Grassroot Perspective – June 27, 2003-A Philanthropist Goes to Washington; Saturday: Merton College (founded in 1264) at Oxford University in England; The Importance of Intellectual Property Rights; The Good Economy Versus Welfare Reform: Who Gets the Credit?

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”Shoots (News, Views and Quotes)”


– A Philanthropist Goes to Washington

By James L. Payne

In philanthropy, as in other human undertakings, there are degrees of
performance, from inspired to disappointing. Because the very act of
generosity merits some credit, we are reluctant to give an entirely
negative rating to any donor, but sometimes a philanthropist comes
along who tests our forbearance. A case in point is Ruth Lilly, heiress
to the Eli Lilly pharmaceutical fortune, who announced last December a
gift of $120 million to support the arts.

If you had $120 million and wanted to assist the arts, how would you do
it? Well, you could simply identify 12,000 artists and give each
$10,000. Or you could give the money directly to art museums, art
schools, orchestras, and so on. Unfortunately, Ruth Lilly and her
lawyers had a different idea. She donated the entire $120 million to an
organization called Americans for the Arts, a pressure group that
lobbies for taxpayer funding of the arts. Its main effort is a yearly
campaign to persuade Congress to pass higher appropriations for the
federal National Endowment for the Arts (NEA). From its plush offices
on Vermont Avenue and K Street, in Washington, D.C., Americans for the
Arts organizes teams of lobbyists and celebrities who, the Washington
Post reports, “fan out across Capitol Hill, calling on members of
Congress and other key officials.”

In other words, instead of buying art, Ruth Lilly has chosen to buy
votes-which she hopes will translate into art. She’s not alone in this
approach. Over the years, a number of donors and foundations have
targeted their giving not at helping people and solving problems, but
at getting government to help people and solve problems. One
philanthropist in this mold was Albert Lasker, who in the 1940s was
interested in cancer research. Instead of directly supporting such
research, Lasker gave his millions to the American Cancer Society to
support its lobbying for tax funding of cancer research.

What’s wrong with this politically oriented philanthropy? To begin
with, there’s an ethical problem. Government does not have any wealth
of its own. Its subsidy programs simply transfer it. They take money
away from Americans who were going to spend it on worthy causes of
their own choosing-food, housing, travel, business investment,
education, charity-and transfer it to the beneficiaries of the subsidy
program. Hence what Ruth Lilly is trying to buy with her purchase of
lobbying services is an enhancement of the system of robbing Peter to
pay Paul the art administrator. Since the biggest taxpayers are wealthy
individuals, the Peters being robbed are, to a large extent, her fellow
philanthropists who are thus prevented from spending their money on
their chosen causes. Even if the lobbying works, this is not a
high-minded, creative approach.

The second problem with Lilly’s lobbying approach is waste. Government
subsidy systems have huge overhead costs. These include not only the
costs of running the IRS but also a much larger burden placed on the
economy in the form of tax-compliance costs and disincentives to
production. By a conservative estimate, these costs amount to 65 cents
for every tax dollar collected. In addition, there is the overhead and
waste in the government agencies that disburse the funds. For example,
the NEA spends only about half its appropriations in actual grants to
artists and art projects. The rest is eaten up in administrative
overhead, transfers to other agencies, and public-relations campaigns.

Overhead Costs

So let’s step back and see just what is happening to Ruth Lilly’s gift
to Americans for the Arts. After raking off a share for its own
overhead costs, Americans for the Arts then tries to “buy” the votes of
enough congressmen to increase the appropriations of the NEA. There are
two possible outcomes. One is that the lobbying campaign succeeds, that
it results-let’s be optimistic-in a $10 million increase in the NEA
budget (now $105 million). This will mean that Ruth Lilly has made
Americans about $16.5 million poorer (the figure includes the
tax-system waste factor) in order to direct about $5 million to art (the figure includes the bureaucracy waste factor). So under this optimistic scenario, Ruth Lilly will have purchased something like 4 percent of the arts support she could have had simply by spending her $120 million directly on the

The other possibility is that the lobbying campaign is unsuccessful.
Perhaps higher appropriations for the NEA are blocked by a budget
crunch, or changing political winds. In this scenario, then, Ruth Lilly
has completely wasted her $120 million. Instead of the 12,000 artists
who could have been supported with that money, all that remains are
wistful memories of celebrity visits to congressional offices.

James Payne is the author of The Culture of Spending: Why Congress
Spends Beyond Our Means and Costly Returns: The Burdens of the U.S. Tax
System (ICS Press).

Above article is quoted from Foundation for Economic Education, Ideas
on Liberty May 2003

– Saturday: Merton College (founded in 1264) at Oxford University in

A Galen Institute Report by Grace-Marie Turner

Dr. Liam Fox, a Member of Parliament and health secretary in the Shadow
Cabinet, hosted a conference organized by his new organization, The
Atlantic Bridge, to exchange ideas about advancing market-based health

During his talk, Dr. Fox gave chilling examples of ways in which the
care of patients can be subordinated in Britain’s socialized National
Health Service (NHS) to meet the political target du jour.

The latest dictate to hospital administrators: Reduce the waiting time
for patients in emergency rooms.

Some of the clever bureaucratic solutions: Drive patients around in
ambulances or park the ambulances outside hospitals for hours until
they can be seen. If there aren’t enough ambulances, leave patients on
gurneys in the hallways but take the wheels off the gurneys. Why?
Because if it doesn’t have wheels, it is, according to the rules, a
hospital “bed.” Voila! The waiting time vanishes from the records.

The UK has decided to increase its national expenditures on the NHS by
about 3%, but so far virtually all of the new spending has gone to
increased bureaucracy and almost none to patient care, Fox said.
Surprise, surprise.

Despite this, it is extraordinarily difficult to talk with average
British citizens about markets that have incentives to respond to
consumer demands, and the importance of competitive pricing and
intellectual property rights to induce innovation. The NHS is as
beloved as Medicare in the US but even more decrepit. Dr. Fox and The
Atlantic Bridge are courageously working to change their system and
deserve great respect.

I stressed in my presentation that continued innovation in health care
financing and medical advancements is the only answer to the health
sector woes in our two countries. These changes can engage consumers in
making value-based decisions and encourage ever better medical
technologies that diagnose and treat disease earlier and less
invasively to keep people healthier longer. Here’s a link to my
PowerPoint presentation.

Monday: Back in Washington for our briefing on Capitol Hill with the
Council for Affordable Health Insurance focusing on tax credits as tax
cuts for the uninsured.

Mark Pauly gave a brilliant presentation to our well-attended lunch
briefing, making a convincing case that a tax credit for health
insurance should be seen not as a public spending program but as a tax
cut with the condition that people purchase health coverage.

He described a plan for a scaled, flat tax credit of $1,000 for
individuals and up to $3,000 for families earning up to 300 percent of
poverty. He estimates this would cover 70 percent or more of the uninsured for
a total tax reduction of $48 — $60 billion a year, offset by $10
billion in uncompensated care.

This cost is, BTW, significantly less than the plans offered by the
Democratic presidential candidates so far, with a very similar
reduction in the number of uninsured. Here’s a link to Mark’s
PowerPoint presentation.

Jeff Lemieux of the Progressive Policy Institute backed Mark’s plan,
and Joel White of the House Ways and Means Health Subcommittee staff
endorsed using the $50 billion earmarked in the congressional budget
for tax credits, targeting the unemployed.

Wednesday: New York. Lady Thatcher was the guest of the Atlantic Bridge
(a busy organization!) for a fund raising reception in Manhattan, and
the Iron Lady was as steadfast and passionate as ever in making the
case for individual liberty, private property rights, low taxation, and
limited government.

Her talk was very inspiring for anyone who might be feeling discouraged
about the difficulty of making progress on free-market ideas. We only
need to remember the extraordinary political and economic battles she
fought for 11 years as Prime Minister. “Never waver in your
confidence,” she implored.

Largely as a result of her victories, the British economy today has
greater strength than its European neighbors with lower unemployment
rates and stronger economic growth.

She talked of the wellspring of ideas that she and President Reagan
shared to guide their vision, and said that both countries will be
stronger by continuing to draw energy from each other to advance
individual freedom – a key mission of The Atlantic Bridge.

Lady Thatcher said she felt very much at home in the reception hall at
the beautifully restored St. Regis Hotel which, she said, looked just
like Ten Downing Street. My husband, Douglas, and I actually had a
short talk with her in which she stressed the importance of the rule of

Thursday and Friday: Princeton. I’m here for a conference on regional
disparities in US health spending. Dartmouth researchers presented
eye-opening data on the greater utilization of medical care for
Medicare patients in high-spending regions, with some indications that
quality and outcomes are worse! We’ll be hearing much more about this.

Above article is quoted from Galen Institute, Health Policy Matters

”Roots (Food for Thought)”

– The Importance of Intellectual Property Rights

By Bartlett Cleland

Published: The Heartland Institute 04/01/2003

How many movie studios would be willing to spend multiple-millions of
dollars on a blockbuster film if other studios could copy it upon
release and send it to the video rental stores under their own label?

Would J.K. Rowling even try to write another Harry Potter novel if
other publishers could print their own edition of the book, perhaps in
paperback, and sell it for a lot less money, in part because they
wouldn’t pay the author any royalties?

Intellectual property — something that is a creative work, created in
the mind of someone or a group of people — is still property.

People whose homes have been broken into, their possessions stolen,
feel violated; people whose intellectual property has been stolen feel
no less violated.

The technologies of today make it increasingly easier to transfer
intellectual property from one person to another. The Information Age
and the New Economy are forcing us to rethink property rights. What
kinds of “things” do people have a right to call their property? To
what kind of compensation are they entitled if someone takes that
property? These questions are not easily answered.

This country has a long history of recognizing intellectual property.
Patent protections, for example, were among the first laws enacted by
the First Congress in 1790. The Constitution authorizes patent
protection as a way to “promote the progress of science and useful
arts.” The Founders understood patent protection provides the
incentives necessary to encourage companies and individuals to keep
inventing, and to invest in commercializing the invention.

What patent laws have done for pharmaceuticals and computer hardware in
the U.S., copyright laws have done for music, film, publishing, and
software. We lead the world in these industries … because in the
United States, creators own their intellectual property and have the
right to profit from it. Take away or diminish that right and you will
soon have no intellectual property to steal.

Attacking Intellectual Property

U.S. protections for intellectual property are under attack on several

South Africa is one example. Its government — and many liberal activists
in the U.S. — claim the people of South Africa are being “held at
ransom” by U.S. pharmaceutical companies that refuse to cut prices for
their AIDS drugs. Why, do you suppose, have none of these innovative,
technologically driven pharmaceutical companies grown in South Africa?
Look no further than the protection of intellectual property. And what,
do you suppose, will happen to the U.S. pharmaceutical industry if it
is prevented from profiting from the billions it spends on research and
development every year?

On another front, former Vice President Al Gore wants to make it more
difficult for pharmaceutical firms to get patent extensions. He
supports compulsory licensing of U.S. intellectual property, which
would allow foreign interests to exploit protected property without
getting permission from the owner.

And in the U.S. Senate, several bi-partisan proposals for restricting
patent protections are under consideration. All end in the same
wrong-headedness: government meddling in the free market, and
specifically in the world of technology.

Bad for the Economy

Intellectual property represents a huge slice of the U.S. economic pie.
Demand for these products in the international marketplace is growing
more rapidly than demand in the U.S. itself. In the short term,
proposals to restrict the intellectual property rights of
pharmaceutical manufacturers and similar firms will have a devastating
effect on the economy, at a time we can ill afford it.

In the long run, wholesale erosion of property rights will mean
irreparable damage to the most innovative and creative industries that
drive our economy. In a world where one cannot profit from ideas or
inventions, little incentive exists to continue.

The United States has a long history of opposition to government
takeover of industry. By failing to protect intellectual property
rights, we turn our back on that history, allowing a power grab of not
just a company, or even a single market sector, but of the very
foundation of economic growth and innovation.

Doing so will leave this country — and the world — substantially poorer,
not just in the pocketbook, but intellectually as well.

Bartlett Cleland is director of the center for technology freedom at
the Institute for Policy Innovation (IPI).

– The Good Economy Versus Welfare Reform: Who Gets the Credit?

By Robert Rector and Patrick F. Fagan

Published: The Heartland Institute 04/01/2003

When welfare reform was enacted, liberal opponents predicted it would
yield sharp increases in poverty even in good economic times; the
effects of reform during a recession were expected to be disastrous. To
date, those predictions have proven erroneous.

Welfare caseloads have, up to now, declined during the current
recession. That’s good news, though a note of caution is warranted. The
effects of a recession in increasing welfare dependence may continue
for several years after the onset of the recession. Thus, it is
possible Temporary Assistance to Needy Families (TANF) caseloads will
rise during 2003. However, recent trends strongly suggest that, if TANF
caseloads do rise in 2003, the increase will be quite small when
compared to increases spurred by prior recessions.

Overall, the health of the economy in the mid and late 1990s did
contribute to positive changes in welfare dependence, employment, and
poverty. It is very unlikely, for example, that dramatic drops in
dependence and increases in employment would have occurred during a
prolonged recession.

However, it is also certain that good economic conditions alone would
not have produced the striking changes that occurred in the late 1990s.
It is only when welfare reform was coupled with a growing economy that
these dramatic positive changes occurred.

Economy vs. Reform

Historically, periods of economic growth have not resulted in lower
welfare caseloads. During eight periods of economic expansion prior to
the 1990s, not one led to a significant drop in the Aid to Families
with Dependent Children (AFDC) caseload. Indeed, during two previous
economic expansions (the late 1960s and the early 1970s), the welfare
caseload grew substantially. Only during the expansion of the 1990s did
the caseload drop appreciably.

How was the economic expansion of the 1990s different from the eight
prior expansions? The answer is welfare reform.

The national TANF decline has slowed appreciably during the current
recession, which began in April 2001. Critics of reform might argue
this shows the economy has been the dominant factor in the reduction of

While it is true the slowdown in the economy is affecting the decline
in caseload, it is important to note the vast difference in trends
before and after welfare reform. Prior to the mid-1990s, the AFDC
caseload remained flat or rose during economic expansions and generally
rose to a substantial degree during recessions. Since welfare reform,
the welfare caseload has plummeted downward during good economic times
and declined more slowly during the recession.

Thus, while the state of the economy does affect AFDC/TANF caseloads,
the difference in caseload trends before and after reform is enormous.
This difference is clearly due to the impact of welfare reform

State Budget Recession

The rate of caseload decline varies enormously among the 50 states. If
improving economic conditions were the main factor driving down
caseloads, the variation in state reduction rates should be linked to
variation in state economic conditions. On the other hand, if welfare
polices are the key factor behind falling dependence, the differences
in reduction rates should be linked to specific state welfare policies.

Dr. June O’Neill, former director of the Congressional Budget Office,
recently examined changes in welfare caseload and employment from 1983
to 1999. Her analysis shows that in the period after the enactment of
welfare reform, policy changes accounted for roughly three-quarters of
the increase in employment and decrease in dependence. By contrast,
economic conditions explained only about one-quarter of the changes in
employment and dependence. Substantial employment increases, in turn,
have led to large drops in child poverty.

Overall, the health of the economy in the mid and late 1990s did serve
as a positive background factor contributing to positive changes in
welfare dependence, employment, and poverty. It is very unlikely, for
example, that dramatic drops in dependence and increases in employment
would have occurred during a prolonged recession. However, it is also
certain that good economic conditions alone would not have produced the
striking changes that occurred in the late 1990s. It is only when
welfare reform was coupled with a growing economy that these dramatic
positive changes occurred.

Robert Rector and Patrick F. Fagan are coauthors of a Heritage
Foundation Backgrounder, “The Continuing Good News about Welfare
Reform, from which this essay is excerpted.

Above articles are quoted from The Heartland Institute, Intellectual
Ammunition Spring 2003

”Evergreen (Today’s Quote)”

“The jobs-housing balance should be relegated to history, along with
other discredited notions that seemed useful at the time, like
high-rise public housing and alchemy. It is people not urban planning
that determines where people live and work.” — Wendell Cox, Wendell Cox
Consultancy February 2003

”’Edited by Richard O. Rowland, president of Grassroot Institute of Hawaii, 1314 S. King Street, Suite 1163, Honolulu, HI 96814. Phone/fax is 808-591-9193, cell phone is 808-864-1776. Send him an email at:”’ ”’See the Web site at:”’