Archive for July, 2010
Maybe the French Aren’t So Bad After All
I like poking fun at French politicians for being hopeless statists, and I always assumed that French voters shared their collectivist sympathies. But according to new polling data reported by the Financial Times, there may be a Tea Party revolt brewing in France. Among major European nations, the French are most in favor of smaller government. Sacre Bleu!
European governments have solid public support, at least for now, for the spending cuts they are making in an effort to boost economic recovery, according to the latest Financial Times/Harris opinion poll. …The poll’s results point to a fiscal conservatism among the European public that contrasts with the eagerness with which most governments ran up high deficits to protect jobs and living standards as the crisis unfolded. …Asked if public spending cuts were necessary to help long-term economic recovery, 84 per cent of French people, 71 per cent of Spaniards, 69 per cent of Britons, 67 per cent of Germans and 61 per cent of Italians answered Yes. …Asked if they preferred public spending cuts or tax rises as a way to reduce budget deficits and national debts, strong majorities in the five EU countries as well as the US were in favour of spending cuts. Similarly conservative views on public expenditure emerged when people were asked if EU governments were right to engage in large-scale deficit-spending after the 2008 crisis. In all five EU countries, a majority – ranging from 68 per cent in France and Italy to 54 per cent in the UK – said the governments were wrong to have done so.
Study: Competition Saves Lives in Britain’s NHS
This interesting NBER study just came across the transom:
The effect of competition on the quality of health care remains a contested issue. Most empirical estimates rely on inference from non experimental data. In contrast, this paper exploits a pro-competitive policy reform to provide estimates of the impact of competition on hospital outcomes. The English government introduced a policy in 2006 to promote competition between hospitals. Patients were given choice of location for hospital care and provided information on the quality and timeliness of care. Prices, previously negotiated between buyer and seller, were set centrally under a DRG type system…
Our results constitute some of the first evidence on the impacts of a market-based reform in the health care sector. We find strong evidence that under a regulated price regime that hospitals engage in quality competition and that the 2006 NHS reforms were successful. Within two years of implementation the NHS reforms resulted in significant improvements in mortality and reductions in length-of-stay without changes in total expenditure or increases in expenditure per patient. Our back of the envelope estimates suggest that the immediate net benefit of this policy is around £227 million. While this is small compared to the annual cost of the NHS of £100 billion, we have only calculated the value from decreases in death rates. Allowing for improvements in other less well measured aspects of quality will increase the benefit, as will any further falls in market concentration which may occur as the policy continues in operation. If the UK were to pursue policies that lead to deconcentration of hospital markets, the gains could be substantially larger.
These results suggest that competition is an important mechanism for enhancing the quality of care patients receive. Monopoly power is directly harmful to patients, in the worst way possible – it substantially increases their risk of death. The adoption of pro-market policies in European countries, as well as policies directed at increasing or maintaining competition such as antitrust enforcement, appear to have an important role to play in the functioning of the health sector and assuring patients’ well being.
The study is, “Death by Market Power: Reform, Competition and Patient Outcomes in the National Health Service,” by Martin Gaynor (Carnegie-Mellon University), Rodrigo Moreno-Serra (Imperial College Business School), and Carol Propper (University of Bristol).
Venezuela’s Intensifying Assault on Press Freedom
Jackson Diehl and Mary O’Grady write today in the Washington Post and Wall Street Journal, respectively, about Guillermo Zuloaga, critic of Hugo Chavez and owner of Globovision TV, the only remaining independent TV station in Venezuela.
Zuloaga has become an international symbol of press freedom as he and his station have come under increasing government harassment, especially in the past year. Last month, a Chavez controlled court issued an arrest warrant for Zuloaga and his son, and they went into hiding. In March, Zuloaga was arrested briefly for having spoken critically of the Venezuelan regime at an international conference. The government accused the Globovision head of criticizing the president and poisoning the minds of Venezuelans. Chavez has promised to shut down Globovision, as he did with Venezuela’s largest station in 2007 (RCTV), and he regularly vilifies the free press. The TV station and its reporters have come under countless physical attacks by government backed thugs. Last July, days after we announced that Zuloaga would speak at a Cato forum here in Washington, a court prevented him from leaving the country. Instead, he taped a video message for Cato and sent his son Carlos, the VP, to speak. (See the forum here. See Guillermo Zulloaga’s message to Cato by clicking on the second video link.)
Zuloaga and his son have now come out of hiding. A few of us met with him at Cato last week. He told us of numerous ways in which Chavez has violated Venezuelan laws and the constitution in his effort to harass Globovision, confirming a recent report by the Inter-American Commission on Human Rights that documented the regime’s systemic violation of basic freedoms and its arbitrary use of criminal and administrative law against opponents.
Globovision is one of the last bastions of freedom in Venezuela. It is where Venezuelans go to hear news that will not be reported on one of the countless state-run TV stations. It is the media outlet to which Venezuelan civil society reports abuses by government when they happen, so as to most effectively defend itself. I can attest to that critical role that Globovision plays in Venezuela. As I reported from Caracas here in May of last year, the national guard tried to shut down a Cato seminar for Venezuelan students, an abuse that we immediately reported to Globovision, which in turn began reporting the harassment and thus pressuring the regime to back off.
As the economic, security and social conditions of Venezuela continue to spiral downward, Chavez will intensify his socialist revolution. If he finally does close Globovision, it should erase any lingering doubt about the authoritarian nature of the Bolivarian regime.
No-Fly With Me
The ACLU is representing several plaintiffs in a recently filed lawsuit challenging the U.S. government’s ”No Fly” list. The video in this “Blog of Rights” post tells the story of two of the plaintiffs. “I wanna go home!” laughs U.S. Marine veteran Ayman Latif. “I wanna see my mom. I want her to see my babies.”
No-fly listing is a constitutional aberration in which the executive branch unilaterally imposes a disability on persons it selects using unpublished criteria. It often denies these individuals any recourse by obscuring the reasons why they aren’t permitted to fly. Bills in the House and Senate would extend the use of the “no-fly” list to use in gun control.
There is no way to clear up the “no-fly” status of innocent travelers once and for all. The DHS’ Traveler Redress Inquiry Program may be good for unraveling mistaken name matching, but evidently it hasn’t cured the problem for these travelers.
No-fly listing is also a weak security measure. It’s CYA—”See? We did something!”—but it creates a class of people too dangerous to let fly but not so dangerous that they are sought for arrest.
There is some merit to watch- and no-fly-listing in the international context, where the U.S. is often unable to pursue threatening individuals. But generally, as I wrote in my book, Identity Crisis, “this procedure is like posting a most-wanted list at a post office and then waiting for criminals to come to the post office. It is a singularly lazy way to ‘pursue’ terrorists.”
Another security demerit: No-fly listing gives away the store. It tells any terrorist on a list that he or she is a suspect.
Since 9/11, airports and air travel have been something of a constitution-free zone. Exigency in the first year after that stunning attack may have justified some of the practices begun then, but we are secure and confident enough today to adhere to the Constitution. This lawsuit may vindicate due process values and the important liberty interest in freedom of movement.
Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law
At more than 2,500 pages and 500,000 words long, the new health care bill — the Patient Protection and Affordable Care Act — is the most significant transformation of the American health care system since Medicare and Medicaid.
The bill’s complexity has created confusion, frustration, false expectations, and conflicts about its coverage and impact. An incisive new report by Cato scholar Michael D. Tanner provides an authoritative and deeply revealing explanation of its provisions.
The diagnosis: the bill is bad medicine. It is likely to make Americans less healthy, less prosperous, less able to direct their own health care decisions, and places huge burdens on our economy and already massive national debt. It is now certain that the debate over health care reform will be with us for much longer.
Update: Printed copies are now available for purchase for $10.
Restore Free Markets to Health Care
Eline van den Broek probably is not happy today since she was in South Africa watching her team lose a high-scoring (by soccer standards) battle with Spain, but she should be very proud of the new video she narrated that urges the repeal of Obamacare — and also points out some of the other reforms that are needed to restore a free market to the US health care system.
Her comments on how the American health care system was a mess even before Obamacare are particularly important and echo many of the points made by Mike Tanner and Michael Cannon.
The Recess Appointment of Donald Berwick
Late last week, President Obama made a recess appointment of Dr. Donald Berwick to head the Center for Medicare and Medicaid Services (formerly the Health Care Financing Administration). This has provided a good chunk of the week and weekend’s polititainment.
I know little about Berwick or his merits as an administrator of the government health care system, but in an April Cato@Liberty post I reviewed an article of his on “patient-centered health care.” If you’re interested, take a look at my comment, “A Little Less Poetry, a Little More Economics.”
Don’t Take Glenn Beck’s Word for It. Take Mussolini’s.
Establishment intellectuals are in high dudgeon at the use of terms like “socialism” and “fascism” to describe President Obama’s program of government takeovers of automobile companies; the extension of federal control over banking, financial services, local schools, energy production, health care, and the internet; and “spread the wealth” tax-and-spend policies. But Herbert Hoover and Ronald Reagan had a point when they pointed to similarities between Mussolini’s fascism and FDR’s New Deal. And, as I wrote in a review of Wolfgang Schivelbusch’s Three New Deals: Reflections on Roosevelt’s America, Mussolini’s Italy, and Hitler’s Germany, 1933–1939, Mussolini saw the connection, too: In a laudatory review of Roosevelt’s 1933 book Looking Forward, Mussolini wrote, “Reminiscent of Fascism is the principle that the state no longer leaves the economy to its own devices. … Without question, the mood accompanying this sea change resembles that of Fascism.”
And today I discovered another example, in Susannah Cahalan’s New York Post review of James Mauro’s book Twilight at the World of Tomorrow: Genius, Madness, Murder, and the 1939 World’s Fair on the Brink of War. Mauro relates the visit of Grover Whalen, New York’s police commissioner and president of the World’s Fair Corporation, to Rome to persuade Mussolini to authorize an Italian pavilion at the 1939 World’s Fair. The conversation, Mauro says (as summarized by Cahalan), began like this:
“I understand you served as Police Commissioner of New York,” he said. “How did my people behave?”
“Some good, some bad,” Whalen responded.
“The bad ones — from Sicily?”
Mussolini first balked at participating in the Fair.
“What, Italy compete with Wall Street?” the dictator said. “What, for example, would it accomplish?”
“The American people would like to know what fascism is,” Whalen responded.
“You want to know what fascism is like? It is like your New Deal!”
Mauro’s source for this conversation was Whalen’s autobiography, Mr. New York.
America is not fascist Italy, much less Germany or Russia. We have only the late Mr. Whalen’s word that this conversation took place. But historians should be able to talk rationally about similarities and parallels in disparate programs.
Learning From Our Mistakes: Nation-Building Follies and Afghanistan
When the United States first invaded Afghanistan, the objective was clear and direct: defeat al Qaeda and oust the Taliban regime that had given the terrorist organization a safe haven from which to plan the 9-11 attacks. The mission has since become something very different—and utterly impractical. U.S. officials now stress the goal of supporting an indigenous political structure that will provide security to the Afghan people and implement good governance (apparently under the enlightened leadership of Hamid Karzai and his corrupt henchmen). Western military and civilian personnel are involved in everything from setting up schools to drilling wells to building roads. They may avoid using the term nation–building, but that is clearly what is taking place.
Afghanistan is an extremely unpromising candidate for such a mission, given its pervasive poverty, its fractured clan–based and tribal–based social structure, and its weak national identity. Furthermore, U.S. and NATO officials should be sobered by the disappointing outcomes of other recent nation–building ventures. The two most prominent missions, Bosnia and Iraq, ought to inoculate Americans against pursuing the same fool’s errand in Afghanistan.
The Dayton Accords ended the Bosnian civil war, but Bosnia is no closer to being a viable country than it was in 1995. It still lacks a meaningful sense of nationhood or even the basic political cohesion and ethnic reconciliation to be an effective state. If secession were allowed, the overwhelming majority of Bosnian Serbs would vote to detach their self–governing region (the Republika Srpska) from Bosnia and form an independent country or merge with Serbia. Most of the remaining Croats—who are already deserting the country in droves—would choose to secede and join with Croatia. Bosnian Muslims constitute the only faction wishing to maintain Bosnia in its current incarnation.
The economic situation is equally bad. Indeed, without the financial inputs from international aid agencies and the spending by the swarms of international bureaucrats in the country, there would scarcely be a functioning economy at all.
Although Bosnia is a nation–building fiasco, it eventually may be less of a disaster than Iraq. Americans who cheered the success of the surge strategy, and now swoon at the prospect of General Petraeus achieving a repeat performance in Afghanistan, were premature in their elation. Tensions are again simmering, both between Sunnis and Shiite Arabs and between Arabs and Kurds, and there have been numerous violent incidents. Months after national elections, the political squabbling is so bad that Iraqis have been unable to form a new government.
Moreover, Iraq has already ceased to be a unified state. Baghdad exercises no meaningful power in the Kurdish region in the north. Indeed, Iraqi Arabs who enter the territory are treated as foreigners—and not especially welcome foreigners. Although the Kurds have not proclaimed an independent country, the Kurdistan Regional Government rules a de facto state with its own flag, currency, and army.
None of this bodes well for Iraq’s national unity or even stability going forward. There are already calls by American pundits to abandon—or at least delay—plans for the withdrawal of the remaining U.S. combat forces, lest the country again erupt into chaos.
Despite a 15–year effort and the expenditure of billions of dollars, the Bosnian nation-building mission is a flop. Despite a seven–year effort (and counting), the expenditure of at least $800 billion, and the sacrifice of more than 4,300 American lives, the Iraq nation-building mission is, at best, a disappointment Yet, instead of learning from those experiences, U.S. leaders seem intent on pursuing the same chimera in Afghanistan.
Foreign policy, like domestic politics, is the art of the possible. Containing and weakening al Qaeda may be possible, but building Afghanistan into a modern, democratic country is not. The increasingly evident failures of nation–building in Bosnia and Iraq—both of which were more promising candidates than Afghanistan—should have taught us that lesson.
C/P at Big Peace
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- Would it take seven years for a senior manager at a private company to be fired if he goofed off and didn’t go to work?
- Only a government monopoly would try to raise prices when the demand for its services is plummeting.
- Are we spending $18 billion a year of taxpayer money on NASA simply to generate warm and fuzzy feelings?
- Fraud in the Low-Income Home Energy Assistance program illustrates the problem with governments being charitable with other people’s money.
- Paul Krugman is dismissing concerns that the Obama administration’s fiscal and regulatory policies are fostering uncertainty in the business community, and thus inhibiting job growth and an economic recovery. We beg to differ.
Does MedPAC Think Markets Produce Zero Public Goods?
I just came across this doozy in a 2009 report by MedPAC, the government agency that advises Congress on how to adjust Medicare’s price and exchange controls:
In broad terms, we must … invest in better information on the effectiveness of treatment options so it might guide the decisions of patients, health care providers, and public and private insurers. Our nation spends over $2 trillion on health care, yet we know far too little about the comparative effectiveness of alternative treatments. Such information is a public good, which has not—and will not—be [sic] spontaneously produced by the private market.
Except: the private market has spontaneously produced comparative-effectiveness information, as I documented in this study released one month prior to the MedPAC report. I also explain why the argument for government provision of public goods is shaky.
Ironically, MedPAC disables the “copy” function in the reports it posts online, so I had to type out the above excerpt by hand. Why is that ironic? It’s an example of the sort of innovation that enables markets to overcome the public-good problem. (But since my tax dollars paid for that report, it seems to be an innovation that maybe MedPAC could abandon.)
Jilted Cavs Fans Should Blame Ohio’s Income Tax
Supporters of the Cleveland Cavaliers, especially the owner of the team, are upset that basketball superstar LeBron James has decided to sign with the Miami Heat. The anger is especially intense because the Cavaliers offered James $4 million more over the next five years. But their anger is misplaced because more money in Cleveland actually translates into about $1 million less disposable income when the burden of state and local income taxes is added to the equation. Rather than condemn James for making a rational choice, local basketball fans should tar and feather Ohio politicians.
This story from CNBC walks through the calculations.
[I]f you match up what James’ salary would be for the first five years in Cleveland and the five years in Miami, you find that the Cavaliers are only offering him $4 million more. That advantage gets erased — and actually gives the Heat the monetary edge over — when you consider the income tax difference. …Playing in Cleveland, LeBron would face a state income tax of 5.925 percent, plus a Cleveland city tax of two percent. Over the first five years of a new contract with Cleveland, James would give back $3,953,060 combined to the state and city for the 41 games each season he’d play at home. But James would have to pay none of that for home games in Miami since Florida doesn’t have an income tax. Athletes have to pay income taxes to states that they play in on the road, so the games he’ll play away from home — whether he played for Cleveland or Miami — are essentially a wash. But there are, on average, 11 away games per season where James would have to pay Ohio and Cleveland taxes. Why? Because he has to pay when he plays in the six areas –– Florida, Texas, Washington D.C., Illinois, Toronto and Tennessee –– that have no jock taxes. That’s another $1,061,128 he’ll have to pay in taxes that he wouldn’t have to pay in Miami.
New York basketball fans also should be angry. With some of the highest taxes in the nation, many of which target highly productive people as part of a class-warfare policy, New York is bad news for professional athletes. The New York Post, commenting on the probability that James would sign with the Miami Heat, identified the real villains.
[B]lame our dysfunctional lawmakers in Albany, who have saddled top-earning New Yorkers with the highest state and city income taxes in the nation, soon to be 12.85 percent on top of the IRS bite. There is no state income tax in Florida. On a five-year contract worth $96 million — what he’d get from the Knicks or the Heat — LeBron would pay $12.34 million in New York taxes. Quite a penalty for the privilege of working in Midtown.
Now let’s look at the big picture. The calculations that LeBron James made when deciding to sign with the Miami Heat are the same calculations that companies make when deciding whether to build factories and create jobs. So when people wonder why high-tax states such as Ohio, California, and New York are losing jobs to zero–income tax states such as Florida and Texas, part of the answer should be obvious. And if we move to the global level, folks should not be too surprised that companies and investors, all other things equal, are likely to avoid the United States, with its punitive 35 percent corporate tax, and instead create jobs and build wealth in places like Hong Kong, Ireland, and Switzerland.
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
