Archive for January, 2010
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The Buck Stops with Obama
Today Politico Arena asks:
Do you feel safer from terrorism today than you did the day before? Assess Obama’s response.
My response:
Medicaid’s Cash Cab
As Congress hashes out an agreement behind closed doors to expand the government’s role in health care, a Medicaid story out of New York serves as another reminder that government is part of the health care problem, not the solution. Audits released by the state’s comptroller found $169 million in misspent funds, including a $196,000 cab bill for a woman who took a daily $300 taxi ride to visit her son in Albany for three years.
The following are some of the findings:
- $53 million in overpayments for Medicaid recipients who had multiple identification numbers.
- $20 million that was nearly spent because the state’s computer system failed to catch a clerical error. Auditors caught it before it was paid out.
- $5.4 million in overpayments to 10 hospitals that billed for discharging a patient when, in fact, the patient had been transferred to another facility. Hospitals receive higher payments for discharges rather than transfers.
- $1.2 million paid for services that were not medically necessary or not provided.
According to the state’s comptroller, “[T]he state Medicaid system is leaking millions of dollars… Safeguards designed to protect the taxpayers by detecting waste, fraud and abuse keep failing.” However, this is business as usual when it comes to New York’s notoriously fraud-ridden Medicaid program, as a Cato essay on fraud and abuse in federal programs notes:
The former chief investigator of the state’s Medicaid fraud office believes that about 10 percent of the state’s Medicaid budget is consumed by pure fraud, while another 20 to 30 percent is consumed by dubious spending that might not cross the line of being outright criminal.
A 2005 investigation by the New York Times found remarkably brazen examples of fraud and abuse in New York’s Medicaid. The article noted that the program has “become so huge, so complex, and so lightly policed that it is easily exploited… [T]he program has been misspending billions of dollars annually because of fraud, waste, and profiteering.”
With the massive and complex expansion of Medicaid and other health programs in the pending legislation, we can expect a gargantuan expansion in fraud and abuse. The good news, I suppose, is that the government will need a massive hiring of new health care auditors, which should reduce the nation’s unemployment rate.
For more on fraud and abuse in government healthcare, see here.
Fly the Perfectly Safe Skies!
Do you insist on flying risk-free, at all costs? Satirist/animator Mark Fiore has just the airline for you.
New Study Seconds Cato Finding: Immigration Reform Good for Economy
The Center for American Progress and the Immigration Policy Center released a new study this morning that finds comprehensive immigration reform would boost the U.S. economy by $189 billion a year by 2019. The bottom-line results of the study are remarkably similar to those of a Cato study released last August.
Titled “Raising the Floor for American Workers: the Economic Benefits of Comprehensive Immigration Reform,” the CAP study was authored by Dr. Raul Hinojosa-Ojeda of the University of California, Los Angeles.
It finds that legalizing low-skilled immigration would boost U.S. gross domestic product by 0.84 percent by raising the productivity of immigrant workers and expanding activity throughout the economy.
Using a different general-equilibrium model of the U.S. economy, the earlier Cato study (“Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” by Peter Dixon and Maureen Rimmer) found that a robust temporary worker program would boost the incomes of U.S. households by $180 billion a year by 2019.
Both studies also concluded that tighter restrictions and reduced low-skilled immigration would impose large costs on native-born Americans by shrinking the overall economy and lowering worker productivity.
I’m partial to the Cato study. Its methodology is more comprehensive and more fully explained, but it is worth noting that very different think tanks employing two different models have come to the same result: Legalization of immigration will expand the U.S. economy and incomes, while an “enforcement only” policy of further restrictions will only depress economic activity.
If Congress and President Obama want to create better jobs and stimulate the economy, comprehensive immigration reform should be high on the agenda.
A Double Dip for Housing?
Washington is fretting this week over news that mortgage applications fell dramatically in November. Coupled with earlier indications of renewed softening in the housing market, there is growing fear that housing is headed for a “double-dip downturn” that could further damage the economy. As a result, Federal Reserve policymakers are considering additional stimulus, while the National Association of Realtors is suggesting an(other) extension of the “temporary” homebuyer tax credit.
Remarkably, neither policymakers nor the media are asking the obvious question: Given all of the emergency interventions in housing that government has undertaken, and the fact that the housing market continues to erode, do such interventions do much good?
Since the bursting of the bubble in 2006, the great unknown has been whether housing prices will revert to their historical trend (and possibly to below trend for a short period), or stabilize at some permanently higher level because a portion of the bubble (aided perhaps by public policy) would prove enduring. There is good reason to expect reversion to trend, but the economy can surprise us.
Let’s use an example to understand this better. The graph below depicts the course of house prices for my hometown of Hagerstown, MD, an area within commuting range of suburban DC that was hit particularly hard by the bubble and its deflation. The black line is a house price index computed by the Federal Housing Finance Agency for 1989–2009. The red line is an extended linear trendline drawn using index data from the period 1989–2002. (You can do the same analysis for your area using these FHFA data.) The question, then, is whether house prices will fall all the way back to the trendline or will stabilize at a level above the trendline.
WaPo: Too Dismissive of Privacy Concerns
The Washington Post writes, “There’s nothing to fear from the use of full-body scanners at airports.”
That’s a little too dismissive. While it’s true that TSA has done much to limit the privacy threats, this is a fundamentally invasive technology.
I was particularly struck by this doe-eyed argument: “Officers in [the] remote screening room are prohibited from bringing in cellphones, cameras or any device with a camera.”
Here’s how I wrote about the fate of that rule in an earlier post:
Rules, of course, were made to be broken, and it’s only a matter of time — federal law or not — before TSA agents without proper supervision find a way to capture images contrary to policy. (Agent in secure area guides Hollywood starlet to strip search machine, sends SMS message to image reviewer, who takes camera-phone snap. TMZ devotes a week to the story, and the ensuing investigation reveals that this has been happening at airports throughout the country to hundreds of women travelers.)
My error was to say it would be SMS. In the Washington Post‘s account, TSA screeners communicate by wireless headset. (I don’t remember how they communicated in the demonstration I saw in Detroit.)
In college, I worked at a bar, and at the door of this bar it was customary to say at appropriate moments, “Did you get those books?” or “Did you get that book?” Everyone knew what these phrases meant and trained their eyes accordingly. I’m sorry if that was crude.
I’m more sorry if nobody on the editorial board at the Post recalls the vigor and ingenuity of youth. There is not “nothing to fear” from the use of full-body scanners.
Blasphemy Laws Are an Admission of Failure
The Washington Post feature “On Faith” today discusses Ireland’s new, profoundly misguided blasphemy law. Blasphemers there can now be fined up to $35,000. That’s a lot of money for a few little words.
Atheist Ireland is testing — and protesting — the law by publishing blasphemous quotations like the following:
“Thou hast said: nevertheless I say unto you, Hereafter shall ye see the Son of man sitting on the right hand of power, and coming in the clouds of heaven.”
“Ye are of your father the devil, and the lusts of your father ye will do. He was a murderer from the beginning, and abode not in the truth, because there is no truth in him.”
“May Allah curse the Jews and Christians for they built the places of worship at the graves of their prophets.”
“Show me just what Muhammad brought that was new and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached.”
They are, respectively, from Jesus, Jesus, Muhammad, and Benedict XVI.
Maybe it’s an American thing, but the Post apparently couldn’t find any panelists to defend the law. These folks are all professional wordsmiths, of course, and these tend to be most supportive of the freedoms that they depend on the most. As I noted in my recent Policy Analysis, those who are most easily offended, and who value free speech the least, tend to gravitate not to newspapers, but to governments (and university administrations). That’s where the power is.
Susan Jacoby, for whom I have the utmost respect, even calls the law Pythonesque, likening it to the Ministry of Silly Walks. Of course, there’s this as well:
Blasphemy laws are oddities, because they concede an awful lot of emotional power to the blasphemer. They tell the world: My feelings are so very fragile. Or perhaps they say: My god is so very weak — so weak that he needs state protection against other gods, or even against mere potty-mouthed humans. Either way, it’s an embarrassing admission, but hardly the business of government. If your god can’t take the heat, he’s hardly a god at all.
Jesus and Mo put it very well indeed:
Thursday Links
- The populists have it wrong. Why free trade and globalization are great blessings to Americans and poor families around the world.
- How Obama’s plan for health care will affect medical innovation in America: “Imposing price controls on drugs and treatments–or indirectly forcing their prices down by means of a ‘public option’ or expanded public insurance programs–would reduce the incentive for innovators to develop new treatments.”
- Register now for the upcoming Cato forum featuring author Tim Carney and his new book, Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses. Buy the book, here.
- Podcast: “Shoes, Undies and Airplane Security” featuring Jim Harper.
Karl Rove’s Hypocritical Call for Fiscal Rectitude
Even though I’ve been in Washington for almost 25 years, I still get shocked by the deceit and double-talk that characterizes this town. A perfect example can be found in today’s Wall Street Journal, which features a column by Karl Rove attacking President Obama for fiscal incontinence. I’m a big fan of condemning Obama’s big-government schemes, but Rove is the last person in the world who should be complaining about too much wasteful spending. After all, he was the top adviser to President Bush and the federal budget exploded during Bush’s eight years, climbing from $1.8 trillion to more than $3.5 trillion. More specifically, Rove was a leading proponent of the proposals that dramatically expanded the size and scope of the federal government, including the no-bureaucrat-left-behind education bill, the two corrupt farm bills, the two pork-filled transportation bills, and the grossly irresponsible new Medicare entitlement program.
Not surprisingly, Rove even tries to blame Obama for some of Bush’s overspending, writing that “…discretionary domestic spending now stands at $536 billion, up nearly 24% from President George W. Bush’s last full year budget in fiscal 2008 of $433.6 billion. That’s a huge spending surge, even for a profligate liberal like Mr. Obama.” This passage leads the reader to assume that Obama should be blamed for what happened in fiscal years 2009 and 2010, but as I’ve already explained, the 2009 fiscal year started about four months before Obama took office and 96 percent of the spending can be attributed to Bush’s fiscal profligacy. Yes, Obama is now making a bad situation worse by further increasing spending, but he should be criticized for continuing Bush’s mistakes.
Rove then has the gall to complain that Obama is “…growing the federal government’s share of GDP from its historic post-World War II average of roughly 20% to the target Mr. Obama laid out in his budget blueprint last February of 24%.” Yet a quick look at the budget data shows that the burden of federal spending jumped from 18.4 percent of GDP when Bush took office to more than 25 percent of economic output when he left office. Even if the (hopefully) temporary bailout costs are not counted, Bush and Rove are the ones who deserve most of the blame for today’s much larger burden of government. It should be noted, by the way, that none of the new spending under Bush was imposed over his objection. He did not veto any legislation because of excessive spending.
Finally, Rove concludes by writing that, “After a year of living in his fiscal fantasy world, Americans realize they have a record deficit-setting, budget-busting spender on their hands.” I’m almost at a loss for words after reading this sentence. All during the Bush years, I would complain to people in the Administration about wasteful spending. It didn’t matter whether I was talking to people at the Office of Management and Budget, the Council of Economic Advisers, the Treasury Department, or the National Economic Council. They almost always expressed sympathy for what I was saying, and then complained that the decisions were being made by the “White House political people.”
There’s an old joke about chutzpah and it features a guy who murders his parents and then asks the court for mercy because he’s an orphan. Karl Rove has taken the joke to the next level, but there’s nothing funny about the consequences for America.
What Is Seen and What Is Not Seen
Two items in Tuesday’s newspapers remind us of the often unseen costs of regulation and also of the often unseen benefits of market processes. In the Wall Street Journal, Prof. Todd Zywicki examines the likely consequences of a law to limit credit card interest rates and the fees they charge to merchants:
Card issuers might also reduce the quantity and quality of credit cards by restricting credit availability and cutting back on product innovation or ancillary card benefits. This is exactly what happened when Australian regulators imposed price controls on interchange fees in 2003: Annual fees increased an average of 22% on standard credit cards and annual fees for rewards cards increased by 47%-77%. Card issuers also reduced the generosity of their reward programs by 23%. Innovation, especially in terms of improved security and identity-theft protection, was stalled. Card issuers also increased their efforts to attract higher-risk customers who generate interest and penalty fees to offset lower interchange revenues from lower-risk transactional users.
Those are the kinds of unseen costs that most of us wouldn’t anticipate (that’s why economists talk about “unanticipated [or unintended] consequences” of action). Only after the fact were economists able to identify the specific costs of the regulation. It seemed like a good idea – limit the cost of something that consumers (voters) want. Did anyone predict the consequences? People probably predicted that annual fees would rise to compensate for the lost revenue from interchange fees. But did they anticipate a slowdown in innovation in security and identity-theft protection? Did they anticipate that card issuers would work harder to get higher-risk customers? Such regulation always impedes the optimal working of market processes, and thus inevitably delivers sub-optimal results.
Meanwhile, we often observe conditions in the marketplace that don’t seem to make sense to us. So we assume something is wrong, maybe even corrupt. An article in the Washington Post written in a sober yet hysterical style raised the problem of “medical salesmen in the operating room.” Then, in a letter to the Post, Dr. Mark Domanski explains why it makes sense to have medical salesmen in the operating room. A Post article on the topic had been full of anecdotes about a salesman who “began his career selling hot dogs” hanging out in operating rooms and doctors who expressed outrage. If only they had thought to ask a surgeon in distant Arlington, Virginia:
I found David S. Hilzenrath’s Dec. 27 Business article, “The salesman in the operating room,” to be one-sided.
Of course, medical sales representatives work along doctors in operating rooms. As a surgeon, I always want a company rep in the operating room.
So, if you were having surgery that involved a complicated piece of equipment, wouldn’t you like somebody from the manufacturer to be there? I know I would.
Here’s why:
Remember when you tried to assemble that desk you bought from a furniture store? We all know how to use a screwdriver, but when something is off, it’s nice to know there is a number to call. What if you needed to put that desk together quickly because you needed it for something important? It would be nice if the company sent someone to make sure all the parts were there and in good order. That’s what a good rep does.
As the surgeon, I make the diagnosis and decide the treatment. No company representative tells me how to use a knife. But many products in the operating room are complex and change almost every year; they are getting better that fast.
When I am using a complex product, such as a plating system for fixing a jaw fracture, having the rep in the room ensures that the system is functional. I know all the parts will be there. I know that the right screw and plate will be handed to me at the right time.
Sometimes we call in the rep for an operation, and it turns out that the fracture does not need to be plated. No rep has ever suggested that I plate a fracture that didn’t need to be plated.
Members of Congress and activists are constantly reading articles about apparent problems and rushing off to propose legislation. These examples and countless more should remind us to think carefully before we coercively interfere in the decisions that millions, billions, of people make every day.
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Los Angeles Crime Rate Declines Again Despite Complaints about Immigrants
Posted by Daniel Griswold
One of the more common complaints I hear about illegal immigration is that low-skilled workers from Mexico and Central America allegedly bring with them a wave of crime and incarceration expenses, especially to southern California.
Those complaints are hard to square with the mounting evidence that immigrants, even low-skilled, illegal immigrants, are no more prone to commit crimes than native-born Americans. The latest data point comes from Los Angeles, where the Wall Street Journal reports this morning: “Violent crime in Los Angeles hit its lowest level in more than half a century last year, one of a growing number of U.S. cities reporting its streets were remarkably safe in 2009.”
I tried to connect the dots on immigration and crime in a recent article I wrote for Commentary magazine, titled “Higher Immigration, Lower Crime.” My conclusion was entirely consistent with the latest crime report from Los Angeles:
Filed under: General; Trade and Immigration
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