Archive for May, 2006
Crisis of Abundance Watch
Joe Kristan is reading Crisis of Abundance and blogging the experience. He writes
Crisis of Abundance says
“An important characteristic of premium medicine is that many procedures have a low probability of affecting the outcome. In fact, often the procedures do not even affect the treatment plan.”
Digital mammography seems an apt illustration of this point. It is more effective for only a minority of patients, and the treatment for a cancer discovered digitally doesn’t differ from that discovered on film. Yet as it is the latest technology, and in short supply, the digital technology will cost more. It’s an illustration of “premium medicine” that could have come right out of C of A. And, as C of A notes, spending on imaging services is growing twice as fast as health spending as a whole.
He is referring to an article in the Wall Street Journal on digital mammography.
Mike Tanner says it’s fine that Americans spend a lot on health care. I would agree if it were an income effect. The problem is that with 85 percent of our health care services paid for by third parties (a stat which I got from the Tanner-Cannon book), I think it’s largely a substitution effect, based on an implicit price to the consumer of zero.
If you want to comment on this issue, go to the Amazon page for Crisis of Abundance. Scroll down for the discussion forum.
Giving Diplomacy a Shot
Lots of whispers around Washington this morning that today’s the day that State will announce that the US is willing to come to the table with the Iranians. And sure enough, at 11:00 this morning, Secretary Rice announced that the United States will join the EU-3 nations (Britain, France, and Germany) in negotiations with Iran, provided that Iran is willing to suspend uranium enrichment.
This is a step in the right direction for the administration. Now, though, it’s important that we keep the talks focused and cut to the chase, preventing the talks from turning into torturous and largely pointless name-calling matches like the Six Party talks in North Korea. Those of us who are advocates of diplomacy will be watching the negotiations closely.
Expect loud bellows of outrage from the few remaining Bush doctrine supporters any time now.
Next Week at Cato Unbound: The Future of Work
Join us next week for the June issue of Cato Unbound devoted to glimpsing the future of work in America.
Richard Florida, author of the bestselling Rise of the Creative Class, will lead off with an essay this coming Monday. Replying to Florida over the following week and a half will be: George Mason economist and futurist Robin Hanson, an expert on robot economics [pdf]; UCLA economist Edward Leamer, author of a much-circulated review [pdf] of Thomas Friedman’s The World Is Flat; and MIT economist Frank Levy, co-author of The New Division of Labor: How Computers are Creating the New Job Market.
Here’s what they’ll be talking about:
The economists tell us that technology is a substitute for some forms of human capital and a complement to others. As the pace of technological advance continues to quicken, the “information age” evolves into something new, and the world economy becomes ever more integrated, the most economically valued set of human skills and capabilities continues to shift rapidly. Tens of millions of Americans used to make, and many still do make, a good living in low- and medium-skilled assembly line jobs. However, many of these jobs can now be done at less expense by machines, or by lower-paid workers in poorer countries like China and India. At the same time, the return on investment in education continues to rise, widening the gap in pay between workers with college degrees and workers without them. What do these trends mean for the future of work in America? Are there any jobs safe from mechanization and outsourcing? If part of rising inequality a function of the match between technology and human capital, what can be done to ensure that more people develop the right kind of capital? In a changing global economy, what is America’s comparative advantage? If you had a child tomorrow, and wanted her to get ahead, what would you want her to pick as her college major eighteen years from now?
Join us next week for a provocative look at the future of work in our high-tech, globalized world.
Give Us Liberty… or Send Your Kids to Public School
Back in January, the Florida Supreme Court struck down that state’s “Opportunity Scholarships” school voucher program. I discussed their bizarre léger-de-loi here, and called for a state constitutional amendment to correct it here.
After the amendment effort failed in the State Senate, some Floridians have decided to take matters into their own hands, circulating a petition to guarantee universal school vouchers.
While their exact policy prescription differs from what I’d suggest, it has a delightful little catch: “If the Amendment is not passed, all elected officials and schoolteachers must send their children to public schools.”
That would run afoul of the U.S. Supreme Court’s 1925 Pierce v. Society of Sisters ruling guaranteeing parents the right to private schooling (assuming they can afford it), but rhetorically, it’s a pretty good point. Today, the only folks who have school choice are the wealthy, who can either choose a different school district by moving, or choose an independent school by paying tuition.
The poor, by contrast, are generally condemned to the public school to which they are assigned by the stroke of a bureaucrat’s pen. How is this supposedly uniform system of public schooling working out for them?
America has the largest achievement gap between wealthy and poor students of any industrialized country in the world.
The only way that will change is if we extend choice to all families, regardless of income.
On Second Thought, Let’s Not Go Dutch
Heritage Foundation education analyst Dan Lips has a piece out today arguing for a federal school voucher program.
It does a great job documenting the dire educational situation facing millions of disadvantaged American kids, and wisely recommends giving them and their families unfettered choice of government and independent schools.
That said, it’s both dangerous and unconstitutional to have the federal government handing out school vouchers. I explain the problems (and the “going Dutch” reference) here, along with suggesting a safer, state-level alternative.
Selective Outrage
Here’s the webpage for Rep. Sensenbrenner’s breathlessly titled hearing on the FBI search of Rep. Jefferson’s office: “RECKLESS JUSTICE: Did the Saturday Night Raid of Congress Trample the Constitution?” It’s a stacked deck–four scholars who share Sensenbrenner’s outrage over the raid.
Perhaps the testimony of Jonathan Turley or Bruce Fein, both of whom have been on the right side of important separation of powers issues in the last few years, will change my mind. But right now the congressional reaction to the search reminds me of President Clinton piously invoking the Constitution in defense of the God-given, natural right to fool around with the help and lie about it in court. As Clinton put it at a news conference in 2000: “on the impeachment, let me tell you, I am proud of what we did there, because I think we saved the Constitution of the United States.”
If you’re going to defend the Constitution, you could pick clearer grounds than a narrow interpretation of “high crimes and misdemeanors,” and it would also be nice if you’d demonstrated the slightest interest in defending it before Ken Starr came knocking. Similarly, if you’re going to complain about “Trampling the Constitution,” it’s a little unseemly to start with penumbras and emanations from the Speech or Debate Clause, when you have a president who claims inherent authority to break any law that Congress passes if he believes it constrains his freedom of action in the war on terror. Marty Lederman puts it well:
if this were part of a concerted congressional effort to fight back against the tide of Executive aggrandizement, the outrage might be understandable. But Congress has been almost completely indifferent, for two years running now, with respect to very serious separation-of-powers challenges — an Executive branch that has repeatedly asserted a constitutional power to ignore statutes regulating the conduct of war; that has kept virtually all of its dubious activities secret from the legislature and public; that has resisted any serious oversight; that has engaged in widespread surveillance of U.S. citizens without warrant or probable cause of wrongdoing (or that the U.S. persons are agents of al Qaeda); etc. And Congress has simply sat back and done nothing. If Denny Hastert, et al., had been fighting tooth and nail on torture, and oversight of Iraq, and the manipulation of intelligence, and the use of signing statements to signal noncompliance with scores of statutes, and violations by NSA of FISA and other statutes, etc., then perhaps this latest incident would rightly be seen as a straw that broke the camel’s back. But… Congress has instead allowed its own core constitutional powers — such as the enactment of laws — to be swept aside with impunity by an Administration with a strikingly aggressive view of Executive prerogatives. That legislators care much more about the sanctity of the contents of their offices than about the enforcement of the laws they have written is, perhaps, predictable, but nevertheless unfortunate.
Sloan’s Cash Cow
Columnists often have cash cows–storylines that they milk over and over. Allan Sloan writes the “Deals” column in the Washington Post, and his cash cow is outrage over corporate mergers and acquisitions that avoid taxes.
In dozens of columns, Sloan has complained about corporations that (legally) minimize their taxes when doing M&As. Typically, he implies that we would be better off if every M&A on Wall Street got hit with a hefty tax of 30 percent or so. In today’s column, Sloan complains that a proposed transfer of the Atlanta Braves from Time Warner to Liberty Media would avoid $700 million in taxes, and that average taxpayers would be ”shut out.”
Here are some issues that I’ve never seen Sloan address:
1) Does it make sense to tax M&As at all? Why should Uncle Sam get a pound of flesh every time American businesses do some restructuring? M&As often have capital-gains-tax implications. But capital gains taxes can represent a double-taxation on business earnings. Under a more efficient tax system, capital gains would not be taxed at all.
2) Two items that make the tax effects of M&As complex are capital gains and depreciation. These items are unique to income taxes. Under a consumption-based tax system, such as the Steve Forbes Flat Tax, they would be eliminated and M&As vastly simplified. Why not focus on tax reform as a systematic fix to the problems of M&As, rather than complaining about each individual deal?
3) Better yet, why not eliminate the corporate income tax altogether, as many eminent conservative and liberal economists have advocated over the decades? Corporate taxes are ultimately paid for by workers, consumers, and individual shareholders. The former group probably bears most of the burden in the modern globalized economy. If $700 million of taxes were avoided on the Atlanta Braves’ deal, the biggest winners are likely to be American workers.
Whining about the particular effects of our complex tax code is easy. I’d rather see columnists like Sloan tell us how to simplify the code so that corporations aren’t encouraged to pursue the fancy tax sheltering that he chronicles in the first place.
Beinart on Being Wrong
Peter Beinart, among the loudest and most passionately pro-Iraq-war liberals, recently got a generous book deal to write about what Democrats should do about foreign policy. Beinart has since recanted his support for the war, admitting (with a list of excuses) that it was a mistake.
Kevin Drum interviews Beinart about his book at the TNR website (sub. req’d.) and asks this:
KD: The obvious question, then, is with a track record like [yours] why should anyone listen to you now?
PB: Anything one writes deserves to be judged by itself. The Democratic Party nominated someone in 2004 who had been flat wrong in his opposition to the Gulf War in 1991, I think most people would acknowledge that.* Many people who were very prominent figures in the Democratic foreign policy debate and the Democratic Party in general–most of the people who were there at that time in 1991 were wrong about that. The vast majority of the party was wrong, and yet it still seems to me that we have things to learn from people like Sam Nunn or John Kerry. If you were to go from the Gulf War through Kosovo and Iraq, you would find that a large number of people in every facet of the liberal Democratic universe were wrong, on at least one of those wars. Very, very few people were right about all three of them. The people who were–and I think Al Gore is in this category–deserve a significant amount of credit, but the truth of the matter is, if you were looking for an untainted record, you would find very few people. (emphasis added)
Per Beinart, pundits’ predictions deserve to be judged by themselves. So if someone has a consistent record of making wrong predictions and embracing dubious premises in support of a policy that turns out to be a catastrophe, when that person starts issuing declarations about similar issues, we shouldn’t pay any attention to his track record, apparently.
That’s pretty convenient. There were plenty of folks who got Iraq right. Beinart got it wrong, and yet has hardly missed a beat in urging an interventionist foreign policy on his fellow liberals. Something’s a bit odd there.
*(I’d certainly quibble with Beinart’s belief that Gulf War I was a slam dunk success. It put US troops in Saudi Arabia which served as a “principal recruiting device” for Osama bin Laden to rally support against the United States and laid the groundwork for the second war against Iraq. But that’s a separate matter…)
A Flood of Immigrants?
In the midst of the Senate debate on an immigration bill this month, the Heritage Foundation published a report claiming that legalization of undocumented workers already here and creation of a temporary-worker program would unleash a flood of more than 100 million new immigrants in the next 20 years. The headline-catching number turned heads on Capitol Hill, provided grist for talk radio, and hardened the opposition to immigration reform.
In hindsight, however, the number looks less and less plausible. Consider: If immigrants did come in such numbers, the average would be 5 million a year. That compares to an average immigration inflow, legal and illegal, of about 1.5 million during the past decade. The U.S. economy simply could not produce enough jobs each year during the next two decades to attract and employ that many immigrants. We also know from experience that previous attempts at legalization did not unleash a flood of so-called chain migration, in which newly legalized and naturalized workers sponsor spouses, children, parents and siblings. Check out an op-ed article posted today on the Cato web site that spells out in detail why the 103 million figure is a gross exaggeration.
The Congressional Budget Office, in its own study [.pdf] released May 16, calculates that immigration reform along the lines of what the Senate passed last week would increase immigration over the next decade by less than 8 million. And an analysis by the President’s Council of Economic Advisers found numerous methodological faults with the Heritage study, including double counting and failure to account for emigration.
The Heritage study generated a lot of heat in an already over-heated immigration debate. Unfortunately, it failed to provide any real light.
Al Gore – Master of Understatement
My nomination for quote of the day comes from former Vice President and current lecturer-in-chief Al Gore: “We now have the capacity to literally change the relationship between the Earth and the sun.”
HSAs Grow Faster than Critics’ Understanding of HSAs
An article in today’s Detroit Free Press reports that health savings accounts (HSAs) are catching on, and showcases some of the less-valid criticisms HSAs.
In the article, Jason Furman of the Center on Budget and Policy Priorities argues that a family of four with an annual income of $30,000 and the usual expenses is unlikely to be able to save $5,000 per year in an HSA.
There are a number of problems with that argument. For example, it doesn’t address the question, “Compared to what?” The alternative to HSAs is usually comprehensive third-party health coverage, which carries much higher premiums than high-deductible health insurance. If the family can’t afford to save, where are they supposed to get the money to pay those higher premiums? Also, there’s nothing in the HSA law that says a family must have $5,000 of cost sharing. The family’s cost sharing could be as low as $2,100. (Less cost sharing means higher premiums, but shouldn’t the family be able to make that tradeoff for themselves?)
The article raises a number of other criticisms of HSAs, all of which I address in a study released today by the Cato Institute titled, “Health Savings Accounts: Do the Critics Have a Point?“
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
