Economist John Cochrane’s piece in the Wall Street Journal (5/4/16) was terrific, an admirable presentation of the reasons why economic growth is nearly extinct in America, as it now is in most of the rest of the world.  (Not counting China, which first needs to pick off the rest of the low-hanging fruit before achieving the capitalistic dead zone.)  But Cochrane’s prescription for growth is becoming the dodo bird of economic thought.  Even if we elect the Republicans’ presumptive nominee, even if the Republicans somehow maintain control of Congress, there will be few remaining politicians or academics  who could put together a cogent and coherent argument in support of the conservative (i.e., what used to be called libertarian or Hayekian) principles of economic growth.  As a practical matter, the term “economic growth” may already be obsolete.

Trying to analyze the Trumpian victory, aka the Rubio/Kasich/Cruz self-immolation, one is struck by the thought that the Republicans had no candidate who was capable of explaining free-market economics to the general public.  One would like to think that Rubio gets it, and Cruz seems to arrive at it backwards (via his trademark “minimalist government” approach), but it is plain that Kasich thinks of growth only as the reward for good central-planning. Trump, alas, seems ignorant on the topic; his only useful contribution is his advocacy of tax cuts.  But even Cruz and Rubio at their best were never able to show anything remotely comparable to Reagan’s crude-but-sophisticated mastery of the Hayek /Friedman principles.  If our best politicians are all either in permanent denial (both the Democrats) or blissful ignorance (Trump and the other Republicans) of those principles, what chance does free-market capitalism have?

The Cochrane essay is an unexceptionable, good-faith effort to set forth free-market economics for the masses, but does the country really get it?  We didn’t get it when we had it (JFK, Reagan, even Bill Clinton on a good day), and we certainly don’t get it after Obama’s 7-year tutorial in how leftism can wreck a major economy.

One hears that the Republican Party is going to be shaken up, even dismantled, but the more likely outcome is that both our major parties will survive, that the surviving versions of the parties will have re-defined the “center” on matters of economics, and that the new center will be so far to the left of Hayek and Friedman that we will have little left to quibble about other than the optimal deployment of the government’s unlimited powers of taxation and regulation.  The Reagan movement has died, R.I.P.  We have entered the Populist era.  Probably to be followed by the authoritarian era, something like an Iron Age with smartphones.



Well, we finally have Donald Trump’s long-awaited plan for dealing with Obamacare, and it is, as the pundits and the children might say, pretty much a nothingburger.

The plan was announced on the candidate’s website a few days ago:

The plan is long on promised outcomes (the country will be a better place, etc.) and short on the proposed steps for achieving those outcomes. The specifics are these seven proposals:
• Repeal Obamacare. OK, fine, a good start.
• Modify existing law that inhibits the sale of health insurance across state lines. Also OK, though one would have preferred “eliminate” rather than “modify,” which is vague.
• Allow individuals to fully deduct health insurance premium payments from their tax returns. OK, very good.
• Allow individuals to use Health Savings Accounts. OK, a good idea, but not enough. Seniors should able to use the federal funds that are used under present law to fund Medicare, to be deposited into HSAs and used to pay their medical bills directly, which would be essential in restoring free-market shopping and pricing for healthcare for seniors.
• Require price transparency from all healthcare providers, to allow individuals to shop for the best prices. OK, a good idea, but futile if the prices for healthcare are still being set by the government, via its regulation of healthcare insurance and Medicare. Until you break up that model, and destroy the system whereby the government controls healthcare-pricing by controlling healthcare insurance and Medicare, price-transparency is of little value. Shop all you want, you would still have to go where the insurance carrier or Medicare permits, and you would still pay whatever they dictate.
• Block-grant Medicaid to the states. OK, a good idea.
• Remove barriers to entry into free markets for drug providers. OK, another good idea, though vague and, like the rest of the program, not directed to the heart of the healthcare problem.

So, there you have it. A proposal that contains several items that sound good/feel good but do not seriously tackle the essential problems of the U.S. healthcare and healthcare-insurance system. Worse, it is a proposal that implies that everything about Obamacare that is not addressed in the proposal, is to be retained in Trumpcare. Here is a summary of the more-important things that Mr. Trump does not address:
• Tort reform. A surprise that he does mention it, as most commentators (other than the tort lawyers) consider it to be one of the biggest contributors to runaway healthcare expenses in the U.S. Is there a reason why Mr. Trump has failed to take on the tort bar?
• Health savings accounts – great idea, but is there a reason why Mr. Trump does not make such accounts available to seniors on Medicare, who could use them to buy healthcare directly instead of having to obtain their healthcare through Medicare? This is very important, because seniors are the biggest healthcare users of all.
• Pre-existing conditions – is there a reason why Mr. Trump has failed to address this topic, thereby implying that he will do nothing to address it? He must know that a great many people are choosing to stay out of Obamacare until they have a major medical problem, and then jumping in on an emergency basis. This issue, a huge problem, could be solved, simply by subsidizing those who already have PECs (grandfathering them), but for everyone else, making it very costly to defer the purchase of insurance until they are hit by a major illness or injury. Sounds like Mr. Trump is playing to the crowd, dodging a much-needed reform.
• The big one: healthcare pricing and insurance pricing, the two topics that should be the essence of any serious reform plan and that are the essence of the program presented by House Speaker Paul Ryan and generally endorsed within the Republican Party. This topic is so crucial, it requires a fuller explanation.

The primary problem with U.S. healthcare and with healthcare insurance programs (including Medicare) is that they do not operate in a free market where patient and provider can negotiate the prices of healthcare services (doctors’ bills, hospital bills, bills for lab tests, etc.). Instead, they operate in a system where the government replaces the market. The government determines which providers can be used and what prices can be charged for their services – for all practical purposes, it is a “single payer” system that eliminates the free-market element and is tightly controlled by the government. You sense that you are paying too much – as is always the case with price-fixing – but, by how much?

The second major problem with the U.S. healthcare and healthcare-insurance programs is that they are burdened with a maze of regulatory controls that obscure the real costs of healthcare. The critical feature of the system is that it embodies an almost infinite number of hidden, built-in subsidies and cross-subsidies for various favored categories (most prominently, for those in financial need). There is no way for you to have any idea of how much of your medical bill, or your health insurance policy, represents a payment to support social policies rather than a payment for health care and risk-based insurance, because the subsidies are baked into the ultimate pricing and never disclosed. You sense that you are paying too much, but you have no idea how much of the cost is subsidies.

The conservative/Ryan approach, unlike the Trump approach, confronts and solves these problems. The Ryan approach un-bundles the healthcare and insurance factor from the subsidization factor, exposes the healthcare and insurance factor to a freed-up market, and then separately provides governmental subsidies or vouchers directly to those who need it (“premium support”). Healthcare insurance reverts to being true insurance, based solely upon actuarially-based calculations of risk. Without these types of reform, there is no basis for hope that healthcare and insurance costs will ever be reduced.

It would have been helpful had Trumpcare also addressed some of the other problems in the current system that are addressed and solved by the Ryan approach, such as the imbalances and cross-subsidies that occur within group insurance policies, which should have no role in a system in which healthcare insurance is truly based upon actuarial calculations of risk and embodies no subsidies or cross-subsidies.

In sum, the Trump proposal contains a few feel-good features and promises and appears to address the common criticism that Mr. Trump tends to provide few specifics on his plans, but in fact, the proposal is not likely to have any substantial effect upon the runaway costs of healthcare and insurance. Is Trumpcare better than Obamacare? Well, yes, but only a little. It is a band-aid, not a cure.


For the many Republicans who feel betrayed by the Chief Justice’s opinions on ObamaCare and many other touchstone cases, whose impression is that Roberts is not the “conservative” they expected him to be, the article by Adam J. White in the November 11, 2015 issue of The Weekly Standard should be an eye-opener. See:

It is now commonplace, and not just among talk-radio hosts who style themselves conservatives, to hear Justice Roberts’s opinions critiqued on the basis of whether conservatives benefit from the outcomes of his decisions. It is almost as commonplace, among analysts who view themselves as being above the fray, to tackle the Roberts oeuvre by determining whether he generally adheres to the “original meaning” or “original intent” theories of statutory or constitutional interpretation. The salient feature of the White article is that it shows the failure of each of those approaches to identify the inner Roberts.

White’s point is that Roberts’s point is that there is no particular mode of statutory or constitutional interpretation that is necessarily the best. Yes, it should be obvious that the approach of picking winners and losers on the basis of identifying the more attractive or deserving winner (the Sotomayor method) is, in the end, a loser’s game. A bit more complex, and less-easily dismissed, are the two approaches currently in vogue: the “living document” approach that is generally favored by the political left, and the “original meaning” and “original intent” approaches generally favored by the political right. White’s view is that Justice Roberts makes a conscious effort to favor none of these approaches, and as a result he disappoints or confuses just about everyone.

White’s insight is that the essence of Robertsism is Separation Of Powers. The Chief Justice is a constitutionalist, but primarily in the sense that he believes the Court’s mission is to police and enforce the constitutional allocation of powers among the three branches of American government. Roberts hates it when Congress delegates too much discretion to federal agencies, by adopting laws that are too vague, too incomplete, and that thereby invest the executive branch with too much leeway to adopt regulations that go far beyond the apparent intention and scope of the law or even conflict with it – as in the notorious case of the ObamaCare statute. He is likewise offended when the President issues executive orders that represent de facto legislation and effectively by-pass Congress. He was willing to twist himself into a pretzel in order to find a way to interpret the ObamaCare statute as being constitutional, because he respects the authority of Congress – even though he might have been appalled, as a citizen, by ObamaCare. In White’s view, Roberts is not political; in his role as judge, he does not allow himself to prefer one outcome over another and he does not prefer less regulation to more regulation. He is neither a federalist nor a cheerleader for states’ rights. He reserves his cheers for democracy and is opposed to efforts to undermine the authority or the actions of Congress.

The Roberts approach carries risk. The risk in it, if not the fatal flaw, is exposed by the Obamacare fiasco, the possibility of a law that was only passed because the administration drafted it so cleverly as to mask its real intent – the very intent that Roberts professed to have discovered. In other words, the Roberts approach allows abuse, perhaps encourages it: if a White House can blow by Congress a law that is intended to mean (and can be laboriously re-written by the Supremes to mean) something quite different from what it appears to mean, the separation of powers will have been subverted, the will of the people ignored. Exactly the opposite of what Justice Roberts claims to seek.

From this observer’s conservative perspective, Roberts is the ideal Chief Justice of the United States. He carries no agenda, follows no particular school of statutory or constitutional interpretation, and does what he can to see that Congress, and only Congress, gets to make our laws. He is willing to consider original meaning, original intent, contemporary perspectives, history, and precedent. His mind is truly open, and he is indeed the “umpire” he set out to be, not a player. Would that we always had nine such justices.


“The size and complexity of the U.S. tax code also grew dramatically in recent decades. As of 2011, it takes 70,000 pages of instructions to explain the federal tax code (McCaherty, 2014). The code has about four million words and 67,000 sections, subsections and cross-references. It’s all crystal clear if you read the instructions.” Those are excerpts from a speech delivered recently by Prof. Steven J. Davis of the U. of Chicago and Hoover Institute. What does the professor suggest? “1. Keep the regulatory system clear, simple, and easy to administer, and then live with it. 2. Keep the tax system as simple as possible. 3. Make economic policies predictable.” I think the professor has identified the problem but not solved it.

The Common Law system, as established and developed in England, used to be taught in our law schools as one of the two primary forms of legal system, the other being the Civil Code system, which evolved from Roman civil law and Christian canon law and, centuries later, got traction in France, Spain, and elsewhere outside the British Empire. The two systems took different paths of development:

  • The Common Law system tried to stick to root documents (the Magna Carta, the U.S. Constitution) and to perceived societal norms and ethics, as interpreted and applied over time by the judiciary, and it did not pursue solutions to anything other than the particular case or controversy at hand. The English and the Americans felt that no one could anticipate every possible conflict or dispute that might arise in the course of human events.
  • The Civil Code system was rules, rules, and more rules, an attempt to anticipate and plan for everything. For all practical purposes, central planning and the Civil Code system are synonymous. Unlike the Common Law system, which was developed by the judiciary, the Civil Code system was developed by the legislature (or by the monarch, emperor, or Pope or other head of state or religion). For a fuller presentation on this topic, see:

The Civil Code system is based upon the conceit that smart, high-minded people can anticipate all possible problems and disputes and can write specific rules and regulations that will appropriately address and resolve them. The American Founding Fathers, like the English and their other colonies, did not share that conceit.

The Common Law system is compatible with free markets and minimal regulation of individual and corporate behavior. The Civil Code system is more compatible with a highly-regulated, centrally-planned economy and civil society. Rome presented the original Civil Code system. As was well-understood by the Romans (and by Gibbon), most “barbarians” regarded a surrender to Rome as a forfeiture of a large share of their individual liberties, a deal accepted by those who felt the material benefits of the Roman umbrella seemed more attractive than a free life in a less-developed territory outside the boundaries of the empire.  That type of trade-off is still operative, two millennia later.

It is no coincidence that the last nations that still emphasize individual and market freedoms are those that adopted a Common Law legal system, while the countries that impose more economic or social limitations can be fairly described as Civil Code countries – whether nominally capitalistic (e.g., China, Russia) or unremittingly controlling and repressive (e.g., North Korea, Iran), and whether labeled democratic, leftist, socialist, communist, or fascist. All authoritarian regimes, regardless of style or label, are essentially centrally-planned, Civil Code regimes. Authoritarians issue rules, they do not wait for judicial verdicts. Cynics have explained the phenomenon by pointing out that it is simpler to corrupt a politician than to corrupt a judge, and that regulations, which spell out the winners and losers in specific situations rather than following root principles, are often purchased by special interests. In all events, the central-planning, Civil Code model invites corruption.

As Hayek showed, the regulatory reach of central planning can only expand, never contract, as its proponents believe that the solution to every problem that is not solved by existing rules is to adopt more rules. The more advanced the establishment of the planning model, the more difficult and unlikely the un-winding.

America’s transition to a regulatory state has not been a matter of party politics, though it is generally identified with the Democratic Party. The Tax Reform Act of 1986, which briefly moved us back in the direction of the de-regulated, Common-Law model, was a bi-partisan law under which we switched to a nearly-flat tax and eliminated many special-interest deductions, credits, and other expressions of crony capitalism and social engineering. But it was a Republican President, George H. W. Bush, who initiated the dismantling of the TRA, and though the coup de grace was delivered by the Clinton administration, Republicans have shown themselves to be almost as addicted to over-regulation as Democrats. With the exception of the TRA, the country has been engaged since 1933 in an uninterrupted transformation into a Civil Code nation, and the process cannot be blamed solely upon the Obama regime. Long before 2009, the Internal Revenue Code and the Code of Federal Regulations were unworkable, virtually unintelligible exercises in central planning.

For all practical purposes, America is no longer a Common Law nation. It is simplistic and unrealistic for Americans to complain about excessive, complex, unclear, or unwise regulations. Short of a willful reversion to the Common Law system, we are never going to put the central- planning genie back into the bottle. You cannot just say, Let’s have better regulations. You cannot end the regulatory state by advocating smarter regulations (as does Cass Sunstein, President Obama’s former “Regulatory Czar”),  or by advocating clearer, simpler, and easier-to-administer regulations (as does Prof. Davis) . Not going to happen. Once you start playing on Prof. Sunstein’s home field, you have already lost the game.


If you have not yet figured out that “net neutrality” is textbook propaganda through the re-definition of words, you need to get up to speed in a hurry.  (Recommended source:  everything on the topic written by L. Gordon Crovitz for the Wall Street Journal over the latest few years – e.g., “What a Tangled Web Obama Weaves” in today’s (11/17/14) edition.)   Propaganda, remember, is the use of facts or ideas, often false or exaggerated, to advance a political cause. The fundamental falsehood of “net neutrality” is that it is neutral, or fair.  On the contrary, what “net neut” does is to put the Internet at the mercy of the rankest form of governmental control and manipulation – including the picking of winners and losers – and thus to ensure that the financial outcomes of the provision of internet service are different from the outcomes that would ensue from the application of the market forces of supply and demand.   Friedman and Hayek would be appalled, and you should be, too.

The essence of the implementation of Net Neut would be for the FCC to reclassify the Internet, to make it a utility under Title II of the Communications Act of 1934,  a classification that, when applied to AT&T a long time ago, eventually necessitated its breakup in the 1980s because it had become a bloated, inefficient obstacle to the development of technological advancement in telecommunications services.   Under Title II, the feds would be given authority to approve, prioritize, and set “just and reasonable” prices for broadband.   In other words, this is governmental price-fixing, just as with AT&T, just as in the infamous Nixon Price Controls catastrophe that caused the shortages and gas-station riots of the early 1970s.    For that matter, just as in Russia and China and every other planned,  statist economy in the world.  Not only that, the switch, as Crovitz points out, would trigger a hidden tax of 16.1% of interstate revenues from the provision of internet service.  Key providers of enormous amounts of Internet service (e.g., Netflix and YouTube, which utilize more than 50% of all US Internet service during peak hours), would be barred from “paid prioritization” (paying extra fees for getting faster lanes for internet usage), which could radically affect their financial models.  Yes, Netflix is not necessarily an innocent victim here, but don’t get drawn into the elaborate cat fights as government regulation turns everyone into a rent-seeker who does not have “clean hands” in the debate; each of the Net Neut proponents, and each more- or less- co-opted supporter, appears confident that it can construct a Rube Goldberg contraption that works better than free markets.  This is a shell game, and each player seems confident that the public (Jonathan Gruber’s “too stupid” public) cannot keep track of the pea.

There would be exceptions and gradations, as the micromanagement model came to fruition in the context of our modern-day mix of crony capitalism and corruption, but that only fills in the picture of how a socialistic, planned economy really operates.  The principal business of business becomes the evasion/avoidance of governmental regulation, rather than old-fashioned increases in productivity, revenues, and profits. Already there are numerous precedents, as Net Neut – as has already been observed by many – is to information-technology and telecommunications what ObamaCare is to healthcare:  the nationalization of an entire industry.  See also what is being . done in banking and finance.

This is way more serious than most people think.  In particular, all of this seems to come as a surprise to a surprisingly large number of techies and other people who earn their livelihood from developing or working with Internet-based resources – especially if they are young lefties, clueless when it comes to matters involving free markets and other freedoms they so ignorantly and ungratefully exploit in modern America.