Archive for January, 2010
Groopman on How Behavioral Economics Undermines the Case for Central Planning
In The New York Review of Books, oncologist and author Jerome Groopman delivers a stunning rebuke to those in the Obama administration (read: OMB director Peter Orszag) who think the federal government can improve health care quality by telling doctors how to practice medicine:
in the Senate health care bill…Doctors and hospitals that follow “best practices,” as defined by government-approved standards, are to receive more money and favorable public assessments. Those who deviate from federal standards would suffer financial loss and would be designated as providers of poor care…
Over the past decade, federal “choice architects”—i.e., doctors and other experts acting for the government and making use of research on comparative effectiveness—have repeatedly identified “best practices,” only to have them shown to be ineffective or even deleterious.
For example, Medicare specified that it was a “best practice” to tightly control blood sugar levels in critically ill patients in intensive care. That measure of quality was not only shown to be wrong but resulted in a higher likelihood of death when compared to measures allowing a more flexible treatment and higher blood sugar. Similarly, government officials directed that normal blood sugar levels should be maintained in ambulatory diabetics with cardiovascular disease. Studies in Canada and the United States showed that this “best practice” was misconceived. There were more deaths when doctors obeyed this rule than when patients received what the government had designated as subpar treatment (in which sugar levels were allowed to vary).
That’s just one of many examples Groopman offers of where government planners have gone awry. He concludes:
Ironically, the failure of experts to recognize when they overreach can be explained by insights from behavioral economics…
The care of patients is complex, and choices about treatments involve difficult tradeoffs. That the uncertainties can be erased by mandates from experts is a misconceived panacea, a “focusing illusion.”
Come to think of it, Groopman makes much the same case as I did in my article, “Pay-for-Performance: Is Medicare a Good Candidate?” (Yale J. Health P. Law & Ethics, Vol. 7, issue 1: Winter 2007): evidence-based medicine is essential, but variation in disease burden and patient preferences (read: values) makes it impossible for central planners to define quality accurately.
Data Privacy Day’s Man About Town
Betcha didn’t know that January 28th is Data Privacy Day. That’s the day on which it’s customary to give gifts of cash and money to your favorite privacy advocate. No, not really. Though Hallmark hasn’t gotten a hold of it, it is a day on which some extra attention gets paid to privacy issues.
I’ll be speaking at two events coinciding with Data Privacy Day. On Wednesday, I’ll be speaking at the 2010 Internet Data Privacy Colloquium put on by a group called Dialogue on Diversity. Register here.
And on Thursday I’ll be speaking at an event put on by the Future of Privacy Forum called “Online Privacy: Your Reputation is ON the LINE.” (Get it? “ON the LINE”? Online? We’re talkin’ computers, folks.) You can register for it on the event’s page.
There you have it! Data Privacy Day! The one day this year, among many, that you should lavish your favorite privacy expert with gifts and praise. And gifts.
Obama the Deficit Peacock
Last week the Democratic-friendly Center for American Progress published an essay entitled: “How to Spot a Deficit Peacock: Four Ways to Tell When Someone Isn’t Serious About the Deficit.” According to the author, “Deficit peacocks like to preen and call attention to themselves, but are not sincerely interested in taking the difficult but necessary steps toward a balanced budget.”
#2 on CAP’s list is particularly interesting given that President Obama is reportedly going to propose a three-year freeze on non-defense discretionary spending in his upcoming budget:
Beware anyone offering easy answers. We face a very large budget gap over the coming decade, and the scale of the problem is such that no one solution is going to solve it all. It is going to take a mix of increased revenues, spending reductions, and improved government efficiency to get our fiscal house in order. Those who claim that we could get the budget back to sustainability if we only cut out earmarks, or say that the solution is to simply freeze discretionary spending, are just peddling fiscal snake oil.
If freezing discretionary spending is “peddling snake oil,” what does the CAP consider proposing to freeze only the non-defense portion of it?
Although I want to give the administration credit for proposing to at least freeze something, it’s too little too late. The Washington Post, which spoke with senior administration officials on the details, says that “the freeze would shave no more than $15 billion off next year’s budget.” That’s chump change compared to the president’s $787 billion stimulus bill and $900 billion for health care reform. And as I warned in December, any new-found “austerity” on the part of the president would be a political sleight of hand:
The “minibus” appropriations bill signed by the President last week jacked up funding by a combined 8 percent for programs ranging from education to housing to transportation. And that’s at a time when inflation is low. Further, funding hasn’t been passed yet for the president’s recently announced troop surge in Afghanistan, which will cost around $40 billion per year.
President Obama will be probably be announcing in his new budget a FY2010 deficit that’s even larger than FY2009’s massive $1.4 trillion deficit. He’s blowing the bank on his stimulus bill, giant health care bill, and large increase in FY2010 appropriations. He’s also looking at the polls, which show his plunging popularity and rising concerns over federal spending and debt.
He’s got to pretend to introduce an “austere” budget for his political survival and the political survival of Democrats up for election next year. That’s why I’m wondering whether the Democrats are purposely jacking up FY2010 spending so high so that they can show a freeze or even “cuts” for FY2011.
Today the Congressional Budget Office released its budget outlook for the next ten years. One paragraph in particular puts the president’s proposed deficit-reduction effort in context:
Those accumulating deficits will push federal debt held by the public to significantly higher levels. At the end of 2009, debt held by the public was $7.5 trillion, or 53 percent of GDP; by the end of 2020, debt is projected to climb to $15 trillion, or 67 percent of GDP. With such a large increase in debt, plus an expected increase in interest rates as the economic recovery strengthens, interest payments on the debt are poised to skyrocket. CBO projects that the government’s annual spending on net interest will more than triple between 2010 and 2020 in nominal terms, from $207 billion to $723 billion, and will more than double as a share of GDP, from 1.4 percent to 3.2 percent.
In the president’s first year in office, he continued the Bush spending spree. He supported jacked-up appropriations, and he’s proposing more defense and entitlement spending. And now he proposes a non-defense discretionary freeze with savings that would pale in comparison to the rising cost of financing the federal debt. Calling the president a “deficit peacock” would probably be too kind.
In Before the Ban
Travel along a two-block stretch of Central Avenue in Prince George’s County, and you’ll find a staggering 11 fast-food restaurants.
For community activist Arthur Turner and state Sen. David C. Harrington (D-Prince George’s), the strip is evidence of the proliferation of burger joints and Chinese takeouts in the county, especially in poorer, inner Capital Beltway communities.
Pointing to studies that rank Prince George’s residents among the least healthy in Maryland, Turner and Harrington want to limit new fast-food restaurants in the county, a far stricter approach than what has been enacted in such places as New York City and Montgomery County, which banned the use of trans fats in those establishments…
“Our county is inundated with unhealthy food choices,” Turner said. “In some areas, if someone wants a healthy choice, there are no options. We want healthy options in our community.”
Opponents of such efforts say that what people eat is a matter of personal choice and that it should be up to the free market to determine which restaurant goes where…
Turner said that his group identified Panera Bread and Chipotle as preferable alternatives to a fast-food burger restaurant and that he plans to seek similar compromises with other developers.
Given the weak correlation between dieting and long-term weight loss, and the very, very weak correlation between dieting and the marginal difference between Chipotle and McDonald’s, basically all that we have here are politicians and activists remaking the community to suit their personal tastes, as if Prince George’s County were just SimCity with slightly cooler graphics.
My prediction: This is a very good deal for any fast food restaurant that gets in before the ban.
‘Avatar’ Is about Property Rights
In the Los Angeles Times today, I write about “Avatar”, which has just become the biggest-grossing movie in Hollywood history, and how conservatives have missed the issue at its core:
Conservatives see this as anti-American, anti-military and anti-corporate or anti-capitalist. But they’re just reacting to the leftist ethos of the film.
They fail to see what’s really happening. People have traveled to Pandora to take something that belongs to the Na’vi: their land and the minerals under it. That’s a stark violation of property rights, the foundation of the free market and indeed of civilization….
“Avatar” is like a space opera of the Kelo case, which went to the Supreme Court in 2005. Peaceful people defend their property against outsiders who want it and who have vastly more power. Jake rallies the Na’vi with the stirring cry “And we will show the Sky People that they cannot take whatever they want! And that this is our land!”
Economists may wonder about the claim that “Avatar” is the highest-grossing film of all time. The Hollywood Reporter estimates that so far it may only have sold half as many tickets as the 1997 “Titanic,” and Box Office Mojo says that adjusted for inflation “Gone with the Wind” remains the movie with the highest U.S. revenue, followed by “Star Wars.”
Obama’s Dilemma
Today Politico Arena asks:
State of the Union: What Should Obama Say?
My response:
Obama’s in a difficult spot: His head tells him to tack right, but his heart’s not in it — and he’s not the first Democrat to be in that spot. That’s brought out today in a CNN Opinion piece, “When liberals revolt,” written by Arena’s (and Princeton’s) Julian E. Zelizer. Tracing similar dilemmas that Johnson, Carter, and Clinton faced, Zelizer shows how they all paid a price for tacking right, which it looks like Obama may do. Johnson faced primary challenges that led him to withdraw from the 1968 race. Carter was challenged by Ted Kennedy. He prevailed; but weakened, he then lost to Reagan in 1980. And Clinton’s move to the center after the disastrous 1994 midterm elections helped him win reelection, Zelizer argues, but it also left him with a thin legislative record on domestic policy.
In short, moving right has its costs, Zelizer claims. Many liberals are “deeply unhappy with the president, believing that he has already drifted too far away from the promises that animated his supporters in 2008.” He’ll need those liberals in 2010 and 2012. Pointing to the “long tradition of Democratic presidents taking the left for granted at a cost to their administrations,” Zelizer notes that they learned “that the ire of the left — a constituency that is very vocal, highly mobilized and politically engaged — can cause enormous damage.”
That it can. But can the left do more than cause enormous damage? In particular: Can it govern? Zelizer cites Ted Kennedy castigating Carter, saying that ”the Democratic Party needed to ‘sail against the wind’ of conservative public sentiment by using the federal government to help alleviate social problems.” Fine speechifying. But will it get you (re)elected — much less enable you to govern? The evidence is not encouraging. In fact, the deeper problem the left is facing is that self-identified conservatives in America outnumber liberals by better than two to one. Cambridge may have voted against Scott Brown by 84 to 14, but that just shows how out of touch Harvard is with the rest of Massachusetts — to say nothing of the rest of the country. Obama won not because the country was enthralled with his vague message, but because his opposition, like Clinton’s in 1996, was so uninspiring. In sum, the left’s problem — and Obama’s — is that the country isn’t buying the message, now that it’s clearer. And that’s the heart of the matter.
Agricultural Exceptionalism
House Agriculture Committee Chairman Colin Peterson (D, Sugarbeet Farmers) announced yesterday [$] that he would begin hearings on the 2012 Farm Bill this spring. I’m still recovering from the traumatizing 2008 Farm Bill fight, so I heard this news with some trepidation.
But wait! Put those red pens away, folks, because Chairman Peterson plans to keep on spending on agricultural programs. Heaven forbid that agriculture should take any of those “cuts” we’ve been hearing so much about :
House Agriculture Committee Chairman Collin Peterson, D-Minn., said… he is determined to write a bipartisan bill that is within the funding baseline that exists in 2012.
The funding baseline is the amount of money that the Congressional Budget Office determines would be spent on all programs in the farm bill if the same programs were to continue after 2012. CBO projects the funding levels based on spending in programs in past years.
Peterson said at least initially he expects each major farm bill section — the farm program, conservation and nutrition — to stay within its 2012 baseline.
He also specifically pledged to fight off any attempts to lower direct payments, which flow to current or past farmers of certain crops year-in-year-out, regardless of whether they still farm or not.
Some further details on his plans for the next farm bill can be found in this National Journal article [$ again, sorry] but the gist of it is that Chairman Peterson doesn’t want reformers interfering the way they did last time, even if farmers were left practically unscathed from the battle.
In a speech to the National Association of Wheat Growers and U.S. Wheat Associates, Peterson said that reformers “who don’t understand how this works … defined what reform is” in 2008. Peterson said there should be changes to the farm bill, but he ridiculed one of the reformers’ biggest goals: limitations on payments to big farmers.
The campaign to lower payment limits “is not reform. It’s an ideology,” he said. Reformers want Congress to decide what size farms should get subsidies, a notion that Peterson rejects. “We are not smart enough in government to decide what farm size is,” he said.
(Sidebar: Isn’t it cute how Chairman Peterson couches his opposition to farm payment limits in libertarianish terms about how government “isn’t smart enough.” His support for a 80+-year-old suite of government interventions suggests he is not as skeptical about government’s smarts as he indicates in this little political aside. But I digress.)
And in a charming dismissal of the importance of free trade (he’s an old-hand at dismissing international obligations in this area), Chairman Peterson offered this:
Peterson said he did not think pressures to comply with trade agreements would be too much of a problem in the farm bill because “the trade situation is dead in the water,” and negotiators realize they cannot get approval from Congress if agriculture is not satisfied. “We’ve got some power over that system,” he said.
“I am not going to turn myself into a pretzel to accommodate this latest trade agreement,” he said.
A disappointing start to the 2012 Farm Bill fight, to be sure, but my hope is not dashed. With any luck, the recent signs of voters’ disgust with Washington will translate into some extra political support for those of us working for real reform. (see examples here and here.)
Mayors Want More Federal Money
Hundreds of city leaders are in Washington for the winter meeting of the U.S. Conference of Mayors. Considering that winter weather in our nation’s capital is about as warm as Barney Frank’s personality, there’s only one reason for the mayors to meet there: grovel for more federal hand-outs.
From the New York Times:
Saying that last year’s $787 billion economic stimulus plan has failed to ease urban unemployment, the nation’s mayors are asking the federal government for a second wave of stimulus money.
If you don’t succeed the first time, apparently you should fail, fail again. Charleston’s mayor, Joseph P. Riley Jr., says that “most economists” believe more federal stimulus spending is the “only thing” that can reduce unemployment. Most Keynesian economists—such as Mark Zandi and Paul Krugman—perhaps, but the broader profession is actually divided on the issue.
The mayors are upset that they “are being deprived of the federal aid owed to them.” To be fair, they are referring to the fact that formulas used to allocate federal surface transportation funds in the stimulus bill went disproportionately to non-metro areas. But this only serves to illustrate why it’s inefficient for citizens to be taxed by the federal government only to have the money returned to state and local governments through some politicized mechanism. State and local governments should fund their own transportation needs. But mayors are all too happy to receive the “free” money from Washington than funding their spending through the more transparent method of taxing their own constituents.
It takes a tremendous amount of gall for some officials and analysts to argue that the federal government is depriving state and local governments of resources. Donald Kettl, the dean of the School of Public Policy at the University of Maryland, made such a claim in the December issue of Governing. The chart shows that federal subsidies to state and local government have been going through the roof:
Instead of wasting time and money trying to get federal taxpayers to make their political careers easier, the nation’s mayors should focus on solving their own problems, which as a Cato essay on HUD community development programs notes, are often a result of poor policies:
The reality is that no amount of federal money can overcome the local hurdles to growth in cities such as Detroit—including political corruption and destructive tax and regulatory policies. Indeed, just like international development aid, federal aid to the cities likely increases corruption and stalls much-needed local reforms.
With the federal government running huge deficits, it cannot afford to fund ineffective and often wasteful local development projects. Community development is a local concern, and only local leaders and businesses using their own funds can make sound cost-benefit decisions on projects. By providing local leaders with handouts from Washington, we simply encourage them to make irresponsible decisions. At the same time, experience has shown that federal politicians use local projects as political tools that are disconnected from sound economics.
Biased Budget Reporting
I was certainly surprised to see Barack Obama propose any sort of spending freeze. Less surprising, however, is how it’s been reported.
For reasons that I admit escape me, it is apparently a law of journalism that any budget-related act will be made to look as stingy as possible. Remember this when you read the news.
Spending increases that were planned all along aren’t considered increases at all and do not make the news. Unplanned increases, those over and above the planned ones, are reported as though only the unplanned parts were increases. Large spending increases get extra praise for boldness. Reductions in the rate of spending growth are called “spending cuts.” Real though tiny cuts are described as draconian measures. We would probably have to invent a new word, something scary with reference to the intimate anatomy, if significant, across-the-board spending cuts ever arrived. Within most of our lifetimes, this has never happened.
Today’s reporting fits the pattern perfectly. The Washington Post headline proclaims, “Obama to Propose Freeze on Government Spending.” The New York Times declares, “Obama to Seek Freeze on Some Spending to Trim Deficits.” It is, we learn, “an initiative intended to signal his seriousness about cutting the budget deficit.”
Wonderful! Or stingy! Or both!
But not, you know, accurate. The details are in the fine print, and they don’t remotely live up to the headlines. The freeze applies only to discretionary spending. It doesn’t touch military or entitlement programs, and these are the large majority of the budget. It may not even be a meaningful freeze on the discretionary portion, as my colleague Dan Mitchell points out. And it’s only down in the fifth paragraph where the Times notes that “The estimated $250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional deficits the government is expected to accumulate over that time.”
In other words, today’s news is a virtual nothing with almost no likelihood of being carried through anyway. If this is “intended to signal seriousness,” I wonder what an unserious proposal would look like. I also wonder what sort of proposals we’d get from our politicians if our media reported on budget matters without its deeply ingrained bias against fiscal discipline.
NRA Cares More about NRA Than Gun Rights, Liberty, Professional Courtesy
Yesterday the Supreme Court granted the NRA’s motion for divided argument in McDonald v. Chicago. What this means is that Alan Gura’s 30 minutes of argument time on behalf of Chicagoland gun owners just became 20, with 10 going to former Solicitor General Paul Clement, whom the NRA hired at the last minute to pursue this motion and argument. (Full disclosure: Alan Gura is a friend of mine, and of Cato.)
The NRA’s motion was premised on the idea that Alan had not fully presented the substantive due process argument for selective incorporation of the Second Amendment — presumably out of an outsized concern for the Privileges or Immunities Clause arguments about which I’ve previously blogged and written a law review article. This is a highly unusual argument and is a facial slap at Alan’s abilities as an advocate. Sadly, it’s also typical of how the NRA has behaved throughout this case and before that during the Heller litigation — sabotaging Alan at every turn and showing again and again that, even in the face of winning arguments that fully support its legal positions, the NRA prefers to seek glory for itself rather than presenting the strongest case for its purported constituency of gun owners.
Alan rightfully opposed the NRA’s motion because the group’s participation at argument adds nothing substantive to the case. No one will ever know why the motion was granted, as the Court need not (and did not) provide any reasons. Nonetheless, it’s a safe bet that this is solely a testament to Clement’s talent and reputation (notably, the motion was not filed by any of the NRA’s other excellent attorneys, who briefed and argued their case in the lower courts and in a cert petition and brief before the Supreme Court).
I have great respect for Paul Clement, and have worked with him by filing amicus briefs in two cases he’s already argued this term, but I do take issue with his repeated suggestion that the motion’s purpose — and the reason behind its granting — was so that “all the avenues to incorporation, including the due process clause, are fully explored at the argument.” This kind of comment — again impugning Alan’s litigation strategy — is uncalled for, and renews concerns over the NRA’s conduct.
Throughout this case, Alan has consistently and forcefully advocated for the Second Amendment’s incorporation under the Due Process Clause. That didn’t change when his case was taken up by the Supreme Court. The thing is that the due process arguments are not all that complex, and simply do not merit the same care and attention in the briefs as arguments based on the Constitution’s actual text and history. A first-year law student who’s taken constitutional law – let alone a Supreme Court clerk – could write a due process incorporation argument in her sleep! In any event, the oral argument will be driven by the justices’ questions, not by any long soliloquies by counsel. Alan’s — and all attorneys’ — job is to be ready for anything.
If the NRA were concerned about the final outcome of the case, it would be unlikely to attack Alan’s strategy or question his preparation (an odd way to be “helpful” to one’s side). It is not a stretch to predict that this case will be favorably decided at least in part on due process grounds, however, so what we are seeing here is likely an attempt by the NRA to position itself as responsible for such a victory – and that Alan isn’t.
Ultimately, then, the NRA is engaging here in fundraising, not liberty-promotion or ethical lawyering.
Obama’s Spending Freeze: Is It Real or Is He Copying Bush?
As reported by the Wall Street Journal, the Obama Administration will propose a three-year freeze for a portion of the budget known as “non-defense discretionary” spending. Many critics will correctly note that this is like going on a drunken binge in Vegas and then temporarily joining Alcoholics Anonymous. Others will point out that more than 80 percent of the budget has been exempted, which also is an accurate criticism. Nonetheless, even a partial freeze would be a semi-meaningful achievement.
But don’t get too excited yet. It is not clear whether the White House is proposing a genuine spending freeze, meaning “budget outlays” for these programs stay at $447 billion for three years, or a make-believe freeze that applies only to “budget authority.” This is an enormously important distinction. Budget outlays matter because they represent the actual burden of government spending. Budget authority, by contrast, is a bookkeeping measure that — at best — signals future intentions. During the profligate Bush years, for instance, apologists for the Administration tried to appease fiscal conservatives by asserting that budget authority was growing at ever-slower rates. In some cases, they were technically correct, but their arguments were deceptive because real-world spending kept climbing to record levels. And needless to say (but I’ll say it anyhow), future intentions never became reality.
Domestic discretionary spending soared from less than $350 billion to more than $600 billion during the Bush years (and rose almost another $100 billion in Obama’s first year!). If the Obama Administration proposes a genuine outlay freeze, he will be taking a genuine (albeit small) step in the right direction. If the “freeze” applies only to budget authority, however, that will be another indication we are in George W. Bush’s third term.
To attack the $1.4 trillion deficit, the White House will propose limits on discretionary spending unrelated to the military, veterans, homeland security and international affairs, according to senior administration officials. Also untouched are big entitlement programs such as Social Security and Medicare. The freeze would affect $447 billion in spending, or 17% of the total federal budget, and would likely be overtaken by growth in the untouched areas of discretionary spending. It’s designed to save $250 billion over the coming decade, compared with what would have been spent had this area been allowed to rise along with inflation. …administration officials acknowledged the freeze is directed at only a small part of overall spending, but that fiscal discipline has to start somewhere. President Obama had requested a 7.3% increase last year in the areas he now seeks to freeze.
Let Me School You in My Austrian Perspective
It’s been making the rounds, but in case anyone hasn’t seen it, this Hayek/Keynes Battle Rap — with Friend-of-Cato Russ Roberts penning the rhymes of F.A. (for “Flow Assassin”) Hayek — may be humanity’s greatest contribution to the fields of music, theater, and political economy all at once:
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