Archive for February, 2009
Nadya Suleman’s Octuplets & the Perils of Public Charity
The AP reports that you and I will be paying the cost of rearing Nadya Suleman’s newborn octuplets — as well as her other six children — through various state and federal welfare programs:
Even before the 33-year-old single, unemployed mother gave birth to octuplets last month, she had been caring for her six other children with the help of $490 a month in food stamps, plus Social Security disability payments for three of the youngsters. The public aid will almost certainly be increased with the new additions to her family.
Also, the hospital where the octuplets are expected to spend seven to 12 weeks has requested reimbursement from Medi-Cal, the state’s Medicaid program, for care of the premature babies, according to the Los Angeles Times…
In California, a low-income family can receive Social Security payments of up to $793 a month for each disabled child. Three children would amount to $2,379.
The Suleman octuplets’ medical costs have not been disclosed, but in 2006, the average cost for a premature baby’s hospital stay in California was $164,273, according to the U.S. Department of Health and Human Services. Eight times that is more than $1.3 million, and the average cost for just one cesarean birth in 2006 was $22,762 in California.
A reasonable person might ask, “So what? Poor kids need help. Would you rather let them die?” That certainly does not seem to be the answer. Yet there are perils inherent in having government come to the rescue.
One challenge confronting both public and private charity is known as the Samaritan’s dilemma: any effort to help the needy inevitably discourages self-help. People at the margins don’t work as hard, or even take deliberate advantage of others’ altruism, which increases the number of people “in need.” That appears to have happened in Suleman’s case:
A Simple Way to Enrich Everyone, Instantly
Hey Slate! I can commit the broken window fallacy too. Can I write a business column? Pretty please?
The economy of the Washington, D.C., area has boomed in recent decades not so much because the federal government has expanded its payrolls massively but because private government contractors have been thriving. As the Bureau of Labor Statistics notes, in January, “the large areas with the lowest jobless rates in December were Oklahoma City, Okla., and Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.” — a capital city, and the capital city.
I have a modest proposal, then.
Washington, DC is only one city, but what we really want is to enrich the whole country. I therefore propose that we increase all federal taxes by a factor of sixty, so that federal spending, which now only enriches the 5 million in the DC area, will be enough to enrich all 300 million Americans.
We can spend it on a proportionate number of “private” government contractors if it helps. That’s fine with me — you know how we free-marketers love anything calling itself “private.” All that matters is that we keep borrowing, taxing, and inflating ourselves into the wealth that Washington so obviously has. That, you see, is the power of private enterprise.
Looking Back: Cato Scholars Critical of Bush’s Big Government Policies
In selling his big-spending ideas for reviving the U.S. economy, President Obama has chastised “the same policies that, for the last eight years, doubled our national debt, and threw our economy into a tail spin.”
We couldn’t agree more with the president.
Unfortunately, he seems unaware that exploding the size of government, as he is proposing to do with this stimulus package, is a remarkably Bush-esque ideal.
While Bush was in office, scholars at the Cato Institute were critical of his big government policies. In a new section on cato.org/fiscalreality, you can find some of our research and commentary throughout the Bush years, including:
- “Bush’s Overspending Problem,” by Chris Edwards, The National Post, February 6, 2003
- “The Bush Legacy: Inflation or Deflation?,” by Steve H. Hanke, Globe Asia, September 24, 2008.
- “‘Conservative’ Bush Spends More than ‘Liberal’ Presidents Clinton, Carter,” by Tad DeHaven and Veronique de Rugy, cato.org, July 31, 2003.
- “Bush’s Stimulus Flop,” by Alan Reynolds, The Wall Street Journal, January 22, 2008.
- “A Sweeping Rejection of President Bush,” by David Boaz, Cato-@-Liberty, November 5, 2008.
$800 Billion Is a Lot of (Other People’s) Money
Even though Keynesian theory does not make sense, President Obama wants a so-called stimulus that will increase the burden of government spending by about $800 billion (including the additional interest on government debt, more than $1 trillion). This is not pocket change. In this short video, Michelle Muccio of the Acton Institute explains how this amount of money would be enough to abolish the payroll tax for the rest of the year.
Why don’t politicians choose tax relief? As John Kerry stated, people can’t be trusted to spend their own money.
A Terror Warrior: Wildly and Carelessly Wrong
A few days ago, Nile Gardiner of the Telegraph (U.K.) took Vice President Biden and the Obama Administration to task for abandoning the “War on Terror” metaphor. It’s empty-headed, fear-based pap.
President Obama’s decision to abandon the phrase “war on terror” sends the wrong signal to al-Qaeda and other Islamist terrorists groups. America and her allies are engaged in a long-term global war against a vicious enemy that seeks the free world’s destruction, whether in Afghanistan, Iraq or in the cities of Europe and the United States. This is hardly the time to be engaging in a cynical PR exercise which will only serve to soften America’s image in the eyes of its worst enemies.
The relevant audience is not al Qaeda and terrorists groups. It’s the people near them ideologically and physically. These people are deciding whether or not to join them or support them.
Communicating that the United States is war-mongering and fearful of al Qaeda makes us look bad to these audiences, and it makes al Qaeda look like a worthy opponent of ours. We could do terrorism no better favor than continuing to claim a “war” on terror featuring al Qaeda.
Gardiner also seems to have no grasp – perhaps no awareness that he should have a grasp – of the actual goals and capabilities of al Qaeda or anyone using the name. Most terrorists don’t “seek[] the free world’s destruction.” The ones who say they do just . . . might . . . be trying to terrorize! What a concept. They have about the same chance of succeeding as I do of earning $1 billion by publishing this post. Terrorists might occassionally succeed with an attack, but exaggerated fears of terrorism will drive us to do much worse to ourselves year over year than the sporadic attack could ever accomplish.
Is dropping “war on terror” a “cynical PR exercise”? No. It’s a hard-headed, strategically sound PR exercise – again, to bring terrorists’ ideological and physical neighbors toward our side.
Sound counterterrorism strategy thinking was on full display at our recent conference on counterterrorism strategy. Video and audio recordings of every panel are available for download. Perhaps Mr. Gardiner can review the proceedings on his home computer while he launders his shorts.
Government-Funded Comparative-Effectiveness Research: a Fool’s Errand
An article in the San Francisco Chronicle by Victoria Colliver explains:
- Why the Left and insurers want the government to fund comparative-effectiveness research (CER),
- Why conservatives and the health care industry oppose government-funded CER,
- Why the opponents of CER will prevail,
- That the Left is going to keep pursuing this fool’s errand anyway, rather than better ways to generate CER, and
- Why I want to knock all their heads together.
All that in a rather short article. Here are the best parts:
“The intent is to use that information to ration care. Why else would you come up with the research to help people choose what provides a lot of value for the money and what doesn’t?” said Michael Cannon, director of health policy studies at the Cato Institute, a libertarian think tank…
“It is perfectly legitimate for Congress to ration care in government programs,” said Cannon, who believes any government effort to conduct comparative-effectiveness studies will quashed by industry. “That’s exactly why you don’t want government paying for medical care.”
The Hitchhiker’s Guide to Recession
My colleague Alan Reynolds has a message for all the paranoid androids in Washington…
Obama, Transparency and Stimulus
On the campaign trail, Barack Obama promised that bills coming to his desk from Congress would sit for five days so the public could read, analyze and comment on them before he signed them into law. In yesterday’s Cato Daily Podcast, Jim Harper, Cato’s director of information policy studies, discussed Obama’s record on fulfilling that promise.
Of course, Obama’s guarantee to let a bill sit for five days did not include emergency legislation. As for the stimulus bill, should it be considered “emergency legislation?” Harper says no.
A five day difference from the time it goes into effect is very small, especially in regard to the fact that most of the people who are expecting to change their behavior in light of the passage of the bill will be able to do that during the five day pendency of it…it should sit for five days before it gets signed, according to the promise that President Obama made during his campaign.
No Cut-astrophe
The Obama administration is shaping up to be little more than the Office of Doomsayer in Chief, at least in the early going, and it is being obediently assisted by the media. In education, USA Today gave the office a nice boost this morning by reporting on a Center for Reinventing Public Education projection that without a stimulus, states might have to cut their education spending by 18.5 percent over the next three years. And CRPE did not include a projection for local cuts, which researcher Marguerite Roza said were impossible to make.
U.S. Secretary of Education Arne Duncan seized the moment, stating in the article that the analysis “obviously confirms what we have feared: that there is so much at stake now and we’re really trying to stave off catastrophe.”
Here we go again…
For one thing, predicting budget shortfalls is hardly an exact science. Moreover, unreported by USA Today, the CRPE analysis is based on the assumption that states will cut spending in all areas equally in response to revenue shortfalls. But in few states does anyone wield the kind of political power that the education establishment brings to bear.
Suppose, though, that total per-pupil expenditures – consisting of local, state, and federal dough – were to decrease by 18.5 percent. (Obviously, the feds aren’t going to cut funding, but let’s pretend that some sense somehow wafted into Washington and caught the pols by surprise.) Where would that put us? On par with Depression era funding? Modern day Sri Lanka or Zimbabwe?
Try again.
Unfortunately, the latest per-pupil funding data the federal government has is from the 2004-05 school year, which is likely lower than what was spent this year. But let’s use it anyway, if for no other reason than to give the Chicken Littles every benefit of the doubt. In 2004-05, the average per-pupil expenditure in the United States was $11,470. Reduce that by 18.5 percent, and you’re spending $9,348.
At what year does that put us? Adjusted for inflation, right about at 1996-97 — hardly major time travel! And compared to other industrialized nations? Still in the top six, nearly tied with Denmark, and that is comparing our average for elementary and secondary schooling with just secondary schooling –- the more expensive level — for everyone else.
Considering all of this along with the evidence that I have laid out previously showing the almost complete disconnect between spending and performance, as well as the massive bloat in the system, and such a cut shouldn’t be called a “catastrophe.” It should be called “why the hell didn’t we make such a cut years ago?”
Stimulus Agreement Means Lower Long-Run Growth
News reports indicate there is some sort of final deal on the so-called stimulus. Some of the politicians are acting as if this massive spending bill is “fiscally responsible” merely because the total amount of money is fractionally smaller than the House and Senate proposals. Ironically, as Veronique de Rugy explains for reason.com, even the Congressional Budget Office, which relies on a deeply-flawed Keynesian economic model, is warning that bigger government will hurt the economy’s long-run performance.
In a report to Sen. Judd Gregg (R-N.H.), the nonpartisan Congressional Budget Office (CBO) writes in plain English—well, economic language—that the Senate bill would eventually cause not a stimulus but a recession in “the longer run.” …On the CBO’s The Director’s Blog, Elmendorf explains why the Senate legislation would eventually reduce economic output:
The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth in the form of government bonds rather than in a form that can be used to finance private investment, the increased government debt would tend to ‘crowd out’ private investment—thus reducing the stock of private capital and the long-term potential output of the economy.
The Senate might have done something straightforward, like cutting the corporate income tax or cutting the payroll tax that all workers pay. Instead, most of the provisions are tax credits, many of which are refundable. In other words, individuals and businesses need to pay their taxes up front and then will get money back from the government. These sorts of programs, aimed incentivizing investment, are better understood as spending programs disguised as “tax cuts.”
And here is one more thing to consider: There is absolutely no evidence that any stimulus package in the past 80 years has goosed economic activity—not FDR’s during the Great Depression, not Japan’s during the 1990s, and not George W. Bush’s in 2001 and 2008. If anything, the economic evidence suggests that such spending packages actually intensified and prolonged misery.
The Congressional Budget Office is right, albeit for reasons other than the ones generated by its garbage-in-garbage-out model. Bigger government hurts economic efficiency by diverting resources from the productive sector of the economy, and it does not matter whether government spending is financed by taxes or borrowing.
Una Hora de SCHIP
HITN’s Destination Casa Blanca has posted their hour-long program — featuring yours truly — on the State Children’s Health Insurance Program expansion that President Obama just signed into law (the utter lack of evidence of effectiveness notwithstanding).
During the program, I shatter the myths that SCHIP is for low-income children, that it’s a cost-effective way of improving children’s health, etc.
I guess we know what you’ll be doing for the next hour.
German High Court Challenges EU and Lisbon Treaty
The forces of European consolidation are attempting to force through the Lisbon Treaty without allowing anyone other than the Irish to vote. And, of course, the Irish have been pressed to vote a second time since they made the “wrong” decision last year, rejecting Lisbon.
But now the treaty faces a serious challenge before the German high court. Reports the EU Observer:
Several of the eight judges in charge of examining whether the EU’s Lisbon Treaty is compatible with the German constitution have expressed scepticism about the constitutional effects of further EU integration.
According to reports in the German media, the debate during the crucial two-day hearing starting on Tuesday (10 Februrary) on the treaty centred on criminal law and the extent to which it should be the preserve of member states rather than the EU.
The judges questioned whether the EU should be allowed to increase its powers in criminal law.
Judge Herbert Landau said new EU powers in criminal justice affected “core issues” of German legislative authority.
“These are issues affecting the shared values of a people,” he said.
Judge Udo Di Fabio, who prepared the procedure and will deliver the judgement on the treaty, asked whether the transferral of powers to the EU really means more freedom for EU citizens.
“Is the idea of going ever more in this direction not a threat to freedom?” he asked, according to FT Deutschland.
Judge Rudolf Mellinghoff asked whether the treaty was already “in an extensive way” being applied when its comes to the area of criminal sanctions in environment issues – the European Commission may sanction companies for polluting the environment
In all, four of the eight judges questioned the Lisbon Treaty.
The Irish vote was bad enough, causing wailing and gnashing of teeth throughout the continent’s Eurocratic elite. If the EU’s most important country rejects the Lisbon Treaty, the entire EU project will be in doubt. After all, it’s one thing to browbeat the Irish, threatening to toss them out of the EU or push them into some form of second-rate status. But the EU couldn’t do that with Germany and survive.
It’s hard to imagine the German court overturning the government’s ratification of the treaty. But no one expected the Irish to say no as well. Europe might soon find itself dealing with a political as well as economic crisis.
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