Archive for February, 2010
Senator Bunning’s Unappreciated Gifts
Sen. Jim Bunning (R., Ky.) blocked “extended” unemployment benefits beyond their scheduled expiration on February 27. That thwarted bill would also have put off, again, a scheduled 21 percent cut in Medicare payments to physicians. Democrats were outraged. But why?
Bunning just wanted to use leftover “stimulus” money to pay for the benefits. Why not? Such transfer payments accounted for over 80 percent of stimulus spending last year.
Besides, as Federal Reserve policymakers noted, the evidence is overwhelming (see here and here) that extending unemployment benefits from six months to nearly two years has raised the unemployment rate by a percentage point or two. I’ve waited since 1991 for someone to prove I’m wrong about that. Nobody has, because nobody can.
If the maximum duration of jobless benefits were trimmed by 13 to 20 weeks (which is all that’s at stake), they would still be far more extended than ever before. But the unemployment rate by the time of this November’s elections would be much lower than otherwise. Would Democrats prefer to go into the elections with an unemployment rate near 10 percent or a rate below 9 percent?
As for Medicare, slashing payments to physicians is the Democrats’ favorite way of paying for expanding Medicaid enrollment and health-insurance subsidies for the non-poor. If they really think that will work, how can they possibly object to saving money sooner rather than later?
[Cross-posted at The Corner]
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- The two most recent first quarter deficits have been about $100 billion higher than the average annual deficits run from 2002 to 2008.
- Utah legislators call for fiscal federalism.
- Small businesses are citing government as the problem, but the media ignores the story.
- Fannie Mae and Freddie Mac should be put in the budget, and then privatized.
- The Economic Development Administration, National Association of Development Organizations, and the Appropriations Committees aren’t exactly taxpayer-friendly.
Do We Really Want to Mimic Western Europe’s Stagnant Welfare States?
Since many of the politicians in Washington want America to be more like Europe (including complete government-run health care instead of the partially government-run health care system we have now), it’s worth contemplating what that would mean for the economy.
America today is richer than Western Europe. Indeed, per-capita living standards are about 30 percent higher in the United States — and that’s according to the statists at the Paris-based Organization for Economic Cooperation and Development (see page 6 of this report). And we have been growing faster, which presumably should not be the case according to convergence theory (see Annex Table No. 1 of this OECD database).
It also seems that Europe’s economy is more likely to endure a double-dip recession. Bloomberg reports:
Europe’s economy may be coming unstuck from the global recovery as governments to the south of the region struggle to reverse budget deficits and consumers in the north pull back spending. After the 16-nation euro economy almost stagnated in the fourth quarter, data this week showed the weakness reaching into 2010. …“Europe is where we see the biggest risk of a double dip at the global level,” said Julian Callow, chief European economist at Barclays Capital in London. “Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.” …“There are tentative signs that the U.S. economy may be pulling ahead from Europe,” [UBS strategist Nick] Nelson said in a Feb. 23 report… “The sovereign debt crisis in Europe’s periphery reinforces drags on euro-area growth,” said Michael Saunders, an economist at Citigroup in London.
Left-wing populists genuinely seem to believe that the economy is a fixed pie, so even though they are fundamentally wrong, their fixation on redistribution is understandable. After all, given their inaccurate view of the world, robbing Peter is the only way to lift Paul. What is more mystifying is why the (presumably) thoughtful left wants America to be more like Western Europe, where living standards lag America and the gap grows wider with each passing year. The only logical conclusion is that they are so fixated on differences in income (or, less charitably, are so resentful of success) that they are willing to make poor people worse off if they can impose even greater damage on rich people. As Winston Churchill noted, “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
Weekend Links — Health Care Edition
- Republicans and Democrats are both missing the point of true health care reform: “Health care reform cannot just be about giving more stuff to more people. It should be about actually ‘reforming’ the system. That means scrapping the current bills, and crafting the type of reform that makes consumers responsible for their health care decisions.”
- Alan Reynolds: If people looking for individual health insurance policies were allowed to shop in any state, the number of uninsured could drop by 11.1 million … or more.
- And the winner for the worst idea for health care reform goes to…
- Something you might want to brush up on: The Reconciliation Rulebook.
- In case you missed it, Cato health policy experts live-blogged part of Thursday’s health care summit.
Shane Harris’ The Watchers at Cato March 10th
Here’s a great conversation at Slate.com about Shane Harris’ new book The Watchers.
We’ll be having the author here at Cato on March 10th for a similar discussion of his book and the growth of the surveillance state.
Does Duncan Have Any Clue What a Free Market Is?
On the heels of exploiting the name of perhaps the world’s all-time greatest free-marketeer, U.S. Secretary of Education Arne Duncan has decided to cut right to the chase and abuse the term “free market” itself. Writing in the Washington Post as part of his ongoing effort to demonize banks and push the Student Aid and Fiscal Responsibility Act over the finish line, Duncan offers the following:
The president’s plan actually creates jobs and draws on free-market principles by selecting private companies through a competitive process to service student loans issued directly by the Education Department. These private companies, including Sallie Mae, compete for our business and are evaluated on the quality of their customer service and their default rates.
Got it? When the federal government decides which companies get to service loans that it completely controls, those are “free-market principles” at work.
Right. And the legislation Duncan is trying to sell us really is fiscally “responsible.”
Should the U.S. Withdraw from NAFTA?
Rep. Gene Taylor, D-MS, thinks so. According to CongressDaily, Taylor is about to introduce a two-page bill that would withdraw the United States from the North American Free Trade Agreement.
Taylor blames the agreement with Canada and Mexico for the loss of 5 million manufacturing jobs since it was enacted in 1994. This is a popular but false charge. Manufacturing jobs have declined in the past 15 years for one big reason: soaring productivity.
Overall output at U.S. factories was actually 37 percent higher in 2009 compared to 1993, the year before NAFTA took effect, according to Table B-51 in the latest Economic Report of the President. We are producing a higher volume of stuff with fewer workers because individual workers are so much more productive than they were in the early 1990s.
As I’ve argued before, NAFTA has spurred more trade and deeper integration among the three partner countries. It has created new opportunities for American companies and their workers to raise their competitiveness in global markets. It has strengthened ties to our two closest neighbors.
The U.S. government would be foolish to withdraw from an agreement that continues to pay huge dividends.
When Bipartisanship Is Good News
Usually when I hear that a policy proposal has bipartisan support, I instinctively check for my wallet. But I greeted with pleasure the news on Wednesday that two lawmakers — Rep. Scott Garrett (R, NJ) and Rep. Patrick Murphy (D, PA) — had introduced a bill to shut down the USDA’s Market Access Program, which the congressmen rightly paint as “corporate welfare to big business.”
I yield to no one in my abhorrence of trade barriers, here and abroad. But this program is less about addressing market access per se, and more about taxpayer funding of marketing campaigns, trade shows and other promotions, which surely are the responsibility of the firms/industries concerned.
Incidentally, the Market Access Program is a line item in one of many agricultural programs identified by our Tax and Budget team as being ripe for the chopping block.
EDA, NADO, and the Appropriations Hearings Charade
A couple weeks ago Orson Swindle, an assistant secretary of commerce for economic development in the Reagan Administration, was kind enough to send me news articles from his days battling policymakers over porky Economic Development Administration projects. In a 1989 Insight article, Orson gave a nice summation of one of the problems with special interest spending:
The minute you fund a program you’ve just created a constituency group. Before long, they will be organized and have a staff here in Washington, which is paid from dues from the members who get their money from the federal government. And those go up and lobby to keep the money going. It’s a classic microcosm of what’s wrong with government.
The National Association of Development Organizations is a perfect example of what Orson was talking about.
NADO says it “is an advocate for federal programs and policies that promote regional strategies and solutions for addressing local community and economic development needs.” It got started in 1967 when federal subsidization of state and local government was taking off. It’s headquartered in Washington and its dues come from members getting money from the federal government. According to USASpending.gov, NADO itself has received almost $1 million in federal money over the past decade.
Economic Development Administration funding is obviously a core interest for NADO. On January 8th it applauded a pro-EDA funding letter sent by 20 senators to President Obama. NADO’s concluding remarks are illustrative of the incestuous relationship between the special interests and members of Congress:
NADO thanks those regional development organizations that contacted their Senators to urge them to sign the letter. Regional development organizations are encouraged to formally thank those Senators that showed their support for EDA.
Exactly what does NADO mean by formally thank? Regardless, “thanking” politicians for giving the gift of other people’s money is patently repulsive.
The Health Care Debate on C-SPAN
Today, President Obama began to fulfill the promise that health care legislation would be hashed out on C-SPAN. His discussion with congressional leaders was broadcast on that cable channel and streamed live on the Internet. The nearly six-and-a-half hour-long meeting began to touch on many of the issues at stake in the health care area.
I’ll leave observations about the merits to our experts, who live-blogged the morning session. I found a few things interesting from a transparency perspective:
The format was far more conducive to productive discussion than procedures for “debate” in Congress. What generally happens in the House and Senate is display of members’ and senators’ well-settled views. So today interested Americans could get a real sense of the issues and how their representatives think about them.
There seemed to be a division between representatives who knew the technical subject matter and those who—for lack of a better phrase—knew the emotional subject matter. Surprisingly astute commentaries on fiscal realities were met with appeals to the story of one constituent or another—or of members’ own families’ health predicaments.
Though there was much talking past one another, these are all good things to see. It will inform the public, and a better informed public will make better decisions about health care legislation, about individual representatives, and about the proper role of government.
I know how I feel about these things. (I’m soft-pedaling my views here as hard as I can…) My opinions didn’t change, though I adopted new nuances to my thinking.
It’s doubtful that many people’s opinions will change. But I’m confident that a more open process will lead to better results in many senses: specific policy results; electoral activity; and people’s overall sense of the role of government.
Today’s meeting only scratched the surface, of course. Sessions like this in the days and weeks to come will do more to improve the transparency of the lawmaking process, in this issue and hopefully others. Today’s transparency precedent is something that the president and federal lawmakers should not retreat from.
Are We Really Going to Leave Iraq? (cont’d)
A follow up on yesterday’s post about my skepticism that we would be able to get out of Iraq by 2011 (and get all “combat” troops out by September 1 of this year):
- Tom Ricks reports that Gen. Odierno has formally requested keeping a combat brigade in Kirkuk beyond the September 1 deadline; but
- Laura Rozen says we should keep our eyes peeled for a Senate resolution whose “group of cosponsors will confirm that, at long last, the war over the war is over.”
One way to square these two seemingly contradictory statements is if the bipartisan consensus Rozen implies exists reflects an agreement between Democrats and Republicans that the United States should use Iraq as a new military base in the Middle East like we used to use Saudi Arabia. Ricks’s report strongly implies that the military is trying to force Obama to stay, although it’s not clear whether Obama has any desire to take up a fight with them over leaving. And that’s assuming he actually wants to leave.
Ricks writes cryptically that “this debate is just beginning. I expect that Obama actually is going to have to break his promises on Iraq and keep a fairly large force in Iraq, but of course that won’t be the first time he’s had to depart from his campaign rhetoric on this war.” Finally, Ricks suggests
Let’s open the betting: How many U.S. military personnel will be in Iraq four years from today–that is, Feb. 25, 2014? The person who guesses closest gets a signed copy of any of my books. My guess: 28,895. Not “combat” troops, of course! Goodness no. Just “advisory” troops who carry M-16s and call in airstrikes and such.
I have enough humility to duck a precise guess, but I would be very, very surprised if the number is zero. Americans don’t give up military footholds unless we’re chased out, a la Vietnam, Lebanon, or Saudi Arabia. We’re still in Europe, for goodness’ sake.
Patriot Act Update
It looks as though we’ll be getting a straight one-year reauthorization of the expiring provisions of the Patriot Act, without even the minimal added safeguards for privacy and civil liberties that had been proposed in the Senate’s watered down bill. This is disappointing, but was also eminently predictable: Between health care and the economy, it was clear Congress wasn’t going to make time for any real debate on substantive reform of surveillance law. Still, the fact that the reauthorization is only for one year suggests that the reformers plan to give it another go—though, in all probability, we won’t see any action on this until after the midterm elections.
The silver lining here is that this creates a bit of breathing room, and means legislators may now have a chance to take account of the absolutely damning Inspector General’s report that found that the FBI repeatedly and systematically broke the law by exceeding its authorization to gather information about people’s telecommunications activities. It also means the debate need not be contaminated by the panic over the Fort Hood shootings or the failed Christmas bombing—neither of which have anything whatever to do with the specific provisions at issue here, but both of which would have doubtless been invoked ad nauseam anyway.
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