Archive for January, 2010
Obama Admits CBO Cost Estimates of ObamaCare Are Incomplete
Yesterday — day #224 of the ObamaCare Cost-Estimate Watch — President Obama told House Republicans:
You can’t structure a bill where suddenly 30 million people have coverage and it costs nothing.
And just like that, the president admitted that the official Congressional Budget Office estimates of his health care plan do not reflect its full costs.
Both the House and Senate versions of ObamaCare would cover millions of uninsured Americans by requiring them to purchase private health insurance. As President Obama notes, even if you force people to spend their own money on health insurance, it still costs something to cover them. And if the government partly subsidizes those premiums, the remaining mandatory premium is still part of the cost of covering them.
Yet Democrats have systematically blocked the CBO from including those costs in its official cost projections. The Senate bill’s estimated price tag of $940 billion, for example, includes only the costs that bill would impose on the federal government. By my count, that’s only 40 percent of total costs. By Mr. Obama’s admission, that’s not the full cost of the bill.
Now that the President of the United States has acknowledged that the CBO’s cost estimates are incomplete, could we maybe get a complete cost estimate? Maybe just for the Senate bill?
Karl Rove’s Spending
Former George W. Bush adviser Karl Rove enjoys complaining about the spendthrift ways of President Obama and the Democrats. But I noted in a Wall Street Journal letter today:
Annual average real spending grew faster under President George W. Bush than any president since Lyndon Johnson… Even leaving out defense, President Bush was the biggest spender since Republican Richard Nixon.
My letter pointed to two prior op-eds by Rove, but he was at it again yesterday in the Journal. He said that his former boss “cut in half the growth of discretionary domestic spending from the sizzling 16 percent rate of President Bill Clinton’s last budget.” Call me crazy, but I don’t think supporting domestic spending growth of 8 percent during a time of very low inflation is an acheivement to crow about.
Over at National Review, Veronique de Rugy apparently gets just as annoyed as I do hearing big-spending Republicans complain about big-spending Democrats.
Mr. Rove’s columns are usually very interesting, but I’d like to see him accept at least some of the blame for the exploding size of government during his tenure at the White House.
Larry Lessig and the Lunching Libertarians
Outside the realm of copyright, Cato folk (and libertarians generally) don’t often see eye-to-eye with left-leaning cyberlawyer and Harvard prof Lawrence Lessig. Nevertheless, I wasn’t too surprised when Lessig signaled his interest in opening a dialogue with Cato scholars about his Change Congress project and his research on political corruption. After all, we’ve long argued that an expansive state will inevitably attract moneyed interests eager to feed at the public trough or co-opt well-intentioned regulation to stifle competitors. And as Lessig argues, legislators may come to see growing government as a means of creating supportive constituencies.
He’s posted the presentation he gave to a group of us at a luncheon discussion earlier this week, which I think makes an interesting case:
As he writes over at the Huffington Post, we see many of the same structural problems, though we differ as to the solutions. Lessig has been critical of the legal reasoning behind the recent Citizens United decision, which we at Cato welcomed. Despite this, we were pleasantly surprised to hear Lessig aver that he is not interested in overturning the decision—that he prefers, rather, to find ways of reducing the political influence of special interest money without restricting speech. Lessig’s favored solution is public financing of elections, whereas I think the majority here at Cato share the skepticism of my colleague John Samples about the viability of that kind of reform.
The Presidential Scold
Today, Politico Arena asks for comments on:
Duking it out in Baltimore
My response:
It’s all well and good that President Obama wants to meet with Republicans — giving the appearance of reaching out — but when it’s mainly to “chastise” them for opposing his programs, as the AP is reporting after his session at the House Republicans’ retreat in Baltimore today, it’s little but a continuation of the lecture he gave to Congress, the Supreme Court, and even the American people on Wednesday evening. “I am not an ideologue,” he’s reported to have said. Yet it appears that he rejected the Republicans’ proposals for a different approach to health care, a line-item veto for spending bills, and across-the-board tax cuts.
But why should that surprise? Ideologues aren’t open to new or different ideas, because they have the truth. Yet the deeper truth that’s been apparent all along is that we have here a president who, along with so many on his staff, has little grasp of economic reality, because he has no experience in the business world — indeed, appears often to be hostile to that world. Just today, for example, the White House unveiled its plan for a new tax break to spur job creation. As reported by CNN, Obama “wants to give businesses a $5,000 tax credit for each net new employee they hire this year.” The CNN headline captures it all: “Here’s $5,000. Go hire someone.” That’s not the way the world works. Temporary tax gimmicks like that, which the White House estimates will cost $33 billion, are hardly what’s needed. If businesses are to start hiring on a regular basis, they need assurance of a regular climate that will enable them to plan rationally. This administration has given them anything but that kind of assurance. And today’s meeting in Baltimore, like Wednesday night’s lecture, hasn’t helped.
Weekend Links
- A libertarian primer on the real meaning of the phrase “campaign finance reform.” For more, read John Samples’ book, The Fallacy of Campaign Finance Reform.
- New report shows that Head Start, a sacrosanct (and very expensive) federal education program, doesn’t work. So what should we do about it? Give it more money of course!
- “In his State of the Union address, President Obama proposed spending another $4 billion annually on K–12 public education. He did not mention that state, local, and federal governments already spend well over twice what they did in 1980, or that there has been no discernible improvement in student achievement during that period.” Just sayin’.
- Michael Tanner on Obama’s faith-based boondoggle: “The faith-based initiative was a typical example of Bush-style “big-government” conservatism. It has been co-opted by the Obama administration as another weapon for social engineering.”
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- The federal government added its 2,000th subsidy program for individuals, businesses, or state and local governments. Statists, rejoice!
- Hundreds of the nation’s mayors meet in Washington to grovel for federal handouts.
- President Obama’s proposed spending freeze wouldn’t actually be a freeze.
- USDA chief Tom Vilsack says food stamps are an “economic driver.” Seriously.
- It’s hard to reconcile the massive increase in federal aid to state and local governments with the Tenth Amendment.
The Next Step after Citizens United
The debates following the Citizens United decision continue, thanks in part to President Obama’s criticism of the U.S. Supreme Court during the State of the Union address. Keeping track of those debates might cause you to miss what may well turn out to be the next step in liberalizing our campaign finance laws, the case of SpeechNow.org v. Federal Election Commission which was argued last Wednesday before the entire U.S. Court of Appeals for the D.C. Circuit.
SpeechNow is a group of individuals with a clear mission: “SpeechNow would like to run advertisements urging voters to elect federal candidates who support full protections for First Amendment rights and to defeat candidates who are hostile to those rights.” The group has made sure that its members are independent of candidates for office and the political parties.
You would think they could set up the group and spend as they wish since SpeechNow is not tied to a candidate or party and hence cannot pose a threat of corruption. After all, the First Amendment protects speech by individuals, and the courts have only permitted regulations related to corruption (contribution limits) or public education (mandatory disclosure of spending).
Unfortunately federal law requires any groups that receives contributions of more than $1,000 during a calendar year or spends more than $1,000 during a year to register as a “political committee.” That status would mean disclosure of SpeechNow’s members and limits on contributions and spending. Fulfilling reporting and other requirements and observing the contribution limits would kill SpeechNow’s effort before it started. No group, no ads, no speech.
The Federal Election Commission argues that allowing speech by SpeechNow’s members would lead to corruption. Elected officials, they assert, will reward people who support favored speech even if those people are independent of a candidate or a party. Justice John Paul Stevens endorsed this corruption argument in Citizens United. He was dissenting and had the support of a minority of his fellow justices. The judges who heard the case for the circuit court seemed to believe Citizens United had weakened this sort of corruption argument.
Citizens United limited the power of the federal government over independent expenditures and speech by groups taking a corporate form. The reasoning in that case should apply with added force to individuals associating together to speak, individuals who have no ties to candidates or the political parties.
We’ll keep you up-to-date on the fortunes of the SpeechNow effort. For now, you can read more about the case at the Institute for Justice website or see an account of the circuit court hearing here.
Can Unemployment Benefits Create Jobs?
At the Center on Budget and Policy Priorities, sociologist Michael Leachman claims “some of the most effective job-creation and job protection measures” in last year’s American Recovery and Reinvestment Act are excluded from the job figures to be released on recovery.gov on January 30. He explains that, “Most of ARRA’s distributed dollars to date have gone directly to individuals (including greater jobless benefits and food stamps) and states (including greater federal support for Medicaid). Although these dollars are likely protecting or creating hundreds of thousands of jobs, none of the aid for individuals or the Medicaid support are [sic] reflected in the January 30 jobs data release.”
In particular, Leachman claims Recovery Act funds to extend unemployment benefits from 26 to 79 weeks (and to 99 weeks since November) “produces and sustains jobs.” For proof, he cites estimates from Mark Zandi of Economy.com “that every dollar spent on extending unemployment insurance benefits produces $1.61 in economic activity.”
This analysis runs into two big problems. The first is that it assumes that the amount of time people spend on unemployment insurance is unrelated to how long the government offers to keep paying benefits. The second is that it assumes that the assumptions about “fiscal multipliers” built into Economy.com econometric model are actually evidence rather than just assumptions.
On the first point, page 75 of the 2007 OECD Employment Outlook explains: “It is well established that generous unemployment benefits can increase the duration of unemployment spells and the overall level of unemployment… This could have a negative impact on productivity through inefficient use of resources and depreciation of human capital during long spells of unemployment. In addition, by reducing the opportunity cost of unemployment, generous unemployment benefits may lead existing employees to reduce their work effort, thereby lowering productivity (see e.g. Shapiro and Stiglitz, 1984; Albrecht and Vroman, 1996).”
As I recently noted, the overwhelming evidence that extended unemployment benefits raise the duration and rate of unemployment comes from economists in the Obama administration, Larry Summers and Treasury economist Alan Krueger, as well as many others such as Lawrence Katz of Harvard and Bruce Meyer of the University of Chicago.
Contrary to Leachman, bribing people to stay on the dole for an extra 53-73 weeks leaves them with less money to spend, not more. It also looks bad on resumes, and may cause lasting damage to future job prospects.
Chinese Security Scholar Calls for Overseas Basing to Counter U.S.
Dr. Dingli Shen, a scholar of security studies and Chinese and U.S. foreign policies at Fudan University, had an interesting op-ed yesterday that merits attention.
Dr. Dingli Shen
According to Shen, China should consider developing “overseas military bases,” which he says people define in today’s context as “supply bases for the navy escorting the ships cruising in the Gulf of Aden and Somalia.” Shen lists four main interests that justify overseas bases: “the protection of the people and fortunes overseas; the guarantee of smooth trading; the prevention of the overseas intervention which harms the unity of the country and the defense against foreign invasion.”
The lay reader should be clear that the United States does not look favorably on China’s developing the ability to guarantee its own smooth trading; we like having the leverage to determine, ultimately,whether we will allow foreign countries to trade. The reader should also be aware that the third interest Shen lists is a diplomatic phrasing of “being able to prevent U.S. intervention in Taiwan,” perhaps in addition to some much smaller concerns about Tibet. The Chinese do not need to do anything to pursue the fourth listed interest, preventing foreign invasion of China. So what’s left is protecting Chinese people and money overseas; wresting control of China’s sea lines of communication from the United States; and preventing U.S. intervention in ways that would “harm the unity of the country.”
More Data on “Fiscally Conservative, Socially Liberal” Voters
A study by the Tarrance Group for the Republican organization GOPAC provides further evidence on the existence of voters who don’t fall into the “conservative” or “liberal” box. Tarrance asked people who voted in the 2008 election not just to label themselves conservative or liberal, but to describe their views on both fiscal and social issues. The questions were:
When thinking about fiscal issues, like taxes and government spending, do you consider yourself to be:
Very conservative, Somewhat conservative, Somewhat liberal, or Very liberal?When thinking about social issues, like abortion and gay marriage, do you consider yourself to be:
Very conservative, Somewhat conservative, Somewhat liberal, or Very liberal?
Tarrance leaves out the “moderate” option, but a few respondents volunteer it.
The results were interesting. While 69 percent of respondents described themselves as conservatives on fiscal issues, only 53 percent said they were conservative on social issues. When you combine the responses, you find that 23 percent of respondents described themselves as fiscally conservative but liberal or moderate on social issues. That’s pretty close to the estimates of the libertarian vote that David Kirby and I presented in “The Libertarian Vote in the Age of Obama.” See pages 4-7, especially Figure 3, in the full study. Using fairly strict criteria, we declared 14 percent of the electorate to fall into the libertarian category. But three other studies yielded 23 to 26 percent who gave libertarian answers to questions about both fiscal and social issues.
Tarrance presented the results to GOPAC this way (the “moderate” category includes both those who volunteered the word moderate and those who declined to pick either liberal or conservative as a label):
Teachers Union Channels Teen Talk Barbie
“Math class is tough!” –Teen Talk Barbie
Political scientist Jay Greene bravely decided to read the new NEA paper that is billed as showing that “Teachers Take ‘Pay Cut’ as Inflation Outpaces Salaries. Average teachers’ salaries declined over the past decade.”
But a funny thing happened when he reviewed the study: it didn’t support the NEA’s own claim. Here’s Jay:
The only problem is that this is not what the data in the NEA report actually show. In Table C-14 “Percentage Change in Average Salaries of Public School Teachers 1998-99 to 2008-09 (Constant $)” we see that salaries increased by 3.4% nationwide over the last decade after adjusting for inflation…. I can’t find a single table or figure in the report that would justify the headline and claims in the press release. But when the Ministry of Truth speaks, who are you supposed to believe — them or your lying eyes?
Of course the real reason that public school labor costs have risen so much in the past 40 years is not that salaries have skyrocketed, but that employment has. We now have 70% more staff per student than we did in 1970, and students’ scores are not a whit better for it at the end of high school.
Would the NEA be happy if we gave every teacher a raise but returned to the staff/student ratio of 1970? I doubt it. It would drastically cut the union’s dues revenues.
In any event, the union’s impact through collective bargaining, as I wrote in the Cato Journal recently, appears to be negligible. Where they make a difference is in effective lobbying to preserve the existing government education monopoly. The monopoly is great for public school employee unions, but lousy for kids, parents, and taxpayers.
George Will on Obama
In the Washington Post and many other papers today, in re the State of the Union:
Obama’s leitmotif is: Washington is disappointing, Washington is annoying, Washington is dysfunctional, Washington is corrupt, verily Washington is toxic — yet Washington should conscript a substantially larger share of GDP, and Washington should exercise vast new controls over health care, energy, K-12 education, etc.
Mark your calendar for May 13, when George Will keynotes the biennial Milton Friedman Prize for Advancing Liberty Dinner here in Washington. I anticipate similarly acerbic analysis.
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