Issue Brief

Consumer groups and the media are putting pressure on public officials to allow U.S. citizens to reimport drugs from foreign countries like Canada. Using an economic simulation model, this report concludes reimportation or price controls would have a significant negative impact on the Maryland economy, and its large biotech sector.

Social Security has two major problems that necessitate fundamental reform now. The program will fall far short of funds to pay promised benefits to today's middle-aged and younger workers, according to Social Security's own trustees. Additionally, workers get a very low return on the money they pay into the system. Saving and investing the money in personal accounts would yield much higher returns. Such accounts would solve the long-term bankruptcy problem as well.

The most desirable method of financing the transition to personal retirement accounts is to modestly reduce the growth rate of federal spending. Raising taxes would harm the economy. And future benefit cuts are wholly unnecessary, not only because they would do nothing to bridge the short-term financing gap, but also because the eventual proceeds from large personal accounts would more than offset any savings gained from cuts in promised benefits.

Establishing personal retirement accounts creates no net new cost to the Social Security system. The act of refinancing and formalizing the $12 trillion liability is incorrectly interpreted as a “transition cost.” It is simply the part of the unfunded debt obligation that must be covered from sources other than current workers’ FICA contributions. Refinancing enables an eventual elimination of the liability. Alexander Hamilton performed a similar feat during the early days of the Republic.

Our current federal tax system fails to raise the necessary revenue to fund government in an efficient manner, and in a way that accurately prices the cost of government so that voters can make intelligent decisions. The President’s tax reform commission should establish neutrality, visibility, fairness and simplicity as criteria for a reformed tax code that will improve the economy and promote better government.

Severe acute respiratory syndrome has receded since the epidemic of 2003, but it could one day come back with a vengeance. The world is relying on the pharmaceutical industry to develop a vaccine and effective treatment against SARS and other diseases. Yet drugmakers are being vilified and facing increasing difficulty doing business, hampering their efforts to find a cure for such diseases.

Consumer groups and the media are putting pressure on public officials to allow U.S. citizens to reimport drugs from foreign countries like Canada. Using an economic simulation model, this report concludes reimportation or price controls would have a dramatic negative impact on the Illinois economy, and its large biotech sector.

It is mistaken to assume that the cost of transitioning to Social Security personal accounts is based on the amount of general revenues that would be needed to finance the transition. This measure, which excludes items that are true costs and includes other items that are not true costs, is biased against personal accounts.

Critics claim the pharmaceutical industry is unique and therefore requires distinctive forms of regulation, such as price controls. But absent in this view is a systematic appraisal of the economics of the industry. Were their approach adopted, the consequences would be less innovation, fewer life-saving drugs, and a less-healthy citizenry than what could be possible.

The enormous benefits of Social Security reform involving large personal accounts is quite achievable, as is the proposed transition financing. A manageable amount of debt would be issued in the early years and paid off during the course of the reform. The reform plan would promote modest restraint in the growth of other federal spending, and should produce significant revenue feedback effects.