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Slim Odds

Popular Media Free lunches are hard to turn down for a city staring into the fiscal abyss. As it faces dwindling revenues and the increased demand for public services that usually accompanies a recession, Philadelphia, like most other U.S. cities, is looking for new ways to make a buck.

Summary

Free lunches are hard to turn down for a city staring into the fiscal abyss. As it faces dwindling revenues and the increased demand for public services that usually accompanies a recession, Philadelphia, like most other U.S. cities, is looking for new ways to make a buck. However, with unemployment above 10 percent and a fear of providing even more excuses for businesses and more-affluent residents to flee for the suburbs, the city is not inclined to hike income and property taxes.

Spurred by this bleak outlook, Mayor Michael Nutter, like politicians in New York, California, and a host of other places, has hit upon an ingenious idea. Given that, among its other problems, Philadelphia is wrestling with a growing obesity epidemic, why not kill two birds with one stone and tax sodas? While taxing cheesesteaks or Tastykakes might lead to protests up and down Broad Street, a few additional cents’ tax on each soda sold in the city holds the prospect of expanding the budget while trimming waistlines.

This double-dividend argument has been used before by public finance scholars in other contexts, from fossil fuels to alcohol. While almost all taxes are problematic because, in the process of raising revenues, they discourage a desirable activity, taxing “bad” activities supposedly generates cash flow while discouraging the underlying activity.

Unfortunately, like many free lunches, the health benefit from a soda tax is a mirage. Not only is the tax unlikely to generate much revenue as soda drinkers substitute away from the sugary beverages, most of the evidence suggests that they will substitute toward consuming other foods and beverages that are just as bad or worse for their health.

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Innovation & the New Economy

The non-constitutional problem with a health care mandate

TOTM There’s been much teeth-gnashing following yesterday’s ruling by a Virginia judge that the “individual mandate” portion of Obamacare is unconstitutional.  Among many other places, see . . .

There’s been much teeth-gnashing following yesterday’s ruling by a Virginia judge that the “individual mandate” portion of Obamacare is unconstitutional.  Among many other places, see the ongoing discussion at The Volokh Conspiracy.  I have a quick, non-constitutional response.

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Antitrust & Consumer Protection

Carl Shapiro on BCBS and the New Merger Guidelines

TOTM Carl Shapiro’s (DOJ) speech at the ABA Fall Forum contains (at least) two interesting tidbits worth highlighting for TOTM readers.  The first is a discussion . . .

Carl Shapiro’s (DOJ) speech at the ABA Fall Forum contains (at least) two interesting tidbits worth highlighting for TOTM readers.  The first is a discussion of the DOJ’s case against Blue Cross Blue Shield, which as discussed here, turns on an economic analysis of the use of most-favored nations clauses in contractual arrangements with hospitals…

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Antitrust & Consumer Protection

DOJ v. Blue Cross Blue Shield of Michigan

TOTM This should be an interesting case to watch.  As I’ve discussed, if one excludes policy speeches and restricts focus to enforcement action and activity, it . . .

This should be an interesting case to watch.  As I’ve discussed, if one excludes policy speeches and restricts focus to enforcement action and activity, it has been thus far difficult to distinguish the Obama Antitrust Division from the Bush II Antitrust Division when it comes to single firm or allegedly exclusionary conduct.  But the DOJ’s recent announcement of case against Blue Cross Blue Shield of Michigan looks like the DOJ’s first major “exclusionary” conduct case — despite the fact that it is brought under Section of the Sherman Act rather than Section 2 (there is also a state antitrust law claim).

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Antitrust & Consumer Protection

McDonald’s, Mini-Meds, and Medical Loss Ratios: What’s to come, and what can Sebelius do about it?

TOTM Yesterday, the Wall Street Journal ran an article entitled McDonald’s May Drop Health Plan. The article reported that “McDonald’s Corp. has warned federal regulators that . . .

Yesterday, the Wall Street Journal ran an article entitled McDonald’s May Drop Health Plan. The article reported that “McDonald’s Corp. has warned federal regulators that it could drop its health insurance plan for nearly 30,000 hourly restaurant workers unless regulators waive a new requirement of the U.S. health overhaul.” The insurance plan at issue is a so-called “mini-med” plan, which provides limited coverage but at low prices. The Journal reports, for example, that “[a] single worker can pay $14 a week for a plan that caps annual benefits at $2,000, or about $32 a week to get coverage up to $10,000 a year.”

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Financial Regulation & Corporate Governance

Beer v. Pot, Public Choice Edition

TOTM The political economy of alcohol regulation has always been fascinating.  But things took an interesting turn of late (HT: Marginal Revolution) when a beer industry . . .

The political economy of alcohol regulation has always been fascinating.  But things took an interesting turn of late (HT: Marginal Revolution) when a beer industry trade group took a stand against a proposition that would legalize marijuana in California…

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FTC v. Ovation Opinion

TOTM The opinion in Ovation (i.e. FTC v. Lundbeck) is now available.  The first footnote in Judge Ericksen’s opinion notes that “the FTC and Minnesota began . . .

The opinion in Ovation (i.e. FTC v. Lundbeck) is now available.  The first footnote in Judge Ericksen’s opinion notes that “the FTC and Minnesota began their closing argument by disclaiming the notion that these cases were ‘about unhappiness about the high price of Indocin.’  Nevertheless, the FTC and Minnesota cited in their post-trial response a press release issued by the FTC to announce the action’s commencement.  The press release asserts that the acquisition of NeoProfen resulted in the increase of Indocin IV’s price by almost 1300%; characterizes the prices charged by Lundbeck as ‘artificially high;’ and notes one commissioner’s view that Lundbeck’s ‘profiteering on the backs of critically ill premature babies is not only immoral, it is illegal.”

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Antitrust & Consumer Protection

The FTC Loses in Ovation Pharmaceuticals

TOTM There are some new developments in the Federal Trade Commission’s consummated merger case brought against Ovation.  Namely, the FTC has lost.  TOTM readers may recall . . .

There are some new developments in the Federal Trade Commission’s consummated merger case brought against Ovation.  Namely, the FTC has lost.  TOTM readers may recall that I spent some time criticizing the Federal Trade Commission’s complaint, back in 2008, in FTC v. Ovation in federal district court in Minnesota.  As I described the stylized facts back then…

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Antitrust & Consumer Protection

Republicans for Expanding the Tort System?

TOTM Barring some sort of last extension Medicare, Medicaid and SCHIP Extension Act (MMSEA) of 2007 will require all property casualty insurers to report all settlements, awards . . .

Barring some sort of last extension Medicare, Medicaid and SCHIP Extension Act (MMSEA) of 2007 will require all property casualty insurers to report all settlements, awards and judgments that involve a Medicare beneficiary to the Centers for Medicare and Medicaid Services. Essentially the MMSEA turns subrogation rules on their head by requiring the defendant to notify a third-party if the plaintiff might owe them money. Under subrogation rules a third-party insurer with an interest in a case, think a health insurer who wants to be reimbursed by a defendant for the injuries caused to the insurer’s beneficiary, would have to join the case which of course would require finding out about the case in the first place.

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Financial Regulation & Corporate Governance