Archive for January, 2009
Can Congress and the President Coordinate Care?
Paul Testa of the New America Foundation has kind words for the briefing paper that Arnold Kling and I coauthored, “Does the Doctor Need a Boss?“ He notes “how similar the authors’ core arguments and ideas were to other calls we’ve heard for delivery system reform from across the political spectrum.”
But Testa loses us here:
The emerging consensus on the means as well as the ends of delivery system reform create can lay the foundation for broader health reform. It’s up to Congress and the Obama Administration to build off that foundation bringing in the necessary pieces of cost, coverage and financing reforms to create a truly sustainable health care system that works for all Americans.
As Kling explains in this Cato podcast, Congress and the president are the wrong people to direct delivery system reform.
Of Cab Fares and Health Care: Markets with Uncertainty Require Competition between Payment Systems
Last week, I was late for a briefing on Capitol Hill. Some would say that was because traffic snafus caused by the March for Life blocked the usual route from the Cato Institute to Capitol Hill, requiring our cabbie to circle back to Cato and take another route. I say the real reason was the D.C. Taxicab Commission.
The D.C. Taxicab Commission requires all cabbies to use the same fare system. Until recently, the commission required cabbies to use a zone system. Under the zone system, the fare from Cato to Capitol Hill was the same flat rate, no matter what route the cabbie chose or how long the ride. If a cabbie encountered a traffic obstruction that slowed him down, then he bore the cost of that lost time. He received no additional money for waiting in traffic or taking a longer route, and the lost time meant that he would collect fewer fares. Therefore, a cabbie that charges according to zones, or any fixed price per trip, has an incentive to learn about and avoid significant traffic obstructions.
Recently, however, the D.C. Taxicab Commission required all cabs to switch from zones to meters that charge by the minute and by the mile. Under the meter system, the passenger bears the cost of delay, because meters charge additional money for every extra minute and every extra mile. Therefore, cabbies have little incentive to learn about and avoid significant traffic obstructions.
In sum, if our cabbie were paid a fixed price for taking us from Cato to Capitol Hill, he probably would have paid more attention to traffic conditions — on the radio, his mobile phone, etc.. He would have known that the usual route was blocked, because he would have borne the cost of delay. But because the D.C. Taxicab Commission requires him to use a meter, he cared a lot less about delay.
The problem is not the meter system. The old zone system probably had its own perverse outcomes, perhaps dead zones where you couldn’t catch a taxi or cabbies who drove too fast. The problem is that the DC Taxicab Commission dictates a single payment system for all taxis. Absent that mandate, cabbies would use different payment systems and competition would force each to offer better service. “Zone” taxis would slow down and pick up fares in more areas, while “meter” taxis would try to avoid unnecessary delays.
Incidentally, that’s the same reason America spends too much on health care and so few Americans have electronic medical records.
The federal government is the largest purchaser of medical services and it effectively dictates a single payment system for most providers. Medicare pays providers on a fee-for-service basis, which is akin to paying cabbies on the basis of meters. (The federal tax code further encourages fee-for-service payment by insulating consumers from the cost of their health insurance.) As a result, doctors and hospitals have little reason to invest in things (e.g., comparative-effectiveness research, electronic medical records) that help avoid unnecessary services, because Medicare pays for unnecessary services. In contrast, prepaid group plans like Kaiser Permanente receive a fixed amount per patient, which is akin to paying cabbies on the basis of zones. Kaiser conducts comparative-effectiveness research and provides electronic medical records to its enrollees because Kaiser bears the cost of unnecessary or duplicative services.
Markets use competition between different payment systems to improve quality and reduce costs, particularly in markets with uncertainty. That form of competition is usually lost when government runs the show.
Filed under: Cato Publications; General; Health Care; Regulatory Studies
Give Government a Power and It Will Find Something to Do With It
In Section 8131 of the Department of Defense Appropriations Act for fiscal 2004, Congress cancelled funding for the Total Information Awareness program, and it seemed to mean it:
“Terrorism Information Awareness Program” means the program known either as Terrorism Information Awareness or Total Information Awareness, or any successor program, funded by the Defense Advanced Research Projects Agency, or any other Department or element of the Federal Government, including the individual components of such Program developed by the Defense Advanced Research Projects Agency.
But in a classified annex, Congress allowed parts of the program to continue: “[T]his limitation shall not apply to [a] program hereby authorized for Processing, analysis, and collaboration tools for counterterrorism foreign intelligence . . . .”
Providing further:
“None of the funds provided for Processing, analysis, and collaboration tools for counterterrorism foreign intelligence shall be available for deployment or implementation except for:
(1) lawful military operations of the United States conducted outside the United States; or
(2) lawful foreign intelligence activities conducted wholly overseas, or wholly against non-United States citizens.
Parts of TIA could survive, but they could only actually be used in U.S. military operations conducted outside the United States or for lawful foreign intelligence activities conducted overseas or against overseas persons.
Shane Harris of National Journal documented TIA’s life after death in February 2006.
Now whistleblower Russel Tice has come forward in a series of interviews (reviewed by Wired’s Threat Level blog here and here) to describe what he knows of a program that is the very similar to Total Information Awareness, including the use of “red teams” to generate supposed patterns of terrorist activity. The program was potentially used to investigate U.S. journalists and may have combined communications information with credit card data.
In the spring of 2006, Tice told a reporter, “[T]he biggest sweat that happened at NSA happened when John Kerry almost got elected president [in 2004], because they were concerned they were all going to be thrown in jail.” He feels strongly that people at the NSA have been violating the law.
It’s hard to determine the truth of things from one whistleblower who may bring bias and mistake in recollection and interpretation. But there was no reason for Congress to continue Total Information Awareness in secret. As Jeff Jonas and I documented in our paper on the subject, data mining for terrorism will not work. There just aren’t enough instances of terrorism from which to generate patterns that reliably indicate terrorism.
It’s quite plausible that folks at the National Security Agency, finding no counterterrorism use for the Total Information Awareness components transferred there, put them to work on other things – like investigating journalists’ sources.
This cries out to be cleared up. Should it see fit to investigate, Congress should not give immunity to credit card companies.
What Did the New Deal Do?
There has been much recent debate about whether or not President Franklin Roosevelt’s New Deal policies increased the nation’s economic pain during the Great Depression or led to its end. In today’s Cato Daily Podcast, Regulation Magazine managing editor Thomas A. Firey reveals why erroneous stories about the effects of the New Deal survive despite decades of economic research that tell a different, more nuanced story:
Listening to the fight today among commentators on the left and the right talking about the New Deal and making various claims about it, as far as a stimulus—they’re almost all wrong, and what’s most disturbing to me as an economic historian is this is actually pretty well-plowed ground, so I don’t know how they can be wrong and how no one’s calling them out on it….
…The two stylized stories, the one that nothing got better and the other that the New Deal miraculously fixed everything—both are very clearly wrong when you look at the numbers. But no one wants to tell the real story, because, first of all, it doesn’t fall nicely in an ideological story on either side, and, second of all, it requires work. You have to read stuff and do research and care about the facts, and, let’s be honest, in this political environment, very few people do those things or care about the facts.
Obama’s ‘Bold’ Action on Climate Change
I was invited to comment yesterday over at the New York Times on President Obama’s memorandum to the EPA to reconsider its earlier denial of a waiver requested by the state of California; a waiver that would allow that state to impose its own fuel efficiency standards for passenger vehicles and light trucks so as to reduce that state’s greenhouse gas emissions. The simple point I wanted to make at the Times is that allowing this waiver to go through would largely allow that state to dictate fuel efficiency standards for the nation as a whole. I argued that this is probably a bad thing — state action that imposes significant policy changes on the nation as a whole ought to be enjoined and those decisions ought to be left to Congress.
For those of you interested — and who have a strong stomach — read the comments on the board that follows. You might think that there is nothing particularly radical or even ideological in the argument I made. Apparently, you would be wrong.
This morning, I had a chance to reprise that discussion as a guest on the Diane Rehm Show. With me in the studio was David Shepardson, the Washington bureau chief of the Detroit News and Phyllis Cuttino, the director of the Pew Environment Group’s U.S. Global Warming Campaign. You can listen to the show online if you like, but in case you don’t have the time, here are the highlights:
Both Mr. Shepardson and Ms. Cuttino were nearly breathless about the bold, historic step allegedly taken by President Obama this week. Yet is seems to me that telling the EPA to rethink a decision made some months ago — with no stipulation that it actually reverse course — is something short of a political earthquake. “Bold action” would be legislative proposal to increase federal fuel efficiency standards, impose a federal carbon tax, institute an ambitious cap & trade program, etc. I’m not saying I support that sort of “bold” action, but please — let’s keep things in perspective.
Ms. Cuttino argued at every turn that energy efficiency equals emissions reductions. But it does not. Energy intensity in the United States declined by 34% from 1980 through 2000, but energy consumption increased by 26% over that same period. More ambitious gains in energy efficiency promise no better. For instance, energy intensity in China declined by 70% over that same period while energy consumption increased by 80%.
The only way to reduce greenhouse gas emissions is to increase the marginal price of fossil fuels OR to strictly ration their availability. Everything else is a dodge. Reducing the marginal cost of energy or energy-related services — which is exactly what energy efficiency standards do — will not, in aggregate, reduce energy consumption.
Some (Relatively) Good News on Trade
A couple of noteworthy events this week that signal Hope™ for not-too-egregious trade policy from the new administration.
First, Obama met with Mexico President Filipe Calderon and reportedly made no mention of renegotiating NAFTA (although he did say that he wants to revisit labor and environment provisions in that agreement, which is bad enough). Second, President Obama and President Lula da Silva of Brazil spoke by telephone yesterday (more here) and pledged to work together on biofuels (cryptic enough to leave this sceptic unmoved) and on the Doha round of world trade talks.
I am still not convinced of President Obama’s free trade credentials, and it’s a sad day when our expectations are lowered to the extent that we are affirmatively pleased that no protectionist action is being taken. I certainly don’t suggest we laud politicians for not catering to their worst instincts. But in this case, no news is good news.
Slate on Cato Conference
Michael Newman, Slate’s politics editor, writes up the counterterrorism conference we held here two weeks ago. It’s an OK article, and we appreciate the publicity. The trouble is that Newman tries to stuff a conference summary into a theme about Libertarians and Obama. Hence the title, “Cozying Up to the New Guy: Libertarians are oddly hopeful about the Obama administration.” That may be a good hook, it may even be generally true, but it creates a misleading impression here. So at the risk of looking a gift horse in the mouth, I have several complaints.
First, Cato’s defense and foreign policy scholars have repeatedly attacked the Obama team for its adherence to the flawed, bipartisan counterterrorism and defense strategy that it inherited. See here and here for starters. I’m not sure who is cozying up.
Second, the article imagines a strategic rationale behind the conference — Cato thinks it can most influence Obama on issues related to terrorism and is therefore directing its energies there. Not really. There is no singular “Cato view” on these matters or any other. Several scholars here had an interest in counterterrorism policy, and organized a project, which included a public conference, on it. The conference would have happened regardless of who was President. Sure, we’d like the policy-makers in the executive branch to adopt a more sensible perspective about terrorism than their predecessors. But we’d also like Congress, the public, and the media to adopt that view.
Third, Newman gets the theme of the conference right — terror is as big a problem as the terrorism that sparks it — but Slate readers may get the impression that this was just a bunch of libertarians saying so. In fact, the speakers came from across the ideological spectrum. To the extent that they agree, and not all do, it shows that these policies are common-sense, even if they remain unconventional.
Finally, the article says that: “Think tank experts aren’t stupid.” I would have started that sentence with “most.”
Seeking Transparency in the Economic Stimulus
C|Net News blogger Chris Soghoian has the story on the search for transparency in the economic stimulus bill, and he cites Cato’s recent policy forum, Just Give Us the Data!
Good things will happen when taxpayers can see where the money goes.
Sometimes Legislation Is Introduced Just for Show
There have been at least nine bills to deny Members of Congress an automatic pay increase introduced in the new Congress so far. Some are cleverly designed to deny a pay increase when the federal government’s books are out of balance.
Obama’s So-Called Stimulus Scheme: Good for Government, Bad for the Economy
After eight years of higher spending and more intervention, some of us were hoping for change. Unfortunately, President Obama apparently wants to be George Bush on steroids. I explained in a previous video (http://www.cato-at-liberty.org/2008/12/15/are-we-all-keynesians-now/) why Keynesian economics was misguided. The much-anticipated sequel is now available for your viewing pleasure.
This new video looks at the details of Obama’s $825 billion plan to make America more like France. At the risk of spoiling the conclusion, there is no reason to think that big government will work any better for Obama than it did for Bush.
Obama’s Constitution
At the beginning of his inaugural address, President Obama observed that
“America has carried on, not simply because of the skill or vision of those in high office, but because we the people have remained faithful to the ideals of our forebears and true to our founding documents.” [my italics]
Although Obama had taught constitutional law for 12 years, the rest of his address raises a question whether he has ever read the Constitution. For he spells out his vision by committing his administration to a wide range of activities for which there is little or no authority in the Constitution.
“We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place and wield technology’s wonders to raise health care’s quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age.”
Moreover, he asserts, our government should be judged by “whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified,” not by such “stale political arguments” as whether the policies that might generate these outcomes are constitutional and generate benefits higher than the costs.
Nor are the commitments of his administration to be limited to those of greatest concern to Americans.
“To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow, to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders; nor can we consume the world’s resources without regard to effect.”
“What is required of us now is a new era of responsibility – a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world.”
President Obama is intelligent and charming –- but not wise. The Constitution only authorizes the president to be the chief executive of the federal government and the commander-in-chief of the armed forces, ample challenges to the most skilled person, but the president is not the sole leader of the federal government, the American nation, or the free world. Based on his inaugural address, President Obama has no apparent sense of the limits of what he can and should do –- and that will reduce his effectiveness in addressing those issues within his clear authority.
Little Hope for Change on Judges Until the Judiciary Stops Legislating
In a recent editorial, the Washington Post issued a “hope for improvements” from the vitriol, partisan rancor, and blocking of qualified candidates that has increasingly dominated nominations to the federal bench. Don’t hold your breath; this is one hope that will not inspire change during the course of the Obama administration.
No, the poisoning of the judicial appointment process won’t end till courts stop acting as policymakers, finding powers in the Constitution that aren’t there and limiting rights that are. Thus the problem with judicial nominations has less to do with cynical politicians and embittered ideologues than it does with a ”living Constitution” that has been stretched over the years beyond any Founder’s recognition. In failing to enforce the constraints on federal powers — and to protect the rights retained by the people under the Ninth Amendment (along with those covered by the Fifth Amendment’s takings clause and the Fourteenth Amendment’s privileges or immunities clause, to name but the most maligned) – what Alexander Hamilton called the “least dangerous branch” has devolved into a disfunctional policymaking body that understandably attracts political passions. As various parties wrestle to direct the government’s expanded powers in their favor constituents, as my boss Roger Pilon wrote in 2002, “everything is politics, nothing is law.”
Until we reset the balances of power among the branches and the government again abides by its constitutional parameters, I’m afraid that the partisanship and politics of personal destruction surrounding judicial nominations will continue unabated – to the detriment of the nominees, the judiciary, and the country. When so much is at stake, it can be no other way. (You might as well ask elections to be less partisan or otherwise heated.)
But the Post’s editorial is on the right track about one thing: the failure of Republicans to define the word “extremist” when speaking of likely Obama judicial nominees. Democrats and their hard Left brethren were so unsuccesful in blocking John Roberts and Samuel Alito in large part because they had cried bigot about practically every previous lower-court nominee. Instead, let’s define what is unacceptable practically and establish an objective standard for judicial nominees from the new administration. Then it will only be a matter of measuring the degree of support or opposition when analyzing each one’s record. I suggest the following: “An extremist judge is someone who puts policy views over the text of the law as written, someone whose record shows a propensity for rewriting statutes or the Constitution.”
If you don’t like the result you get when following the law or the Constitution, change the law or amend the Constitution. As Oliver Wendell Holmes said when asked whether he would be doing justice on the Supreme Court, “This is a court of law, young man, not a court of justice.”
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