Archive for March, 2009
‘Health Status Insurance’ Provides Real Alternative to Universal Care
So screams the headline of John Cochrane’s oped in today’s Investor’s Business Daily. An excerpt:
Markets can provide long-term, secure health insurance while enhancing choice and competition. Given the chance, they will…
This is not pie in the sky. The market for individual health insurance is already innovating to provide better long-term insurance. Well before it was required by law, insurance companies started offering “guaranteed renewable” policies.
Once you buy in, you have the right to continue coverage even if you get sick, and your premiums do not rise if you get sick.
UnitedHealth Group recently announced a product that gives customers the right to buy medical insurance in the future, at a premium that depends only on their current health status.
For a small premium, you can protect yourself against the risk that your health premiums will escalate. This is only a small step away from full health-status insurance.
The oped is based on Cochrane’s recent Cato policy analysis, “Health-Status Insurance: How Markets Can Provide Health Security.”
You can also hear Cochrane and Johns Hopkins University health economist Brad Herring discussing health-status insurance at this Cato policy forum, held today.
Shuffle, Shuffle, Shuffle…
This morning I attended a federal student aid event at the New America Foundation. The big topic? Not the effect of aid on out-of-control college prices, by far the most important concern from the contexts of economic growth, affordability, fairness to taxpayers, etc. No, it was the Obama Administration’s “bold” (NAF’s word) proposal to kill the federal guaranteed student loan program and do all lending directly from Washington. It was just the kind of debate folks in DC love, one that sounds really important but leaves the government-created problem almost totally untouched.
Here’s the critical reality that was completely ignored: taxpayer-furnished financial aid – whether coming directly from DC or delivered by “private” institutions completely backed by DC – appears to be a very big enabler of rampant tuition inflation. Quite simply, as I lay out in the most recent Cato Handbook for Policy, when government ensures that customers can pay more, students demand more and colleges raise prices.
Of course, the argument that aid drives prices is not without its critics, but they’ve got a tough case to make both in terms of economic theory and college cost reality. In Washington, however, this isn’t even being discussed. In DC, it’s all about the deck chairs and nothing about the sinking ship. But then, as we’ve learned oh-so-clearly over the last several months, politicians gain little from averting disasters they’ve helped cause, and lots from handing out life jackets.
Fortunately, Cato is here to remind politicians about the important stuff, not just to bicker over which special interest gets the biggest tax-dollar windfall. On April 7 we will address the fundamental problems with student aid, hosting a Capitol Hill Briefing on the effects not just of switching from guaranteed lending to direct lending, but of all federal student aid. It’ll be just the kind of discussion Washington so desperately needs but so rarely has.
Register here to attend, or watch online the day of the event.
Court Embraces the Spirit of Aloha
Today the Supreme Court unanimously ruled that the resolution Congress passed in 1993 to apologize for U.S. involvement in the overthrow of the Hawaiian monarchy—a determination that remains controversial among historians—did not affect Hawaii’s sovereign authority to sell or transfer the lands that the United States had granted to the State at the time of its admission to the Union. In an opinion by Justice Alito, the Court correctly explained that the words of the Apology Resolution were conciliatory and hortatory, creating no substantive rights—and indeed the resolution’s operative clauses differ starkly from those which provided compensation to, for example, the Japanese-Americans interned during World War II.
Importantly, the Court also noted that it would “raise grave constitutional concerns” if any act of Congress purported to cloud Hawaii’s title to sovereign lands so long after its admission to the Union. This last point is perhaps most important to the ongoing debate over the “Akaka Bill,” which would create a race-based entity to extract political and economic concessions from the state and federal governments on behalf of ill-defined “native Hawaiians.” It is delicious irony that Hawaii’s attorney general, Mark Bennett, an Akaka Bill supporter, secured this victory.
Just as Hawaii is now allowed to develop state lands for the benefit of all its citizens, hopefully Congress will in future refrain from inflaming racial divisions and instead treat all Hawaiians, regardless of race, with the legal equality to which they are entitled.
Further Cato materials on the above: Here’s our brief in the case, Hawaii v. Office of Hawaiian Affairs. Here are articles I wrote on the case and on the on the Akaka Bill. Here is a write-up of a debate I had at the University of Hawaii last month. Finally, here is a podcast I did for the Grassroot Institute (Hawaii’s free-market think tank) — where, among other things, I correctly predicted the Court’s vote today and the scope of its opinion.
Government Motors
Washingtonpost.com collected and posted sundry opinions about Rick Wagoner’s dismissal as GM CEO yesterday. Those opinions, including mine, are posted here. But to spare you the click, here’s what I wrote:
President Obama’s newly discovered prudence with taxpayer money and his tough-love approach to GM and Chrysler would both have more credibility if he hadn’t demanded Rick Wagoner’s resignation, as well. By imposing operational conditions normally reserved for boards of directors, the administration is now bound to the infamous “Pottery Barn” rule: you break it, you buy it. If things go further south, the government is now complicit.
It also means that Wagoner was perceived as an obstacle to whatever plans the administration has for GM. And that’s the real source of concern. If getting these companies back on their feet is the objective, a bankruptcy judge can make a determination pretty quickly about the viability of the firms and the steps necessary to get there. But if the objective is something more grandiose, such as transforming the industry into a model of green production, government oversight and close scrutiny of operations will be necessary. CEOs must be compliant and pliant. It is worth noting that a return to profitability and the metamorphosis of the industry according to a government script work at cross purposes.
A Mind Is a Terrible Thing to Waste (after High School)
The South Carolina NAACP is among the most strident opponents of a new education tax credit proposal in that state that would make it easier for families — especially poor families — to choose private schools for their kids.
But the NAACP’s national platform states that:
The NAACP is a leading advocate of equal access to quality education. In an effort to promote and ensure education opportunities for minority youth, the NAACP offers the following national scholarships: Earl G. Graves Scholarship, Agnes Jones Scholarship, …. These awards help eliminate financial difficulties that may hinder students’ education goals.
Doesn’t that put the SC NAACP’s position into clear conflict with its parent organization? Actually, no. I deleted the qualifier “higher” before the word “education” in the block quote above. The NAACP strongly supports scholarships for poor kids to attend private schools, so long as the kids are over 18 or so.
A few years ago I debated this bizarre inconsistency with a very candid and pleasant NAACP representative, and his response boiled down to this: ”I lived through the Jim Crow South and I don’t trust a bunch of white Republicans to have our best interests in mind.” Fair enough. We shouldn’t trust politicians of any stripe to have the public’s interests in mind on any issue. We should instead look at what actually works best both here and around the world, and do that.
From the largest shanty town in Africa, to the slums of Hyderabad, India, to the remote rural villages of in-land China, the poor are already choosing private schools in vast numbers. And those schools are significantly outperforming their public sector counterparts at a fraction of the cost. Their stories are told in The Beautiful Tree, a compelling new narrative non-fiction book by scholar and world-traveler James Tooley. Cato is launching the book at noon on April 15th at our DC headquarters. I hope someone from the NAACP will attend.
Oh, and in case it matters to anyone, the lead advocate of SC’s tax credit school choice program is state senator Robert Ford, an African American Democrat. For some reason the NAACP still opposes it.
Af-Pak and the U.S.
The violence ripping across Afghanistan will not be stopped unless the problems in nuclear armed Pakistan are addressed, says Cato scholar Malou Innocent, who traveled to Pakistan late last year.
In a new Cato video, Innocent explains what the United States can do to protect its interests and return stability to the region.
Her forthcoming paper, “Pakistan and the Future of U.S. Policy” will be released next month.
Monday Podcast ‘The Politics of Medical Marijuana’
As of this writing, 13 states have passed legislation legalizing medical marijuana. President Obama’s pledge to stop raiding medical marijuana facilities was met with praise from opponents of the drug war, but what does it mean for the future of drug policy?
In Monday’s Cato Daily Podcast, Rob Kampia, executive director of the Marijuana Policy Project, explains his organization’s goals and strategies for ending marijuana prohibition in the United States.
Our society is not quite ready yet to completely end marijuana prohibition. So what we want to do is keep as many people from being arrested and put in jail as possible in the short run. One way of doing that is to legalize medical marijuana state by state.
Kampia spoke at a policy forum on medical marijuana at the Cato Institute in March.
Obama’s First Tax Hike Hits the Poor
It is curious that President Obama keeps claiming that he is not raising taxes on lower-income Americans, yet a tax hike that will impose a disproportionately large burden on the poor goes into effect Wednesday.
In February, Obama signed into law a large tax hike on cigarette consumers. The federal tax on cigarette consumers is jumping from 39 cents per pack to $1.01 per pack — a huge 159 percent increase. If you smoke two packs per day, President Obama has raised your taxes by a $453 annually.
Next on the Obama low-income tax hike agenda: global warming taxes of about $80 billion per year, as revealed in the Obama budget, which equals an annual tax boost of $700 for every household in the United States.
Amusing, but Tragically Accurate, Video on Ag Subsidies from the U.K.’s Taxpayers Alliance
It is unclear whether European Union agriculture policy is more absurd or less absurd than American agriculture policy. Both systems reward special interests. Both systems distort markets. Both systems deprive people in the developing world. Both systems are bad news for taxpayers. The real issue is whether it is possible to reverse these terrible policies. Maybe a bit of satire will do the trick. Our friends at the Taxpayers Alliance in England have put together a video which uses humor to explain the absurdity of Europe’s so-called common agricultural policy.
After watching this video, I’m feeling a bit envious. My mini-documentaries on economic issues (see examples here, here, and here) have received some good feedback, but perhaps we could change more minds in America by using mockery instead of wonkery.
Events This Week
Tuesday, March 31, 2009
POLICY FORUM – Can the Market Provide Choice and Secure Health Coverage Even for High-Cost Illnesses?
12:00 PM (Luncheon to Follow)
In a study recently published by the Cato Institute, economist John Cochrane argues that the market can solve a huge piece of the health care puzzle: providing secure, life-long health insurance and a choice of health plans to even the sickest patients. The key, Cochrane explains, is to eliminate government policies that force the healthy to subsidize the sick, such as the tax preference for employer-sponsored coverage and other attempts to impose price controls on health insurance premiums.
Featuring John H. Cochrane, Myron S. Scholes Professor of Finance, University of Chicago Booth School of Business Research Associate, National Bureau of Economic Research; Bradley Herring, Assistant Professor, Johns Hopkins Bloomberg School of Public Health; moderated by Michael F. Cannon, Director of Health Policy Studies, Cato Institute.
Please register to attend this event, or watch free online.
Friday, April 3, 2009
P
OLICY FORUM – Drug Decriminalization in Portugal
12:00 PM (Luncheon to Follow)
In 2001, Portugal began a remarkable policy experiment, decriminalizing all drugs, including cocaine and heroin.
In a new paper for the Cato Institute, attorney and author Glenn Greenwald closely examines the Portugal experiment and concludes that the doomsayers were wrong. There is now a widespread consensus in Portugal that decriminalization has been a success. The debate in Portugal has shifted rather dramatically to minor adjustments in the existing arrangement. There is no real debate about whether drugs should once again be criminalized. Join us for a discussion about Glenn Greenwald’s field research in Portugal and what lessons his findings may hold for drug policies in other countries.
Featuring Glenn Greenwald, Attorney and Best-selling Author; with comments by Peter Reuter, Department of Criminology, University of Maryland; moderated by Tim Lynch, Director, Project on Criminal Justice, Cato Institute.
Please register to attend this event, or watch free online.
Tax Havens Have Stronger Governance Standards
Congratulations to The Economist for reporting on a new study showing that so-called tax havens actually have the strongest laws to weed out shady money. The article cites new research by an Australian political scientist, who conducted real-world tests to confirm that it is much easier to set up anonymous structures in nations such as the United States and United Kingdom than it is to set up similar structures in places such as Bermuda and Switzerland:
…with a budget of $10,000 and little more than Google (and the ads at the back of this paper), [Jason Sharman, a political scientist at Australia’s Griffith University] showed how easy it was to circumvent prohibitions on banking secrecy, forming anonymous shell companies and secret bank accounts across the world. In doing so he has uncovered an uncomfortable truth for many of the leaders of Group of 20 nations meeting on April 2nd to discuss, among other things, sanctions against offshore tax havens. The most egregious examples of banking secrecy, money laundering and tax fraud are found not in remote alpine valleys or on sunny tropical isles but in the backyards of the world’s biggest economies. …A money-laundering threat assessment in 2005 by the federal government found that corporate anonymity offered by Delaware, Nevada and Wyoming rivalled that of familiar offshore financial centres. For foreigners, America is a particularly attractive place to stash cash, because it does not tax the interest income they earn. Thus with both anonymity and no taxation, America offers them all the elements of a tax haven. …America is not the only rich nation Mr Sharman tested. He tried to open anonymous shell companies and bank accounts 45 times across the world. These were successful in 17 cases, of which 13 were in OECD countries. One example was Britain, where in 45 minutes on the internet he formed a company without providing identification, was issued with bearer shares (which have been almost universally outlawed because they confer completely anonymous ownership) as well as nominee directors and a secretary. …In contrast, when trying to open accounts in Bermuda and Switzerland, he was asked for documentation such as notarised copies of his birth certificate. “In practice OECD countries have much laxer regulation on shell corporations than classic tax havens,” Mr Sharman concludes.
Jim Webb and Criminal Justice
Senator Jim Webb (D-Va) is calling for a national commission to review the American criminal justice system from top to bottom. Good for him. With more than seven million people under criminal justice supervision (prison, parole, probation), a thorough review is desperately needed. You can tell that Webb is new to the Congress because he is raising a subject that most of the long term incumbents would rather not discuss. As Glenn Greenwald observes:
For a Senator like Webb to spend his time trumpeting the evils of excessive prison rates, racial disparities in sentencing, the unjust effects of the Drug War, and disgustingly harsh conditions inside prisons is precisely the opposite of what every single political consultant would recommend that he do. There’s just no plausible explanation for what Webb’s actions other than the fact that he’s engaged in the noblest and rarest of conduct: advocating a position and pursuing an outcome because he actually believes in it and believes that, with reasoned argument, he can convince his fellow citizens to see the validity of his cause. And he is doing this despite the fact that it potentially poses substantial risks to his political self-interest and offers almost no prospect for political reward. Webb is far from perfect — he’s cast some truly bad votes since being elected — but, in this instance, not only his conduct but also his motives are highly commendable.
Read the whole thing.
And speaking of Glenn Greenwald, he will be here at Cato this Friday to discuss his new study for Cato, Drug Decriminalization in Portugal. Portugal is treating drug use as a health problem, not a crime problem, and it is working rather well. When Senator Webb’s commission gets assembled, this report ought to be at the top of its reading list.
To register for the Greenwald forum, go here. For a discussion on mass incarceration, go here. For more Cato work on crime and drugs, go here and here.
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