Archive for July, 2010
Major Whistleblower Provisions in Financial Regulation Bill
When Congress passes major new regulatory laws, it nowadays routinely throws in provisions authorizing lawsuits on behalf of so-called whistleblowers at regulated businesses. Lawmakers do this despite frequent complaints that such provisions encourage discontented employees to seize on borderline conduct and label it fraud or rule-breaking, enrich some persons who themselves took part in questionable practices, and interfere with companies’ own internal compliance efforts, to name a few presumably unintended consequences.
One reason these provisions are added with such regularity despite their at-best-mixed record is that they are lobbied for avidly by two groups of lawyers, the so-called qui tam bar (which collects a percentage of the sometimes enormous informant bounties provided by statute) and the plaintiff’s employment bar, for whom the laws (especially “anti-retaliation” provisions) can provide valuable leverage in negotiating on behalf of terminated employees even if no bounty is available.
While it has not been a major focus of bill opponents, the Dodd-Frank financial regulation bill is loaded with major new extensions of whistleblower law into the economy’s financial sector. Michael Fox at Jottings By An Employer’s Lawyer has more, and links to a more detailed account at an understandably jubilant plaintiff’s-lawyer site. I covered the issue a few weeks ago at Overlawyered, where there is also background on qui tam and whistleblower matters more generally.
Schools on Film
AEI’s Rick Hess worries that school choice advocates are moving into the public messaging arena with “brazenly manipulative” flicks that rely on shallow “sound bites.” He cites the screening of five documentaries at an upcoming national conference in San Franscisco to argue his point.
I can’t comment on them as a whole–I haven’t seen them all–but I would like to point out that there will actually be at least eight screenings at next month’s conference. Among them will be a brief sample of a proposed six-part documentary series called School, Inc. Taking Educational Excellence from Candle to Flame. This series, inspired by James Burke’s Connections and Carl Sagan’s Cosmos, would take viewers on a world-wide quest to answer one very important question: why is excellence routinely replicated and spread on a massive scale in every field except education?
The series hasn’t been shot yet, and perhaps distributors today won’t think viewers are still interested in the kind of challenging, thought-provoking documentary series that so captivated me (and millions of others) in my teen years. But the project’s advisory board includes Jay Mathews, Paul Peterson, James Tooley, and Michael Horn, my co-producers and co-writers (Patrick Prentice and Tim Baney) have more than half-a-century of documentary filmmaking experience between them, and I’ve been studying school systems around the globe and across history for the better part of two decades. We’re confident that this series will be both substantive and entertaining, and think that American (and foreign) audiences are very interested in the subject matter. As we start to pitch to distributors in the coming months, we’ll find out if they agree.
Stay tuned….
More on Justin Amash
I wrote yesterday about a candidate for the House of Representatives who offered an interesting and critical look at his experience as a state legislator in Michigan. This candidate, Justin Amash, both reads the bills he votes on and posts explanations for his votes on his Facebook page. Here are two of his explanations:
Justin Amash just voted no on HBs 6038 and 6226, which impose stiff penalties and prison sentences on individuals who possess or use two synthetic drugs: one that mimics the effects of ecstasy and another that mimics the effects of marijuana. I have never possessed or used illicit drugs, nor should anyone. But this legislation is more about sensationalism than actual public protection. HB 6038 passed 105-1. HB 6226 passed 104-1.
Justin Amash just voted no on HR 294, which “recognize[s] the perfect game pitched by Armando Galarraga of the Detroit Tigers on June 2, 2010, against the Cleveland Indians.” Congrats to Mr. Galarraga for his outstanding performance and achievement, but I’m not the commissioner of Major League Baseball, and this resolution is not an appropriate legislative matter. It passed 101-5.
If he keeps this up, I may stop being cynical about politics which would be a problem because I don’t know any other way to be, having living in DC for 18 years. But I’m willing to give it a try.
You can have a look at his other explanations for his votes here. (Make sure you go down to the older posts on his wall to get his explanations).
Argentina Sets an Example of Equality Before the Law for Latin America
Nowadays, it’s hard to find an instance where Argentina sets a positive example for the rest of Latin America. However, last night’s vote in that country’s Senate that legalizes same-sex marriages must be praised as that. Argentina has now become the first country in Latin America to recognize marriage equality for all couples.
The fight for marriage equality is just beginning in Latin America. Outside of Argentina, only Mexico City grants gay couples the right to marriage. Uruguay has granted civil union rights to same-sex couples since 2008, and last year in Colombia the Constitutional Court ruled that same-sex couples can be recognized as de facto unions, which enjoy all the rights of marriage. In December, Costa Rica might hold a referendum on this issue. While the referendum is promoted by opponents of gay civil unions, the vote could end up in a big upset victory for the gay community.
Latin America, with its deep-seated conservative Catholic tradition, is not fertile soil for the cause of gay equality. That is one more reason to applaud last night’s brave vote in Buenos Aires.
Dear Health Care Journos, There’s Nothing Free about ObamaCare
The Obama administration announced yesterday its plans for implementing ObamaCare‘s mandate that consumers purchase first-dollar coverage for preventive services. The press release reads (emphasis added):
Administration Announces Regulations Requiring New Health Insurance Plans to Provide Free Preventive Care
Of course the administration would emphasize that consumers will pay nothing for these services at the moment of service, and elide the fact that this mandate will increase their health insurance premiums. The administration’s use of the word “free” is what we call spin.
What’s surprising–and more than a little disappointing–is that journalists and headline writers at major media organizations would repeat the administration’s spin, as if the government really is giving away free stuff:
- New York Times: “Health Plans Must Provide Some Tests at No Cost…free coverage…free screenings…free preventive services…”
- Los Angeles Times: “Healthcare law offers preventive care at no cost”
- Politico: “New rules: Free preventive care…free under new federal guidelines.”
- Reuters: “Healthcare overhaul mandates free preventive care…no extra cost to consumers…Medicare patients will have access to free prevention services…”
- Wall Street Journal: “White House Unveils Free Preventative Services…services that will be free to consumers…free preventive care…free preventive care…”
Each use of “free” and “no cost” in these excerpts is false, even within its original context. There’s no such thing as a free lunch. Everything has a cost. No government can change that. Mandating that insurers cover certain services does not magically make them free. Consumers still pay, just in the form of higher health insurance premiums and lower wages.
The Wall Street Journal (in paragraph six), The New York Times (paragraph seven), Reuters (paragraph 16), and the Los Angeles Times (paragraph 19 or so) do mention that consumers will pay for this mandate in the form of higher premiums–but that doesn’t make the untrue stuff true. It just makes the article internally inconsistent. Moreover, the Los Angeles Times incorrectly suggests that the higher premiums would be offset by lower out-of-pocket spending. (The change in premiums will be larger due to moral hazard and administrative costs.) And Reuters mentions higher premiums only vaguely, and as if insurers would bear that cost. Each article also repeats the administration’s spin that spending more on preventive care would reduce health care costs, without mentioning that the Congressional Budget Office and other health care researchers dispute that claim.
Journalists need to be very careful with terms like “free” and “no cost.”
Unleashing an Internet Revolution in Cuba
By now the name of Yoani Sánchez has become common currency for those who follow Cuba. Through the use of New Media (blog, Twitter and YouTube) Yoani has challenged the Castro regime in a way that various U.S. government-sponsored efforts have failed to do before, earning the respect and tacit admiration of even those who continue to sympathize with the Cuban regime. As my colleague Ian Vásquez put it a few months ago, Yoani keeps speaking truth to power.
Although she’s a remarkable individual, Yoani is not alone in fighting repression with technology. Other bloggers are making their voice heard, and that makes the Castro dictatorship nervous. As Yoani wrote in a paper recently published by Cato, despite the many difficulties and costs that regular Cubans face when trying to access Internet,
… a web of networks has emerged as the only means by which a person on the island can make his opinions known to the rest of the world. Today, this virtual space is like a training camp where Cubans go to relearn forgotten freedoms. The right of association can be found on Facebook, Twitter, and the other social networks, in a sort of compensation for the crime of “unlawful assembly” established by the Cuban penal code.
As recent events in Iran and elsewhere have shown, once a technology becomes pervasive in a society, it is extremely difficult for a totalitarian regime to control it. A new paper published today by the Cuba Study Group highlights the potential of technology in bringing about democracy and liberty to Cuba. The document entitled “Empowering the Cuban People through Technology: Recommendations for Private and Public Sector Leaders,” also recommends lifting all U.S. restrictions that hinder the opportunities of companies to provide cell phone and Internet service to the island. For example, the paper reviews the current U.S. regulatory framework on technology investment in other repressive regimes such as Iran, Syria, Burma and North Korea, and finds that “the U.S. regulations governing telecommunications-related exports to Cuba are still some of the most restrictive.”
By removing these counterproductive restrictions, Washington could help unleash an Internet revolution in Cuba. More Yoanis will certainly bring about more change in the island than 50 years of failed U.S. trade and travel bans.
Obamanomics and my Seven Steamy Nights with the Gals from Victoria’s Secret
The White House is claiming that the so-called stimulus created between 2.5 million and 3.6 million jobs even though total employment has dropped by more than 2.3 million since Obama took office. The Administration justifies this legerdemain by asserting that the economy actually would have lost about 5 million jobs without the new government spending.
I’ve decided to adopt this clever strategy to spice up my social life. Next time I see my buddies, I’m going to claim that I enjoyed a week of debauchery with the Victoria’s Secret models. And if any of them are rude enough to point out that I’m lying, I’ll simply explain that I started with an assumption of spending -7 nights with the supermodels. And since I actually spent zero nights with them, that means a net of +7. Some of you may be wondering whether it makes sense to begin with an assumption of “-7 nights,” but I figure that’s okay since Keynesians begin with the assumption that you can increase your prosperity by transferring money from your left pocket to your right pocket.
Since I’m a gentleman, I’m not going to share any of the intimate details of my escapades, but I will include an excerpt from an editorial in today’s Wall Street Journal about the Obama Administration’s make-believe jobs.
President Obama’s chief economist announced that the plan had “created or saved” between 2.5 million and 3.6 million jobs and raised GDP by 2.7% to 3.2% through June 30. …We almost feel sorry for Ms. Romer having to make this argument given that since February 2009 the U.S. economy has lost a net 2.35 million jobs. Using the White House “created or saved” measure means that even if there were only three million Americans left with jobs today, the White House could claim that every one was saved by the stimulus. …White House economists…said the unemployment rate would peak at 9% without the stimulus (there’s your counterfactual) and that with the stimulus the rate would stay at 8% or below. In other words, today there are 700,000 fewer jobs than Ms. Romer predicted we would have if we had done nothing at all. If this is a job creation success, what does failure look like? …All of these White House jobs estimates are based on the increasingly discredited Keynesian spending “multiplier,” which according to White House economist Larry Summers means that every $1 of government spending will yield roughly $1.50 in higher GDP. Ms. Romer thus plugs her spending data into the Keynesian computer models and, presto, out come 2.5 million to 3.6 million jobs, even if the real economy has lost jobs. To adapt Groucho Marx: Who are you going to believe, the White House computer models, or your own eyes?
Emergency Spending
A recent paper by Veronique de Rugy examines how policymakers use various budgeting gimmicks to increase spending and obscure liabilities. One particularly abusive mechanism is the designation of supplemental spending as an “emergency.” The emergency designation makes it easier for policymakers to skirt budgetary rules, particularly “pay-as-you-go” (PAYGO) requirements.
The following chart from the paper shows how supplemental spending, most of which was designated as “emergency,” has taken off in the last decade:
As the chart notes, much of the increase is attributable to supplemental appropriations for the wars in Iraq and Afghanistan. The Bush administration was rightly criticized by analysts across the ideological spectrum for funding the wars outside of the standard budget process.
However, with the Democrats in control, the emergency designation is now being abusively applied to domestic spending. Congressional Research Service data obtained by the office of Senator Tom Coburn (R-Okla.) finds that emergency spending has increased deficits by almost $1 trillion since the 111th Congress was seated in January 2009.
The biggest chunk came with passage of the $862 billion “emergency” stimulus bill in February 2009. The Obama administration insisted that the emergency spending legislation was necessary to jump-start the economy and keep unemployment below 8 percent. Oops.
Congress has since passed additional multi-billion dollar “emergency” bills to extend supposedly simulative activities like unemployment benefits. The latest “emergency” extender bill that is bogged down in the Senate would add another $57 billion in debt.
What is Congress allowed to designate as emergency spending? Keith Hennessey, a former economic advisor to George W. Bush, offers the best definition: “it’s whatever you can get away with labeling as an emergency.”
However, Hennessey points out that there was originally a test with a fairly high bar created by the Office of Management and Budget in 1991 under the first President Bush. According to Hennessey, all five of these conditions had to be met:
- Necessary; (essential or vital, not merely useful or beneficial)
- Sudden; (coming into being quickly, not building up over time)
- Urgent; (requiring immediate action)
- Unforeseen; and
- Not permanent.
Hennessey says the definition was included in congressional budget resolutions during Bush II’s administration and that the president proposed codifying it in law. But that doesn’t seem to be the policy that the Bush II administration actually followed. With perhaps the exception of initial hostilities, there was nothing “unforeseen” about Bush’s “emergency” war spending in Iraq and Afghanistan. It seems that Bush’s inability to abide by his own proposal is another sad reminder that his fiscally reckless tenure helped pave the road to Obama.
Return of the Principal-in-Chief
According to a Fort Worth Star-Telegram report, President Obama plans to reprise last year’s hotly debated role as Principal-in-Chief to help kick off the coming school year.
Will he have the Department of Education once again put out leading and Obama-aggrandizing study guides? Will he again take personal credit for getting computers and other goodies into your kids’ schools? Will this address look as much like a campaign event as the last one? Will he tell all the kids that the really noble thing to do is get government jobs?
We don’t know the answers to these pressing questions yet, but we do know one thing: If he really does plan to play Principal — or maybe Motivational-Speaker – in-Chief again, it will be both unconstitutional, and unacceptable to a whole lot of people.
For a refresher on last year’s spectacle, by the way, check out this terrific “Cato Weekly Video” installment on it:
Your Health Insurance, Designed by Lobbyists
Christopher Weaver of Kaiser Health News has an excellent article in today’s Washington Post on the various government agencies that will now be deciding what health insurance coverage you must purchase, and how many of those decisions will ultimately fall to lobbyists and politicians:
For years, an obscure federal task force sifted through medical literature on colonoscopies, prostate-cancer screening and fluoride treatments, ferreting out the best evidence for doctors to use in caring for their patients. But now its recommendations have financial implications, raising the stakes for patients, doctors and others in the health-care industry.
Under the new health-care overhaul law, health insurers will be required to pay fully for services that get an A or B recommendation from the U.S. Preventive Services Task Force…[which] puts the group in the cross hairs of lobbyists and disease advocates eager to see their top priorities — routine screening for Alzheimer’s disease, diabetes or HIV, for example — become covered services.
And it’s not just the USPSTF that will be deciding what coverage you must purchase:
[P]lans must also cover a set of standard vaccines recommended by the Advisory Committee on Immunization Practices, as well as screening practices for children that have been developed by the Health Resources and Services Administration in conjunction the American Academy of Pediatrics. Health plans will also be required to cover additional preventative care for women recommended under new guidelines that the Department of Health and Human Services is expected to issue by August 2011.
The chairman of the USPSTF says the task force will try “to stay true to the methods and the evidence… the science needs to come first.” A noble sentiment, but as my colleague Peter Van Doren likes to say, “When politics and science conflict, politics wins.” Witness how industry lobbyists have killed or neutered every single government agency that has ever dared to produce useful comparative-effectiveness research. (You’re next, Patient-Centered Outcomes Research Institute!)
When government agencies are making non-scientific value judgments–e.g., are these studies reliable enough to merit an A or B recommendation? what should be the thresholds for an A or B recommendation? will the benefits of mandating this coverage outweigh the costs?–politics does even better. Witness Sen. Barbara Mikulski (D-Md) overruling a USPSTF recommendation when she “inserted an amendment in the [new] health-care law to explicitly cover regular mammograms for women between 40 and 50. ”
Speaking of value judgments, the one flaw in Weaver’s article is that it inadvertently conveys a value judgment as if it were fact. He writes that the mandate to purchase coverage for preventive services is “good news for patients” and that 88 million Americans “will benefit.” Whether the mandate is good news for patients depends on whether patients value the added coverage more than the additional premiums they must pay. (The administration estimates that premiums for affected consumers will rise an average of 1.5 percent. One insurer puts the average cost at 3-4 percent of premiums. Naturally, some consumers will face above-average costs.) Whether the benefits outweigh the costs is ultimately a subjective determination. (The best way to find out, as it happens, is to let consumers make the decision themselves.)
GOP Spending Cap
Republicans on the Senate Appropriations Committee have announced support for caps on the discretionary spending portion of the federal budget. According to press reports, discretionary spending under the cap for fiscal year 2011 would be approximately $20 billion less than what the president has proposed.
Appropriators — often referred to as the “third party” in Washington — exist to do one thing: spend other people’s money. Getting appropriators to agree to place any sort of limit themselves is a plus.
However, it’s hard to get excited about spending $20 billion less than the president. As the following chart shows, discretionary outlays have soared in the past decade:
With three months still to go in the current budget year, the federal deficit has already hit the trillion dollar mark. By year’s end the government will have borrowed about $1.4 trillion. It’s like the entire discretionary budget — defense and hundreds of other activities — are all financed by borrowing from the next generation.
Republicans apparently want agitated voters to see this gesture as evidence that the party is serious about out-of-control spending and deficits. But capping spending at the already exorbitant levels that Republicans helped reach isn’t exactly a big reform. Instead, Republicans need to propose the elimination of entire agencies and major programs for them to be taken seriously as a party willing to confront the nation’s looming financial crisis.
Georgia on My Mind
Rick Hess has written recently about education policy in the republic of Georgia, describing it as “guaranteed to bring smiles to my friends at the Cato Institute.” Hess characterizes it as a “market-driven system,” and “a seemingly elegant market design,” that has been undermined by a lack of autonomy for schools, “incoherent governance,” and “the reluctance of state officials to keep their hands off the schools.”
Can’t say that this description has me cracking open the bubbly. To the problems Hess has already identified, we could add the fact that there is a national curriculum that even the nation’s voucherized schools must apparently use as the basis for their plan of instruction. The secondary system is also compromised by a central government test suite that determines admission to the nation’s universities. These tests, apparently having little to do with the national curriculum, have led to mass absenteeism among 11th and 12th graders — who cut most of their classes to study for them. The state also seems to require students to take 12 years of schooling before being eligible to enter college, even if they could (and wish to) pass the admissions test earlier.
We could also add to this the fact that a shadowy government agency can and does fire principles from supposedly autonomous voucher-funded schools. Even if it randomly selected the schools to be inspected and applied academic criteria in its decisions, such an agency would not be part of any “elegant market design.” As it happens, though, it does not use academic criteria in deciding whom to fire. According to a Georgian report Hess refers to, a principal could be fired for having playground trees that “are not balanced properly.” [So now we know what Adrian Monk is doing after his show wrapped....]
Georgia, it seems to me, has not yet taken a genuinely laissez-faire approach to education, but I wish them well and hope that they will eventually manage to ensure that all families have access to an unfettered education marketplace.
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NB: Ray Charles’ interpretations of “Georgia on My Mind” are wonderful, but consider giving one of Jay McShann’s a listen if you’re into that sort of thing.
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