Archive for August, 2007
Romney’s New Rx
I’ve got an op-ed out about Mitt Romney’s new health care plan. Short version (192 words) here. Long version (745 words) here.
One amusing aspect that I don’t mention in the op-ed: after criticizing Rudy Giuliani for relying on tax breaks to make health insurance affordable to more Americans, Romney proposes doing just that.
It’s going to be a fun campaign.
Filed under: General; Health, Welfare & Entitlements; Tax and Budget Policy
America’s Longest War
In the current issue of Foreign Policy magazine, Ethan Nadelmann, head of the Drug Policy Alliance, has a brisk, powerfully written piece calling for the legalization of drugs. Unfortunately, it’s subscriber-only, but here’s one of the more provocative passages:
Looking to the United States as a role model for drug control is like looking to apartheid-era South Africa for how to deal with race. The United States ranks first in the world in per-capita incarceration–with less than 5 percent of the world’s population, but almost 25 percent of the world’s prisoners. The number of people locked up for U.S. drug-law violations has increased from roughly 50,000 in 1980 to almost 500,000 today…. In 2005, the ayatollah in charge of Iran’s Ministry of Justice issued a fatwa declaring methadone maintainance and syringe-exchange programs compatible with sharia law. One only wishes his American counterpart were comparably enlightened.
A few weeks ago, the Washington Post’s Outlook section featured an indictment of drug prohibition written by Misha Glenny: “The Lost War.” Glenny concludes with the following:
In Washington, the war on drugs has been a third-rail issue since its inauguration. It’s obvious why — telling people that their kids can do drugs is the kiss of death at the ballot box. But that was before 9/11. Now the drug war is undermining Western security throughout the world. In one particularly revealing conversation, a senior official at the British Foreign Office told me, “I often think we will look back at the War on Drugs in a hundred years’ time and tell the tale of ‘The Emperor’s New Clothes.’ This is so stupid.”
How right he is.
For some of Cato’s 30 years of work on this issue, start here.
Bonus Friday Fun Link: go to page 4 of this document [.pdf] to read about how Richard Nixon’s Archie-Bunker-style social theories led him to ramp up the war on marijuana.
Some Bad Ideas That Won’t Help Solve the Organ Shortage
In “The Solvable Problem of Organ Shortages” [New York Times, 8/28/07], Jane Brody makes suggestions which, if implemented, will rob Americans of fundamental rights and do nothing to solve the organ shortage. Her suggestions may even make the problem worse.
The organ shortage can only be solved by increasing, not decreasing, the control people have over the disposition of their organs. Only an increase in liberty, not a restriction of liberty, has any chance of solving the organ shortage. New and innovative ways to motivate individuals to donate, including the option of compensation for donation both in the case of deceased and live organ donation, are what we need, not new ways to take organs without people’s consent.
One option Brody discusses is donation after cardiac arrest. There is nothing wrong, in principle, with retrieving organs after cardiac arrest, but what defines death and when to give up on a patient are not decisions that should be motivated by a need for organs. It is never appropriate for a doctor to alter how he treats one patient in order to provide an organ to save another patient. Just last month, a San Francisco transplant surgeon was charged with three felonies for allegedly hastening the death of a patient in an attempt to harvest his organs.
A policy of donation after cardiac arrest will drastically erode an already waning trust in the medical profession. Such a policy is likely to result in a backlash both against the medical profession in general and organ donation in particular. People will see such a policy as encouraging doctors to give up on patients when in fact there might still be some hope of improving their condition, just in order to harvest their organs. The net result will be a decrease, not an increase, in organs available for transplant.
The other major option discussed by Brody is presumed consent. Presumed consent is no consent at all, it is taking organs without asking unless an individual knows enough to follow the government’s predetermined method for objecting.
Brody writes: “In Europe, where you are considered a potential donor unless you expressly declare[s] that you do not want to be one, more than 90 percent of people are organ donors.” Americans, unlike Europeans, will not give up their right to self-determination so easily. There will be an outcry both on religious grounds and from those who believe in patient autonomy. Americans will demand to be asked, let alone the question of whether such a law would even be constitutional.
Now these proposals, as great an affront to human dignity as they are, could perhaps have some utilitarian appeal if they had the slightest chance of solving the organ shortage, as Brody’s title suggests. Donation after cardiac arrest and presumed consent, even if implemented simultaneously and without the predicted backlash, would do very little to solve the organ shortage.
Stossel Critiques Commonwealth Fund Study
John Stossel has a good column on a recent Commonwealth Fund study comparing the U.S. health care system to those in Australia, Canada, Germany, New Zealand and Great Britain. That study reports, “Despite having the most costly health system in the world, the United States consistently underperforms on most dimensions of performance, relative to other countries.”
But Stossel observes that the United States does well in some measures while other measures are practically stacked against us:
The proportion of patients who say they got infected at a hospital counts about the same in the “quality” measure as the proportion of doctors who use automated computer systems to remind them to tell patients their test results. Those things aren’t equal in my book.
The study’s authors also consider having high administrative costs and spending the largest share of GDP on health care worse than having the highest share of patients who wait four months or more for surgery. This seems designed to make the U.S. look bad.
Finally, the study penalizes nations for having large numbers of patients who spent more than $1,000 on medical care out of pocket, as if third-party payment is somehow superior.
Stossel made one imprecise claim about the uninsured. He writes, “The same people are not uninsured year in and year out.” That’s mostly true. The estimate that there are 47 million uninsured Americans includes a lot of people who are temporarily uninsured and will regain coverage even if we do nothing.
But a lot of people are uninsured year in and year out. Government surveys estimate that 9 million to 26.4 million Americans are long-term uninsured (i.e., have spells without coverage that last more than two years).
That doesn’t mean those chronically uninsured people aren’t eligible for government programs. Many are. Nor does it mean that they can’t afford health insurance. Many can. But they do exist, and we should be scrapping the government regulations and subsidies that make coverage and care unnecessarily expensive for them.
Richard Jewell, RIP
There were scores of federal agents working at the 1996 Summer Olympics, but it was a private security guard named Richard Jewell who spotted the suspicious backpack loaded with explosives and sounded the alarm–sparing countless lives and injuries. For his good deed, Jewell found himself in the crosshairs of a desperate FBI investigation. Federal agents leaked his name to media outlets and Jewell was smeared as a killer who only wanted to pose as a hero. The feds had to back up when the actual evidence pointed to someone else, but a lot of damage had already been done. The life that Jewell had been hoping for was gone. People treated him as if he had the plague. Sadly, Jewell died yesterday. He was only 44.
The Jewell case serves as a reminder that the government has the power to inflict serious damage on the lives of people–even when there is no conviction in court, and even where there is no indictment.
Note that Cato will be hosting this forum about the Duke University students who got smeared in another investigation that went awry.
Note also the dismissal of charges against Frank Quattrone. The indictment was a page one story, but the dismissal is found in section D, page 2.
Krugman on Education, Health Care
A few days ago, New York Times columnist Paul Krugman drew an equivalence between government provision of education and medical care for children:
We offer free education, and don’t worry about middle-class families getting benefits they don’t need, because that’s the only way to ensure that every child gets an education — and giving every child a fair chance is the American way. And we should guarantee health care to every child, for the same reason.
His argument would have more force if government actually ensured that every child gets an education.
I once attended a dinner discussion with a bunch of health care big-wigs. One highly educated woman — she is both an M.D. and a J.D. — began the dinner by declaring, “We need to make health care a right in this country, just as we make education a right.”
Later in the dinner, she complained that her organization’s materials must be written at an 8th-grade level to be understood by their target audience.
I interrupted to ask how she reconciled those two statements: if we really have created a right to education, why the poor reading comprehension? And if we create a parallel right to health care, how many people’s medical care will be stuck at an 8th-grade level? Her answer was non-responsive.
It would be nice if Krugman and others would at least acknowledge that tradeoff.
Filed under: Education and Child Policy; General; Health, Welfare & Entitlements; Tax and Budget Policy
No, a Disco Ball
In an interview in this morning’s USA Today, U.S. Secretary of Education Margaret Spellings is back to unbridled hyping of the No Child Left Behind Act (NCLB). As has been her custom, her answers are popping with utterly unsubstantiated rhetoric, perhaps the most outrageous of which is her insistence that NCLB has somehow brilliantly illuminated heretofore widespread but invisible failure in public schooling. She says, for instance, that before NCLB the nation took “the ostrich approach” to our schools, but with the law we’re at last “shining a bright spotlight on under-achievement.”
Oh, come on! Americans have known about their awful schools for decades. I mean, did everyone think everything was hunky-dory in Detroit, Newark, Washington, DC, New York, Los Angeles, Oakland, and on and on until, suddenly, NCLB came along and revealed that – gasp! – the schools in those and many other places were actually dangerous, dilapidated dungeons of ignorance? Of course not! And didn’t A Nation At Risk put Americans in a tizzy about their schools back in 1983? Oh, and wasn’t Rudolph Flesch’s Why Johnny Can’t Read a best-seller all the way back in the 1950s?
And what about that NCLB spotlight? At best, it’s a disco ball — it shines light, but light designed to dazzle much more than illuminate and confuse much more than clarify. So, while NCLB requires all states to bring kids to something called “proficiency” – enabling federal politicians to boast about their steely determination to educate all children – it leaves it to the state and local school officials who’s feet are supposedly being held to the fire to define proficiency and write the standards and tests. The result, as a recent study from Spellings’ own department has shown, has been that state officials and federal education fans have been able to point to rising state test scores to “prove” that NCLB is working, but the state test results themselves have essentially been lies, calling scores “proficient” that the feds themselves would call “basic” or “below basic.”
That sure is one wacky spotlight! What we need right now, especially with reauthorization of NCLB expected to begin when Congress returns from vacation next week, is not to shine a spotlight on our schools, but on both NCLB and all the damning evidence of Washington’s failures through decades of federal education policy. Then we’ll see that far from offering a solution to our education problems, Washington is a very big part of them. And don’t worry: All those troubles in the schools we’ve seemingly known about forever will almost certainly still be there when we move the spotlight off of Washington, and back onto them.
World Socialists Whine about Flat Tax Revolution
I almost feel sorry for hard-core leftists. First, they had to endure the agony of watching the Berlin Wall crumble and the Soviet Union break apart. As depressing as that must have been, they now must be horrified that former communist nations are leading the shift to pro-market flat tax systems. But their angst is my joy. I was greatly amused to read this account from the World Socialist Web Site:
The government of Albania has agreed on a standard tax rate (flat tax) of 10 percent aimed at outdoing its East European rivals and attracting international investors. The government in Tirana is determined to transform the impoverished Balkan state into a haven for multinational companies and western speculators. From the start of next year, corporate taxes will be reduced from 20 to just 10 percent. The basic rate of income tax, which amounted to 5 percent for average incomes and a maximum of 25 percent for top earners, had already been changed to a uniform rate of 10 percent for all incomes on August 1. … Measures aimed at massive tax relief for business and the rich are not specific to Albania. It is the result of a vicious competition between states in both the East and West of Europe aimed at creating the best possible conditions for foreign speculators and the wealthy. In the so-called “first round” in the 1990s, the Baltic states began to drastically lower company and income taxes, introducing tax rates of between 25 and 29 percent. These states—with the exception of some “Special Economic Zones”—suffered a loss of interest from foreign enterprises concerned that tax rates were still too high. The “second round” of cuts was initiated by Russia in 2001. Serbia followed in 2003 with the introduction of a flat tax of 14 percent. In 2005 Ukraine, Slovakia, Georgia, and Romania followed suit. The “new round” has now begun with tax reductions in the Czech Republic and Albania. Plans for further radical tax reductions are currently in discussion in Bulgaria, Croatia, and other states.
Time to Remember the Lessons of Katrina
The August 13 Time cover story on Katrina begins:
The most important thing to remember about the drowning of New Orleans is that it wasn’t a natural disaster. It was a man-made disaster, created by lousy engineering, misplaced priorities and pork-barrel politics.
The primary culprit was the Army Corps of Engineers, together with its congressional overlords. In the Time piece, reporter Michael Grunwald does an excellent job describing the misplaced priorities of the Corps, both pre-Katrina and post-Katrina.
As I’ve argued, the Corps ought to be privatized. Alas, the Bush administration bungled its Katrina response and has since missed a big opportunity to push for fundamental reforms of the Corps, FEMA, and other agencies.
America’s “Public Squalor” Versus Europe’s “Social Justice”
A British member of the European Parliament urges approval of the new European Union constitution (now being called a reform treaty in an effort to preclude a referendum), arguing in the Guardian that it will promote European-style solidarity rather than the American-style squalor. Yet according to both the IMF and the World Bank, per capita GDP is $8,500 higher in the United States (nearly $13,000 higher according to the CIA and $9,800 higher according to the OECD) than it is in the United Kingdom. As for the less fortunate, a left-wing think tank published a report last year showing that poor people in America have more income than poor people in the U.K. (see Figure 8D). The international data suggests that the European social model does a good job preserving the self-interest of the political class and a crummy job helping people improve their lives:
The reform treaty will explicitly commit European governments to defend and strengthen the European social model. It will enshrine the values of social justice, full employment and solidarity in the EU’s “mission statement” and commit the EU to “a social market economy, aiming at full employment and social progress”. Similarly, the treaty emphasizes that the EU must work to “combat social exclusion and discrimination”, and will be legally required to promote social justice, gender equality and solidarity between generations. It is values such as these that clearly differentiate the EU from the American model of capitalism that allows private wealth and public squalor. …The overwhelming majority of our socialist colleagues across Europe support the reform treaty, despite some reservations, precisely because it will enshrine the European social model.
Filed under: General; Government and Politics; Tax and Budget Policy
Hmm… You Should Have Someone Look at That
Americans usually criticize socialized health care systems for forcing patients to wait for care, so it’s a curious thing to find American patients waiting. It happens. I’ve weighed in on Americans waiting for care, as have Tyler Cowen, Matthew Yglesias, Ezra Klein, and others.
Today’s New York Times now informs us:
Patients seeking an appointment with a dermatologist to ask about a potentially cancerous mole have to wait substantially longer than those seeking Botox for wrinkles, says a study published online today by The Journal of the American Academy of Dermatology.
Researchers reported that dermatologists in 12 cities offered a typical wait of eight days for a cosmetic patient wanting Botox to smooth wrinkles, compared to a typical wait of 26 days for a patient requesting evaluation of a changing mole, a possible indicator of skin cancer.
The article also provides this interesting contrast:
Dr. Michael J. Franzblau, a dermatologist in San Francisco, said doctors typically charged $400 to $600 for a Botox antiwrinkle treatment, for which patients pay upfront because insurance does not cover it.
Meanwhile, doctors have to wait for health insurance to reimburse them for mole examinations, for which they receive an average of $50 to $75, Dr. Franzblau said.
This article reminds me of a 2005 study that called ambulatory clinics to see who is most likely to get an appointment for follow-up care after an ER visit. The study found, roughly:
- “Four hundred six (47.2%) of 860 total callers and 277 (64.4%) of 430 privately insured callers were offered appointments within a week.”
- People with private insurance and those who offer to pay cash up-front were more likely to get an appointment than Medicaid patients, who in turn were more likely to get an appointment than patients who offered to pay $20 up front and pay the balance later.
- Nevertheless, one-third of those with private insurance — and even those who offered to pay cash up-front — still couldn’t get an appointment.
When I discussed that study with my colleage Peter Van Doren, he described it (with precision) as “an out-of-equilibrium situation not resolved by the price mechanism.” With regard to Medicaid, it’s easy to see what’s interfering with the price mechanism: Medicaid prices are set by state governments, and so they don’t change to eliminate shortages (i.e., waits) the way market prices might. The same is largely true of private coverage: those prices are set by insurers, who mostly just track the prices that the federal government sets through the Medicare program [$].
But then why would there still be shortages for patients who come with cash in hand? The price mechanism seems to be working for cash-paying Botox patients, but not for cash-paying ambulatory clinic patients. One possibility is that there might be spillover effects that affect cash-payers in markets dominated by third-party payment and rigid prices. But then wouldn’t we see cash-only ambulatory clinics emerge to capture those customers? If not, that suggested supply constraints to Peter and me.
Filed under: General; Health, Welfare & Entitlements; Tax and Budget Policy
Tax Havens and Prosperity
The Central Intelligence Agency ranks 229 nations and territories based on per capita gross domestic product and a quick look at the list shows that tax havens dominate the top of the rankings. A majority of the top 20 jurisdictions are tax havens, based on the definition put forth in 2000 by the statists at the Organization for Economic Cooperation and Development. Luxembourg, Bermuda, and Jersey (the one in the Channel Islands) top the list, while places like the Cayman Islands, Andorra, Hong Kong, and Switzerland also rank among the world’s richest jurisdictions. In an ideal world, other nations would emulate the so-called tax havens. Instead, high-tax nations persecute these jurisdictions as part of an effort to create an OPEC for politicians.
SCHIP’s Bad Bargain
According to a cost estimate released by the Congressional Budget Office last Friday, the Senate-passed legislation expanding the State Children’s Health Insurance Program would enroll an additional 6.1 million children in SCHIP and Medicaid. However, 2.1 million would lose their private health insurance. So while the legislation would provide government-run health care to 6.1 million children, it would reduce the number of uninsured children by only 4 million.
That’s government efficiency for you: extending health insurance to two children for the price of three!
I’ll be discussing SCHIP at a Capitol Hill Briefing with Patrick Fleenor of the Tax Foundation on September 13 (register now) and in an upcoming Cato Briefing Paper to be released the same day.
Filed under: Cato Publications; General; Health, Welfare & Entitlements; Tax and Budget Policy
Why Is the President Amplifying Enemy Propaganda?
The president’s speech yesterday was another surreal offering, but this time we got two shocking endorsements and amplifications of essential enemy propaganda points. According to George W. Bush, the reason we are in Iraq is ― in part ― to control its oil. Also, according to the president, there is a real danger that Osama bin Laden and his cohort could establish a caliphate over the swath of territory from Spain to the Phillipines. Here he is on oil, and what would happen to it if we left:
Extremists would control a key part of the world’s energy supply, could blackmail and sabotage the global economy. They could use billions of dollars of oil revenues to buy weapons and pursue their deadly ambitions.
Out of the 20-30,000 people we have in custody in Iraq, 130 of them are non-Iraqi. Can anyone imagine the gang of idiots currently slaughtering innocent Iraqis with car bombs trying to run the oil infrastructure of a country the size of Iraq? Monitoring extraction, handling the logistics of getting oil through southern Iraq out to port and then dealing with multinationals and the sophisticated financial instruments used to remunerate oil producers? Could anything be more ridiculous?
Then we went on to the other nightmare scenario: American defeat in Iraq will birth a caliphate!
These extremists hope to impose that same dark vision across the Middle East by raising up a violent and radical caliphate that spans from Spain to Indonesia… And that is why they plot to attack us again. And that is why we must stay in the fight until the fight is won.
Who is writing this stuff? Chris Preble and I have written why al Qaeda has no hope of taking over Iraq in the wake of a U.S. withdrawal, but their reestablishing the caliphate is an even more ridiculous notion. But don’t take it from me:
“I can see the whole Arab world falling into sectarian violence, so I can’t see this caliphate happening,” said London-based anthropologist Madawi al-Rasheed, referring to Sunni-Shi’ite tensions in Iraq and Lebanon.
“This is just part of (al Qaeda’s) war of slogans.”
[...]
Lebanese historian Kamal Salibi said the region had already failed to unite under the banner of Arab nationalism after World War Two.
“It didn’t work with Arab nationalism, and with pan-Islamism it is working less,” he said. “The likelihood that states would give up their sovereignty is now more remote than ever before.”
[...]
“For most of the mainstream and less mainstream political parties of political Islam, the borders of the contemporary state have been accepted,” said As’ad AbuKhalil from Lebanon, who teaches politics at the U.S. California State University.
“There is absolutely no credence to the notion that the quest for the caliphate is the overriding goal of the Islamist movement in the region.”
It’s disgraceful that the president is aping enemy propaganda, which no doubt gives people in the Islamic world the impression that we believe that al Qaeda is strong ― strong enough to have a shot at the caliphate that it gets mentioned in a presidential speech. The very idea is ridiculous. Al Qaeda is weak and should be destroyed, not revered as a world power.
Abolish the Federal Gasoline Tax!
Earlier this month, Peter Van Doren and I published a study calling for the total elimination of the federal gasoline tax. Well, the first wave of commentary is in and, thus far, we are greatly underwhelmed. Gas tax proponents are going to have to do a lot better than this to hold the intellectual fort.
Over at the Economist, we are accused of misrepresenting citations when we argue that a doubling of the gasoline tax would only reduce tailpipe pollution by about 6 percent over the long run; an accusation also levied by some commenters at Marginal Revolution. The Economist writes:
Consultation of the cited source seems to show not that an increase in efficiency leads to a 20 percent jump in vehicle miles traveled, but that roughly 20 percent of total energy savings from efficiency gains are lost to increased travel. That’s quite a different point, implying that efficiency gains could have a significant impact on emissions.
We happily accept the clarification. The Economist has crisply stated what we in fact meant to say. But clarifying the point does not undercut our argument.
The “rebound effect” discussed above is one reason why aggregate tailpipe emissions will not be reduced as much as gas tax proponent think. But the other – and more important – reason can be found in J. Daniel Khazzoom’s paper which we cited. To wit, current law regulates tailpipe emissions per mile traveled, not per gallon of fuel consumed. A gasoline tax will induce a consumer shift towards more fuel efficient vehicles, and that shift will lead to only modest reductions in vehicle miles traveled. The upshot is found on page 438 of Khazzoom’s paper: Just as we said, a doubling of the gasoline tax would only reduce tailpipe pollution by about 6 percent over the long run.
Now, a careful critic might point out that this problem could be remedied by regulating tailpipe emissions per unit of fuel consumed rather than by vehicles miles traveled. But we haven’t run into that careful critic as of yet. We do anticipate and acknowledge the point, however, in endnote 32 of our paper.
Another large batch of commenters score us for not conceding that gasoline taxes are an efficient means of addressing greenhouse gas emissions from cars. But it never occurred to us to state the obvious – that if society wants to reduce greenhouse gas emissions, the most efficient means of doing this isn’t with a gasoline tax. It’s with a carbon tax.
Greg Mankiw asks us: “If Congress were considering repeal of the gasoline tax together with an income tax increase to make up the lost revenue, would you favor this revenue-neutral change in the tax mix?” Answer – no. The best way to make up for the revenue loss associated with repeal of the federal gasoline tax would be to eliminate the federal spending associated with the tax. Transportation infrastructure should be a state or local undertaking – not a federal undertaking.
Lurking behind that question, however, is the belief that raising revenue via a gasoline tax imposes less efficiency losses on the economy than raising revenue via an income tax. We don’t think much of that argument, but we discuss it at length in our paper so we won’t go through it again here. Perhaps when Prof. Mankiw gets around to reading our paper, he’ll have something further to say on that score.
There is little else of substance for us to deal with after Round 1.
For instance, many commenters have argued that our paper does not properly take into consideration the underlying literature, which supposedly cuts strongly against our arguments. That literature, we are told, was most recently surveyed by Ian Parry et al. in the June issue of the Journal of Economic Literature.
But this simply tells us that most of the opinions being expressed on these blogs are uninformed by any actual reading. Even a casual look at our paper demonstrates that we review and discuss the same literature discussed in Parry et al and, in fact, we cite Parry’s work extensively throughout. Moreover, Parry et al.’s paper in the JEL makes the same point we make in our study – that a gasoline tax is a deeply problematic means of addressing the externalities associated with driving and that there are far better policy tools available to get the job done. Parry et al. suggest that federal gasoline taxes might be a reasonable “second-best” policy, but we anticipate and counter those arguments in our study, so I won’t go into them here.
Remarkably, no one has yet taken up the most radical challenge offered to the common wisdom in our paper: that even a perfectly efficient gasoline tax would do more harm than good because it would induce more mass transit use, and mass transit use imposes even more costs on society than passenger vehicle use. For this argument, we rely on work done by Mark Delucchi at the Institute for Transportation Studies at the University of California and Cliff Winston at Brookings. Is anyone up to the task?
A Poor Investment
The Census Bureau today released the latest figures on poverty in the U.S, showing that 12.3 percent of Americans (roughly 36.5 million people) live below the poverty line. Nothing could better illustrate the continued failure of the American welfare state. Despite spending more than $477 billion on some 50 different programs to fight poverty last year, the actual reduction in poverty was trivial. Indeed, since Lyndon Johnson declared war on poverty in 1965, the U.S. government has spent more than $11 trillion fighting poverty without success.
One definition of insanity is doing the same thing over and over and expecting different results. Perhaps its time to try something different.
Observers have known for a long time that the surest ways to stay out of poverty are to finish school; not get pregnant outside marriage; and get a job, any job, and stick with it. That means that if we wish to fight poverty, we must end those government policies—high taxes and regulatory excess—that inhibit growth and job creation. We must protect capital investment and give people the opportunity to start new businesses. We must reform our failed government school system to encourage competition and choice. We must encourage the poor to save and invest.
More importantly, the real work of fighting poverty must come not from the government, but from the engines of civil society. An enormous amount of evidence and experience shows that private charities are far more effective than government welfare programs. While welfare provides incentives for counterproductive behavior, private charities can use their aid to encourage self-sufficiency, self-improvement, and independence. Private charities can individualize their approaches and target the specific problems that are holding people in poverty.
The big question is how much more money–and how many more lives–will we waste until we realize that, as Ronald Reagan used to say, “government isn’t the solution; government is the problem.”
U.S. Manufacturing Sector Needs No Protection from Congress
Protectionist measures currently being considered on Capitol Hill would damage America’s manufacturing base and fail to take into account that the nation’s manufacturing sector is in fact booming. In “Thriving in a Global Economy: The Truth about U.S. Manufacturing and Trade,” Cato scholar Daniel J. Ikenson argues, “Justification for [protectionist] bills is predicated on the belief that manufacturing is in decline and that the failure of U.S. trade policy to address unfair competition is to blame. But those premises are wrong. The totality of evidence points to a robust manufacturing sector that has thrived on account of greater international trade.”
Filed under: International Economics and Development; Tax and Budget Policy
Gonzales and the Constitution
Attorney General Alberto Gonzales presumably resigned because he had lost support in Congress, especially over issues relating to the firing of U.S. attorneys. But Tim Lynch, director of Cato’s Project on Criminal Justice, has long insisted that the real problem with Gonzales was not incompetence, faulty memory, or his confusing explanations of how the U.S. attorneys came to be dismissed. Rather, he wrote in May:
In area after area — from habeas corpus to separation of powers to executive responsibility — he has sought to strip out the limits that the Constitution places on presidential power. His fiasco regarding the firing of federal prosecutors is a petty offense when compared to the legal advice that he has conveyed to the President. The real scandal is his disregard for constitutional principles.
That’s why you have to appreciate Gonzales’s decision to resign effective September 17, Constitution Day. Maybe he wants to send a subtle signal that the end of his tenure could be an occasion to recover our commitment to constitutional limits on federal power and on presidential power.
Constitution Day is also, of course, famous as the day that the Cato Supreme Court Review is released at an all-day symposium on the Supreme Court’s most recent term.
The Blue Dog Fraud
Many of the newly-elected Democrats in the House of Representatives campaigned as fiscally conservative independents, but the Wall Street Journal reveals that these so-called blue-dog Democrats generally have been supporters of higher taxes and bigger government. Too bad these fiscal frauds aren’t more like the “Boll Weevil” Democrats, members of Congress who provided the margin of victory for many reforms to limit the burden of government during the Reagan years:
So far this year the blue dogs have been almost all bark when it comes to fiscal restraint and debt reduction. Thirty of the 48 have voted for every one of the non-defense spending bills their committee chairman have sent them. …28 of the 48 blue dogs voted “no” on each of the 27 amendments that Republicans proposed to cut the costs of these bills. …Voting records from recent years confirm that the blue dogs are less than consistent spending hawks. The National Taxpayers Union did some checking and found that the blue dogs had an average fiscal score of 24 out of 100, earning them a grade of D as a group. It also found that last year the blue dogs sponsored $145 of new spending for every dollar of budget reductions, for a net spending increase per member of more than $140 billion. The blue dogs are consistent on one fiscal issue: stopping tax cuts. As a group they opposed the Bush tax cuts and the extension of those tax cuts, and a super-majority vote requirement to raise taxes–all in the name of easing the debt burden on future generations. But those concerns evaporated when all but nine in the blue dog coalition voted to expand the Schip health-care program to include many middle-class families, at a cost of $132.6 billion over the 2008-2017 period.
Politics Today
The Washington Post reports today that John Edwards’s new strategy is to reposition himself as a “straight talker,” emulating the model that worked for John McCain in 2000. As someone said, “Sincerity is everything. If you can fake that, you’ve got it made.”
Meanwhile, the Post also tells us about the lifelong congressional insider who’s helping Barack Obama craft his image as a Washington outsider.
What a country. It reminds me of the presidential campaign manager who once told me, “We’ve made a tentative decision to run a bold campaign.”
The Privatization Revolution Reaches the Kibbutz
A fascinating headline in the New York Times today:
The Kibbutz Sheds Socialism and Gains Popularity
It seems that one of the proudest accomplishments of socialism – one that never degenerated into totalitarianism! – the Israeli kibbutz, began to decline in the 1980s as even small-scale socialism proved not to work very well. People left the kibbutzim, and they seemed doomed. But now, as the Times puts it, “most are undergoing a process of privatization,” though just as in China and other reforming socialist societies, they prefer not to use such a word. Nevertheless, the Times says,
On most kibbutzim, food and laundry services are now privatized; on many, houses may be transferred to individual members, and newcomers can buy in. While the major assets of the kibbutzim are still collectively owned, the communities are now largely run by professional managers rather than by popular vote. And, most important, not everyone is paid the same.
Once again, people are lining up to get in.
One difference between libertarianism and socialism is that a libertarian society allows for voluntary experiments in socialism, while a socialist society can hardly accommodate people who prefer to live in a libertarian community. In a free society, if kibbutzim or other experiments in communal living can make a go of it, more power to them. And if the original design doesn’t quite work, then adjustments can be made. And the rest of us benefit by having more patterns and models available to choose from.
Filed under: General; International Economics and Development
The Few, the Proud, the SiCKO Audience
This fun quote from the Kaiser Family Foundation, which polled the public regarding Michael Moore’s film SiCKO, just landed in my inbox:
“Our poll shows how the combination of good timing, a controversial director, and lots of free media attention can generate real impact for a film that very few people have actually seen,” said Kaiser President and CEO Drew E. Altman, Ph.D.
Talking Cancer with the Candidates
The Lance Armstrong Foundation will host forums for presidential candidates today and tomorrow in Cedar Rapids, Iowa. The forums, Democrats today, Republicans tomorrow, will focus, not surprisingly, on health care and the fight against cancer.
As a cancer survivor, this is an issue of great concern to me. Unfortunately, we can expect both the questions and answers to focus around more federal spending for research and the Democrats support for a government-run national health care system. I wish Chris Matthews, who will moderate this forum, would point out to them that cancer survival rates in the U.S. have been rising, and that one reason for this is the free-market health care system that these candidates love to criticize.
The one common characteristic of all national health care systems is that they ration care. Sometimes they ration it explicitly, denying certain types of treatment altogether. More often, they ration more indirectly, imposing global budgets or other cost constraints that limit the availability of high-tech medical equipment or imposes long waits on patients seeking treatment. In the U.S. there are no such limits, meaning that the most advanced treatment options are far more available. This translates directly into saved lives.
Take prostate cancer, which I suffered from, for example. In most countries with national health insurance, the preferred treatment for prostate cancer is…to do nothing. Prostate cancer is a slow moving disease. Most patients are older and will live for several years after diagnosis. Therefore it is not cost-effective in a world of socialized medicine to treat the disease too aggressively. The approach saves money, but comes at a more human cost.
Even though American men are more likely to be diagnosed with prostate cancer than their counterparts in other countries, we are less likely to die from the disease. Less than one out of five American men with prostate cancer will die from it, but 57 percent of British men and nearly half of French and German men will. Even in Canada, a quarter of men diagnosed with prostate cancer, die from the disease.
Similar results can be found for other forms of cancer. For instance, just 30 percent of U.S. citizens diagnosed with colon cancer die from it, compared to fully 74 percent in Britain, 62 percent in New Zealand, 58 percent in France, 57 percent in Germany, 53 percent in Australia, and 36 percent in Canada. Similarly, less than 25 percent of U.S. women die from breast cancer, but 46 percent of British women, 35 percent of French women, 31 percent of German women, 28 percent of Canadian women, 28 percent of Australian women, and 46 percent of women from New Zealand die from it.
Even when there is a desire to provide treatment, national health care systems often lack the resources to provide it. In Britain, for example, roughly 40 percent of cancer patients never get to see an oncology specialist. Delays in receiving treatment under Britain’s national health service are often so long that nearly 20 percent of colon cancer cases considered treatable when first diagnosed are incurable by the time treatment is finally offered.
But the advantages of free-market health care go far beyond an absence of rationing. With no price controls, free-market U.S. medicine provides the incentives that lead to innovation breakthroughs in new drugs and other medical technologies. U.S. companies have developed half of all the major new medicines introduced worldwide over the past 20 years. In fact, Americans played a key role in 80 percent of the most important medical advances of the past 30 years. Eighteen of the last 25 winners of the Nobel Prize in Medicine either are U.S. citizens or work here.
Obviously there are problems with the U.S health care system. I am sure we will hear plenty about that during these forums. But it is important to understand that for all its faults and all the criticism that it has received, the United States’ free market health care system has made it the place you want to be if you have a serious illness. Millions of cancer patients have discovered that. It would be nice if Lance Armstrong, Chris Matthews, and the candidates would stop to think about this.
Unfair Criticism of the Fair Tax
Regular readers know that I think the flat tax is the more astute tax reform option, but I admire the Fair Tax because it has the same pro-growth features as a flat tax (low tax rate, no double-taxation of saving and investment, no special loopholes, etc). As such, I feel compelled to offer a partial defense against Bruce Bartlett’s anti-Fair Tax column in the Wall Street Journal. Bruce notes some of the political obstacles to a national sales tax, and I largely agree with those observations, but Bruce also says that Fair Tax advocates are wrong to advertise the “tax-inclusive” rate. It is true that ordinary Americans think of “tax-exclusive” rates when looking at state sales taxes, but the Fair Tax people are seeking to compare their proposal to the current income tax, which is calculated on a “tax-inclusive” basis. So while it’s true that sales tax advocates should not let people assume that the Fair Tax is calculated the same way as a state sales tax, this does not mean the “tax-inclusive” rate is not an appropriate measure when looking to overhaul the tax code. Bruce also cites the revenue estimates of the Joint Committee on Taxation as if they were carved on stone tablets, but the JCT has a long track record of inaccurate predictions because of their assumption that tax policy has no affect on economic growth. Using the JCT as an authority is akin to letting the other side serve as both player and umpire:
In reality, the FairTax rate is not 23%. Messrs. Linder and Chambliss get this figure by calculating the tax as if it were already incorporated into the price of goods and services. (This is known as the tax-inclusive rate.) Calculating it the conventional way that every other sales tax is calculated, with the tax on top of the price, yields a rate of 30%. (This is called the tax-exclusive rate.) The distinction is confusing, but think of it this way. If a product costs $1 at retail, the FairTax adds 30%, for a total of $1.30. Since the 30-cent tax is 23% of $1.30, FairTax supporters say the rate is 23% rather than 30%. …professional revenue estimators have always concluded that a national retail sales tax would have to be much, much higher than 23%. A 2000 estimate by Congress’s Joint Committee on Taxation found the tax-inclusive rate would have to be 36% and the tax-exclusive rate would be 57%. In 2005, the U.S. Treasury Department calculated that a tax-exclusive rate of 34% would be needed just to replace the income tax, leaving the payroll tax in place. But if evasion were high then the rate might have to rise to 49%. If the FairTax were only able to cover the limited sales tax base of a typical state, then a rate of 64% would be required (89% with high evasion).
School Money for Nothing
If you want a very concrete example of what plagues the public schools in Washington, D.C., this story is for you. Bottom line: D.C. Public Schools are going to shell out $5.4 million this year for 68 employees who are currently slated to do . . . nothing.
It turns out these folks have no role in changes being made to the District’s school system, but they are too senior to let go. And this is a relatively small personnel hiccup for D.C. In 2003, the District “discovered” 640 employees who ended up costing $31 million.
It’s these sorts of things that make one think that perhaps funding really isn’t the primary problem in D.C. schools (that, and the nearly $20,000 per student D.C. has available), and that maybe — just maybe — it’s the bloated, lumbering system itself that’s the real educational enemy.
No Veterans of Foreign Wars Need Apply
“As some of the leading presidential candidates trooped before the Veterans of Foreign Wars in Kansas City this week, there was one thing largely missing at the lectern — veterans of foreign wars,” writes Peter Baker in the Washington Post, contrasting this year’s campaign with past election years.
Baker grades both former presidents and current candidates on a steep curve. He writes, “Every president from Harry S. Truman to George H.W. Bush served.” But LBJ, already a congressman, went on investigative missions for FDR, admittedly flying around the South Pacific combat zone. And the nearsighted Ronald Reagan made propaganda films in Los Angeles. He even counts George W. Bush as a veteran on the basis of his Texas Air National Guard service.
As for the current candidates,
“The torch is being passed to a new generation that’s never worn a uniform,” said Kenneth T. Jackson, a military historian at Columbia University. “It’s a significant change. It means people are now coming of age who are really the post-Vietnam generation.”
But is that really true? The leading Democratic candidates are a woman and a man born in 1961. But John Edwards, born in 1953, Bill Richardson (1947), and Joe Biden (1941) are not “the post-Vietnam generation.” They’re the non-Vietnam generation. A blogger has some more details about the Vietnam records of 2008 candidates here.
As for the Republicans, John McCain famously served, as Baker notes. But Mitt Romney (1947), Rudy Giuliani (1944), Fred Thompson (1942), and Newt Gingrich (1947) are, like their Democratic counterparts, within the age cohorts who went to Vietnam. They weren’t post-Vietnam, just nowhere-near-Vietnam. Mike Huckabee (1955) and Sam Brownback (1956), along with Barack Obama, would seem to the only candidates who are actually from the post-Vietnam generation.
Does this matter? It used to matter to voters. When I asked my parents in the 1960s, about 20 years after the end of World War II, why all the local candidates listed themselves as veterans on all their campaign literature, my mother told me that you’d wonder what was wrong with a man who hadn’t served in “the war.” Today, some worry that military veterans might be more eager to go to war. Historian Jackson sees it differently: “When you have leaders who haven’t gone [to war], I do think it changes the equation a little bit,” he told the Post. “It’s a little bit worrisome. People who have actually been to war . . . are actually a little less inclined to go to war. Generals know what war’s about, and they’re less enthusiastic to go rocketing off than civilians.”
That reminds me of Robert Heinlein’s novel Starship Troopers, often denounced as militaristic or even fascist, especially by people who have only seen the movie. In the novel, only military veterans were citizens with voting rights. But the basis for that was classical republicanism: that only those who were willing to defend the society, and who by facing combat had come to understand the real meaning of power and war and violence, could be trusted to lead the society.
At the very least, candidates who have never served in a war should have some special humility in urging that other Americans be sent to war.
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