorite “green” cash grabs before the end of the year, House Democrats have published their most bloated smash and grab yet.

They call it the Green Act, but a better name might be the Greed Act. The bill extends wind and solar subsidies – which we’ve been promised for decades would be temporary – for yet another five years. In an effort to gain support from farm states, it revives the biodiesel credit.

Most outrageously, the Green Act cancels the phase-out of the electric vehicle subsidies by tripling the per-manufacturer cap. It also ignores rampant fraud and creates a new subsidy for used electric vehicles, despite the fact the original rationale – dependence on foreign oil – is now completely obsolete.

Because no green cash grab would be compete without lavishing taxpayer dollars on the campus left, the bill includes an eye-popping $5 billion in grants for university “environmental justice” programs. Shameless.

With Nancy Pelosi firmly in control, the Green Act could well pass the House, either by itself or more likely as part of a larger year-end package. So the real fight looks likely to be in the Senate, where Minority Leader Chuck Schumer can be expected to go to the mat for the electric vehicles subsidies, if not the whole package. In fact, he recently proposed an electric-vehicles-subsidies-meets-cash-for-clunkers on steroids concept that would pay to scrap every internal combustion vehicle in the country in the most brazen display of wealth destruction via central planning ever attempted outside of the Communist Bloc. So he can be expected, at a minimum, to push hard for the House language on electric vehicles.

That language would triple the cap on subsidies of 200,000 per manufacturer – which has already been reached by Tesla and GM, who of course have unleashed armies of lobbyists to keep the taxpayer largesse flowing. A token cut in the credit amount from $7,500 to $7,000 would be meaningless, thanks to a new credit of up to $2,500 for used electric vehicles.

This program is an almost pure tax break for the rich, and those rich are well represented by their Democratic representatives and senators. Especially from California, which gets nearly half of all the subsidies dollars, and New York, which ranks second.

The Pacific Research Institute looked at IRS data and found that more than half of the electric car buyers claiming the credit make more than $200,000 per year and nearly 80 percent make more than $100,000. Just 1 percent make $50,000 or less.

Worse, a significant number of the predominantly wealthy people claiming the credit are doing so fraudulently. The Treasury Inspector General found in a new report that 16,510 tax returns claiming “potentially erroneous” electric vehicle tax credits, totaling $73.8 million. The IRS doesn’t check VINs, and it looks like credits have been allowed for ineligible vehicles. It also appears there is a particular problem with leased vehicles, in which the leasing company claims the credit and builds it into the lease payment, but then the lessee claims the credit a second time, effectively doubling the subsidy.

The simplest way to end the fraud would be to let the program phase out as scheduled. But Congress looks at rampant fraud and instead wants to expand the program. Unreal.

Nothing in the Green Act deserves to see the light of day in the Senate, especially the expansion of electric vehicle tax breaks. But if it does, President Trump should make clear that he’ll have his veto pen ready.

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Copyright 2019 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Mr. Kerpen is the president of American Commitment and the author of “Democracy Denied.” Kerpen can be reached at [email protected].

A new Wall Street Journal expose finding that “Google has increasingly re-engineered and interfered with search results to a far greater degree than the company and its executives have acknowledged” is sure to bolster efforts from the company’s opponents to break it up or cripple it with regulations.

There is a through-the-looking-glass quality to the debate for those of us who have spent the last 15 years or so in the Net Neutrality wars.

The same players – including Big Tech companies themselves and their surrogates – who have told us for years that only heavy-handed government neutrality regulations can save us from ISPs manipulating traffic and acting as gatekeepers are now recoiling in horror at the prospect of a neutrality regulation for Big Tech companies that are engaging in precisely such manipulation.

At the same time, many of the people who most strongly opposed Obama’s mangled form of net neutrality are now insistent that we repeat the same big government mistakes to address the behavior of Big Tech.

Senator Ted Cruz brought Section 230 – the provision of U.S. law that provides intermediary liability protection to the tech companies – into the scope of the debate by suggesting that limiting such a government-granted benefit could provide a mechanism for conservatives ideologically suspect of regulation to address the perceived thumb these companies had on the scale for Democratic candidates and their liberal allies.

Senator Josh Hawley pushed this idea to an extreme almost shocking from a Republican – a bill requiring certification of political neutrality by federal bureaucrats to retain 230 protection.

Cruz and Hawley understand something too many professional analysts on the right ignore at their peril – the conservative base is nearing a boiling point in its hatred of Big Tech and sees this as a central front in the culture war, not a venue for economic policy subject to ideological constraints.

How, in this context, can we chart a path forward that can satisfy this base anger without betraying free-market principles?

The answer could lie in FCC Chairman Aji Pai’s brilliant resolution of the net neutrality issue. Not only have none of the predicted negative consequences occurred since Pai’s more free-market version of net neutrality was enacted, but to the contrary data speeds have risen sharply, investment is up, and there have been no notable episodes of discrimination by ISPs.

The heart of the Pai order is a transparency rule, which replaces heavy-handed regulation with market discipline – in effect, if you want to treat traffic in a non-neutral fashion you can, but you have to explain what you’re doing to your customers.

Ironically, the Big Tech companies continue to pursue reimposition of the heavy-handed Obama neutrality regulations on ISPs even as they fend off efforts to similarly regulate themselves or limit their liability protections.

But the success of the Pai order suggests a much more elegant solution: Big Tech should be subject to a transparency rule and, if they do in fact discriminate against certain content, they should explain how to their customers.

Such a rule could require clear disclosure of how traffic is treated, and clear specification of the standards used for limiting speech, including any possible viewpoint discrimination. Platforms that represent themselves to the public as neutral could be subject to civil complaints if they violate those representations.

A transparency rule would avoid the perils of more heavy-handed government regulation, dissipate the distrust toward Big Tech from the left and right, and harmonize the rules for ISPs with the rules for the edge giants they are increasingly competing with in the advertising market.

Crafting a transparency rule for Big Tech is easier said than done, of course. But just as with regulation of ISPs, it could be the least-bad option.

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Copyright 2019 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Mr. Kerpen is the president of American Commitment and the author of “Democracy Denied.” Kerpen can be reached at [email protected].

Wouldn’t it be nice not to wait days for checks to clear and funds to become available? 

Beyond the convenience for individuals, it would be enormously beneficial for the U.S. economy, which lags behind Europe in real-time payments.  For some cash-starved small businesses, funds clearing immediately can make the difference between workers being on the job or sitting at home.

So we should all be pleased that an effective real-time payments system is being developed and deployed in the United States.  About 60 percent of all deposit accounts in the country are already connected to the commercially developed system called The Clearing House (TCH), which expects to cover about 90 percent of all U.S. banks by the end of the year. 

But we should be dismayed that shortly after the Federal Reserve studied the issue and recommended that banks develop a private sector real-time payment system, the Fed announced that it would itself build and deploy a system to compete with the private market.  The regulator will also be a competitor, creating an inherently unfair playing field, and the systems are unlikely to be interoperable.  Smaller banks will likely choose to participate in only one given the fixed costs involved, and that means a balkanized, bifurcated real-time payments system in which the sending and receiving account in many transactions will have to default to older, slower payment methods.

Worse, the Fed’s system, dubbed FedNow but more accurately described by the Wall Street Journal as Chairman Jay Powell’s Public Option, will take at least five years to develop, which will almost certainly slow adoption by banks that choose to wait for the Fed’s system.  That means the benefits of real-time payments will be delayed for years for many businesses and individuals.

Moreover, there is no lack of competition in the private sector that might justify the Fed stepping in as an operator.  While TCH is poised to become widely accepted, it faces intense competition from existing private sector alternatives including Zelle, Mastercard Send, and Visa Direct.

As leading free market economists told the Fed earlier this year: “Generally, central banks and governments should not interfere in the payments market by operating their own services. Over the long term, government competition with the private sector will distort the market, stifle innovation, and ultimately harm services to banks and consumers. “

Nonetheless, the Fed is moving forward with its plan, which is presently open to the public for comment.  Fed Governor Lael Brainard leaned heavily in her August announcement on the fact that 350 commenters supported the proposal, so it might be helpful if thousands of citizens now weighed in against it.

Unfortunately, it is possible that the Fed – perhaps the most powerful and least accountable entity in the entire Federal government – will disregard skeptical public comments.  And unless President Trump and the Senate can agree – after many failures – on new nominees to fill the Fed’s vacant board seats, nothing is likely to change the Feds thinking, which appears to be more about enhancing its own power than realizing the benefits of real-time payments.

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Copyright 2019 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Mr. Kerpen is the president of American Commitment and the author of “Democracy Denied.” Kerpen can be reached at [email protected].

Recent comments by President Trump have thrown some cold water on hopes that he will soon order the IRS to index the capital gains tax, ending the taxation of phantom, inflationary gains.

“I’ve studied indexing for a long time and I think it will be perceived – if I do it – as somewhat elitist. I don’t want to do that,” President Trump recently told a gaggle of reporters at the White House.

Does that mean the president now disagrees with his top economic adviser, Larry Kudlow, who has doggedly pursued capital gains indexing for years?Does it mean advocates of the policy change should move on to something else?

Absolutely not.

The president’s reluctance is directly related to dishonest headlines from the New York Times and elsewhere that frame indexing as a tax cut for the rich.The president is not concerned about the substance of the policy or his legal authority to implement it, but rather the perception – the politics of it.

If there was any doubt that the president is still very much considering this big, beautiful tax cut that Nancy Pelosi can’t stop, he put that to rest with a new trial balloon tweet just a week after his public comments. Trump asked if capital gains indexing is “An idea liked by many?” with a retweet of Steve Forbes linking to an article endorsing the idea written by Senator Ted Cruz and Americans for Tax Reform President Grover Norquist.

President Trump is conducting a live focus group on the issue.He wants to know whether the media frame about “another tax cut for the rich” prevails among his supporters and the general public.

So we need to engage that argument and defeat it.Fortunately the facts are on our side.

IRS data show 26 million tax returns paid capital gains tax in 2016, 80 percent of whom made less than $200,000 and 56 percent made less than $100,000.And that understates how widespread the benefits would be because the majority of American households own long-lived assets like homes, mutual funds, and stocks that they will sell someday, representing years and possibly decades of accumulated value.The year they sell they will be “rich” according to income – but only for that one year.Taxing years or decades of inflation because a family looks rich on paper for that one year is wrong.

As Norquist noted in another recent article, the widespread benefits of indexing would be especially beneficial to Trump’s base: “The present capital gains tax is particularly brutal to older Americans who bought a home, built a small business or invested in the stock market before the hyperinflation of the late 1970s… Those damaged most? Older voters. Rural voters. Midwest voters. Homeowners. Self-employed small-business men and women. A.k.a.: Trump voters in swing states. Inflation is a larger part of the capital gains taxes they pay.”

Democrats are howling at the thought of President Trump bypassing Nancy Pelosi and ending the capital gains inflation tax via executive order – which he has acknowledged he has clear legal authority to do.But Nancy Pelosi voted for capital gains indexing herself in 1992 – as did Maxine Waters, Bernie Sanders, and Chuck Schumer.Was it “for the rich” then?

Schumer even gave a floor speech in support of the idea, saying: “If we really want to increase growth, there are proposals that we can do. I would be for indexing all capital gains.”

The bottom line is that taxing inflationary gains is wrong and economically destructive – and President Trump has the power to fix it.He should not be deterred by disingenuous Democrats or their media allies.

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Copyright 2019 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Mr. Kerpen is the president of American Commitment and the author of “Democracy Denied.” Kerpen can be reached at [email protected].

“The issue is patents,” Nobel-prize winning economist Milton Friedman explained when asked in 2004 why he opposed drug reimportation, the practice of bring back prescription drugs originally manufactured in the U.S. and exported to other countries to sale.

“The issue is a government-granted monopoly and whether that, how extensively the rights that are granted for that purpose extend,” Friedman said. “The real issue is not really reimportation. The real issue in my opinion is the Food and Drug Administration. The FDA in the United States has followed policy, which means that it costs roughly $800 million to bring a single new drug entity to the market.”

That $800 million estimate from Tufts University in 2004 has since climbed to $2.6 billion.

“And the question is where is that $800 million going to come from?” Friedman continued. “The answer we have given is that it’s going to come by giving the producer of the drug a patent, a monopoly privilege to sell that drug, to exclude others from the sale of that drug.And the question is, are you going to enforce that exclusion? The only way in which that $800 million can be raised is by charging very high prices to some people. Now, the question is given that you’re charging those high prices to some people, is it okay to charge low prices to some people? This is a standard case of a monopoly which engages in price discrimination as a way of maximizing its income. It charges high prices where the elasticity of demand is low, it charges low prices where the elasticity of demand is relatively high to the citizens of other countries.”

In other words, the company that invests the exorbitant cost of developing a new drug is incentivized by the prospect of securing a patent that will exclude anyone else from selling the drug in the United States for a period of time.As long as foreign governments set prices above marginal cost, it is in the interest of drug companies to take the additional profit on top of their main business in the U.S. market.And it is their right, as patent holders, to do so.

Friedman used a thought experiment: “Consider the following case: Suppose somebody in Canada simply counterfeits a patented drug. Does free trade require that the US accept importation of that drug? I think the answer’s no, if you’re going to enforce the patent, you have to keep out such counterfeits. Well, fundamentally and from an economic point of view, essentially when drugs that are purchased in the United States under a contract that they will be sold in Canada, or instead shipped to the United States, that’s the same thing. That’s violating the patent law.”

Moreover, the drug companies would almost certainly restrict supply into the Canadian market or cease sales entirely to prevent undermining their pricing power in the American market.Which means a loss of Canadian sales, reduced return on capital overall, and upward, not downward pressure on U.S. prices.And the excess supply in Canada available for the U.S. market would therefore – despite whatever safety protocols are in place – consist largely of counterfeits.

As legal scholar Richard Epstein put it, “reimportation is just a costly way (two shipments, not one) to avoid a price discrimination regime that is legal and proper…Banning parallel imports, alas, does not supply any remedy to the persistent problem of foreign free riding on American innovation, when foreign governments use their sovereign power to limit price freedom in their own countries.”

It’s still true.

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Copyright 2019 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Mr. Kerpen is the president of American Commitment and the author of “Democracy Denied.” Kerpen can be reached at [email protected].

Puerto Rico is rebuilding its electrical grid, which was severely damaged by Hurricane Maria.This process includes converting antiquated oil-burning power plants to natural gas, which will result in enormous savings in fuel costs and significant environmental benefits.

With American energy production booming thanks to President Trump’s American energy dominance agenda, Puerto Rico should soon be in a position to use American natural gas – but that win-win outcome will require the president to grant Puerto Rico’s request for a waiver from a World War I era law called the Jones Act.

The Jones Act requires movement of goods by water between points in the United States only by means of vessels that are U.S.-built, U.S.-owned and U.S.-crewed.There are no such vessels capable of transporting LNG in bulk from U.S. sources to Puerto Rico.So, without a waiver, Puerto Rico will have to buy the natural gas to run its power plants from more expensive foreign sources, reducing the economic benefits for ratepayers and enriching foreign rather than American producers.It makes no sense.

Liquefied natural gas (LNG) exports from the United States are booming, and, in 2017, after 60 years of being a net importer of natural gas, we became a net exporter.Ships are leaving American ports loaded with LNG for countries all over the planet, but they cannot deliver to Puerto Rico, specifically because it is part of the United States.The 1920 Jones Act restricts the transportation of cargo between two American ports to ships that are U.S.-built, U.S.-crewed, U.S.-owned, and U.S. flagged.However, as the government of Puerto Rico noted in its waiver request: “of the 478 LNG carriers that currently exist in the world, none are Jones Act eligible.”Thus, without a waiver, Puerto Rico simply cannot transport American LNG to Puerto Rico.

It is unlikely that an American company will build a Jones Act eligible LNG carrier.As Cato Institute analyst Colin Grabow has noted, the economics simply are not there because building an LNG carrier in a U.S. shipyard would cost triple what it costs to build in other jurisdictions, such as South Korea.The Government Accountability Office found that, because no LNG carrier has been built in the U.S. since 1980, a U.S. shipyard undertaking such a project would have to bring in foreign labor, specifically “250 to 300 skilled Korean workers for the duration of the build time to ensure the work is done correctly.”

In the absence of a waiver, natural gas exports to foreign markets will keep booming, but Puerto Rico, an American territory, will be left out and forced to buy more expensive LNG from Trinidad and Tobago and possibly Russia.Puerto Rico would have to pay around $100 million per year more for the privilege of purchasing foreign natural gas.

The opposition to granting this limited waiver to the Jones Act is being advanced by members of Congress who represent shipbuilding interests.Shipbuilders have long feared that any crack in the Jones Act will lead to its eventual repeal and force them to compete directly with lower-cost foreign competitors.Such an argument rings hollow given that there are no American shipbuilders constructing oceangoing LNG carriers, nor have any expressed any intent to do so.

Moreover, the limited waiver Puerto Rico has requested would expire immediately should adequate Jones Act-eligible oceangoing LNG carrier capacity come on line.

President Trump’s American energy dominance agenda is succeeding beyond even what he promised on the campaign trail, with American becoming a powerhouse exporter of oil and natural gas.Puerto Rico does not deserve to be left out and forced to buy foreign LNG.President Trump should therefore approve a limited waiver of the Jones Act and let Puerto Rico enjoy the benefits of clean, abundant, affordable American energy.

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Copyright 2019 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate.

Mr. Kerpen is the president of American Commitment and the author of “Democracy Denied.” Kerpen can be reached at [email protected].