Archive for August, 2010
A Spending Quiz from the ‘Rebel Economist’
A former Heritage Foundation colleague has returned to youtube.com with a video asking taxpayers whether examples of government waste are true or false.
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- Central planners at the U.S. Department of Agriculture are “confounded” by tight sugar supplies. Hayek would be shocked.
- Department of Housing and Urban Development officials continue the agency’s legacy of engaging in politics.
- President Obama says he wants to “invest in our people without leaving them a mountain of debt.” Maybe he meant to say that he wants to “spend other people’s money and leave them with a mountain of debt”?
- Meet the privileged class: federal civilian employees.
- The federal government is a lucrative “industry.”
Government Promotion of Broadband? No, Thanks.
A Pew Internet and American Life poll out this week finds: “By a 53%-41% margin, Americans say they do not believe that the spread of affordable broadband should be a major government priority.” Non-Internet users are less likely than Internet users to say the government should prioritize spreading access to high-speed connections.
The federal government spent $7.2 billion in “stimulus” money on the premise that the federal government is supposed to do this kind of thing. And the Federal Communications Commission’s “National Broadband Plan” is premised on the idea that there is supposed to be a national broadband plan. It isn’t, and there’s not.
Much as I love using the Internet for work, entertainment, and social connection, I recognize that people can live perfectly happy lives without it. The invention and growth of the Internet should always be seen as having opened new avenues for people, not as having created a national communications medium in which participation is required to live a full life. Social engineers, stand down: people will use the Internet if they want it, and they won’t if they don’t.
The Financial Times on Robert Gates
Kudos to the Financial Times (subscription may be required) for figuring out what most other journalists and editorial writers haven’t seemed to grasp concerning Robert Gates’s economy initiative at the Pentagon.
[H]is aim is not to cut the overall budget radically; it is merely to achieve savings in the military bureaucracy and thus, against a background of broader fiscal constraint, protect spending on new weapons and other outlays. (my emphasis)
The reforms in and of themselves are “commendable,” the FT notes, but they don’t amount to very much in the grand scheme, and they therefore do not go nearly far enough. Indeed, as I and others have noted, U.S. military spending will continue to rise if Bob Gates gets his way. This isn’t good enough.
The FT editors agree:
The US needs a much more searching review of its military spending, one that aims to do more than merely curb its growth.
Anyone interested in a comprehensive proposal (three, actually) for substantially reducing U.S. military spending by revisiting the roles, responsibilities, and missions that are currently assigned to Gates’s department can find it here.
Mayor Bloomberg Loves Property Rights
A front-page story in today’s New York Times begins:
Michael R. Bloomberg is a former Wall Street mogul with a passion for the rights of a private property owner.
The story is about the not-really-at-Ground-Zero mosque, of course.
Bloomberg has a passion for property rights — except when the property owner wants to allow smoking on his own property or just wants to keep the property he owns even if a richer person wants it.
Paul Ryan’s Roadmap, and the Difference between Costs and Spending
Rep. Paul Ryan (R-WI) ably defends his “Roadmap for America’s Future” in today’s Washington Post. He doesn’t mention Paul Krugman’s attacks thereon, nor should he. (To read why, consult The Atlantic‘s Megan McArdle and Ted Gayer of the Tax Policy Center.)
I haven’t officially weighed in on the health-care aspects of the Roadmap, but hope to do so in the near future. For the moment, I’ll use Ryan’s oped to stress a distinction that is crucial to thinking clearly about health care costs.
Ryan writes of the dangers of an un-reformed Medicare program (emphasis added):
Under an ever-expansive, all-consuming central government, costs will be contained with Washington’s heavy hand imposing price controls, slashing benefits and arbitrarily rationing seniors’ care.
While those forms of government rationing may reduce spending, that’s not the same as reducing costs. On the contrary, those rationing measures may increase health care costs.
Suppose Medicare set its prices for hip and knee replacements so low that no medical-device manufacturer would provide the hardware and no surgeon would perform the procedures. Medicare spending on hip and knee replacements would fall. But costs may rise: more seniors would be walking around — or not walking around — in severe pain. Pain and reduced mobility are costs, even if they don’t show up in the federal budget or household budgets. (Indeed, those costs would be so severe that overall Medicare spending could rise as seniors bought more wheelchairs, sought treatment for pressure sores, etc.). This is the main reason conservatives criticize Canada’s Medicare system and the British National Health Service: reducing health care spending often increases costs.
I therefore request universal compliance with Cannon’s First Rule of Economic Literacy: Never say costs when you mean spending.
Social Science Friday
Science!
A few odds and ends from the social science blogosphere:
- A rare Michael Kinsley stumble.
- The danger of data without theory.
- General David Petraeus will receive the Hubert H. Humphrey Award in recognition of notable public service by a political scientist at this year’s American Political Science Association annual meeting in Washington.
More Nonsense about the Trade Deficit
It has become conventional wisdom that a rising trade deficit is bad news for the economy. This week’s announcement of an expanding deficit in June prompted such headlines today as this one in the news pages of the Wall Street Journal: “Wider Trade Gap Signals Weak Growth.” As my colleague David Boaz blogged earlier today, the trade deficit is even blamed for daily swings in the stock market.
I’ve been studying and writing about the trade deficit for years, and devoted a whole chapter of my 2009 Cato book Mad about Trade to the subject, and I keep coming back to a basic question: If the trade deficit signals weak growth, why does the U.S. economy seem to perform so much better during periods when the trade deficit is growing, and so much worse when the trade deficit is shrinking?
Think back to the 1990s, the “goldilocks economy” when growth was strong, jobs plentiful, and inflation low. That was also a time of rising trade deficits. In fact, the trade gap grew for eight years in a row, rising from $77 billion in 1991 to $455 billion in 2000. In that same period, the unemployment rate dropped from 7.3 to 3.9 percent.
Again, in the middle of the George W. Bush presidency, the trade gap grew for five straight years, during a period when the economy expanded and the unemployment rate fell from 5.7 to 4.4 percent.
In contrast, the trade deficit invariably shrinks during periods of recession. The trade deficit fell by more than half from 2007 to 2009 as domestic demand and imports plunged and unemployment soared. Sagging domestic demand means fewer imports.
Of course, I’m not arguing that a bigger trade deficit stimulates the economy. I am arguing, contrary to the conventional wisdom reflected in this morning’s headlines, that an expanding trade deficit does not appear to be a drag on growth. In fact, the plain evidence is that an expanding trade deficit is more often than not a signal of stronger growth.
‘Mountain of Debt’
The White House Office of Management and Budget homepage currently features the following quote from the president:
President Obama says he wants to “invest in our people without leaving them a mountain of debt.”
That’s a curious statement because the Congressional Budget Office’s analysis of the president’s current budget proposal projects that publicly held debt as a share of the economy would reach levels last seen at the end of the Second World War.
When the CBO’s numbers are plugged into a bar chart, the projected Obama debt levels (red bars) look like…the upward slope of a mountain (!):
To be fair, Obama’s predecessors — particularly the previous Bush administration — share in the responsibility for the mountainous rise in federal debt. However, that’s all the more reason for the Obama administration to work toward a peak instead of a steeper incline.
Cal Thomas Fulminates against Freedom
Cal Thomas, who bills himself as “America’s #1 nationally syndicated columnist,” rose to fame as the vice president of Jerry Falwell’s Moral Majority in its heyday, though you won’t find that fact in any of his official biographies. But you could figure it out by reading his columns. In his latest, on the California gay marriage decision, he ranges from factual inaccuracy to a revelation of just how reactionary and authoritarian he really is, to a really striking biblical citation.
He starts by denouncing the “decision by a single, openly gay federal judge.” Not true. Judge Vaughn Walker may be gay, but he has never said so. And Salon magazine demonstrates that any such “evidence” is extraordinarily thin. So this is an extraordinary statement by a man who calls himself a journalist of 40 years’ standing. Not to mention an offensive suggestion that gay people shouldn’t serve as judges. Thomas went so far as to call former attorney general Ed Meese, who recommended Walker to President Ronald Reagan, to ask how such a thing could have happened, and Meese assures him, “There was absolutely no knowledge, rumor or suspicion” of Vaughn Walker being a homosexual at the time of his nomination by Ronald Reagan. Well, thank God. You’d hate to think that Ronald Reagan would have put an accomplished Republican lawyer on the federal bench if he’d been a homosexual.
Thomas goes on to complain that this (not) “openly gay federal judge” has struck down “the will of 7 million Californians.” Well, yes. Of course, 6.4 million Californians voted the other way, so I guess on net he struck down the will of 600,000 Californians. And that’s what judges do when they strike down unconstitutional laws. The Supreme Court in Brown v. Board and Loving v. Virginia “struck down the will of tens of millions of Americans.” Libertarians and conservatives asked the Court in the Kelo case to strike down the duly enacted eminent-domain laws of Connecticut.
Fordham Feeds the Paranoia
You might recall several weeks back when Chester Finn, president of the Thomas B. Fordham Institute, called people like me “paranoid” for seeing federal money driving states to adopt national education standards as cause for serious concern that (a) the feds will take over schools’ curricula, and (b) the new federal curriculum will be taken over by potent special interests like teachers’ unions. (You know, the kinds of special interests that can get Democrats to give them $10 billion by cutting food stamps.) Well, in last week’s Education Gadfly, Fordham published a piece by Eugenia Kemble, president of the union-dedicated Albert Shanker Institute, saying that national standards demand a national curriculum.
This interesting little happening — Fordham publishing a piece by a union stalwart arguing that a national curriculum must go with national standards — didn’t go unnoticed by fellow paranoiac Greg Forster, who is now in a blog dispute with Kemble. It makes for telling reading, especially Kemble’s rejoinder. It features an all-too-casual use of the charged term “balkanization” to seemingly describe anything not centralized, and utterly fails to mention federal funding when implying that the common standards push is state led and voluntary.
Unfortunately, Kemble mainly just sidesteps Forster’s primary point: Fordham has provided yet more evidence that national standards funded by the feds will lead to a national curriculum that could very well be controlled by special interests. Heck, Fordham is in league with at least one component of the teachers’ unions here, which is fine if they share the same goals. All Forster is trying to emphasize is that it is ridiculous to call people crazy when they simply point out what so much evidence seems to show.
USA Today Abets ObamaCare Supporters’ Misinformation Campaign
An article in today’s The USA Today titled, “With Many Still in Dark, Groups Shed Light on Health Care Law,” aims to correct misinformation about ObamaCare. Ironically, the article is itself a monument to misinformation.
It begins:
True or false: The new health care law will cut Medicare benefits for seniors. It will slash Medicare payments to doctors. It will ration health care.
In three polls conducted last month, large percentages of Americans answered “true” to each statement. All three are false.
In fact, two of the three statements are 100-percent true.
First, ObamaCare will cut payments to the private health insurance companies that provide coverage to the 20 percent of Medicare enrollees who participate in the Medicare Advantage program. That will eliminate many types of coverage for seniors in Medicare Advantage. That should be painfully obvious, but if you require confirmation, visit FactCheck.org. ObamaCare will also ratchet down the price controls that Medicare uses to pay hospitals and many other health care providers. It should likewise be obvious that that will reduce access to services that are ostensibly “guaranteed” to all enrollees. But again, if you need confirmation, check in with Medicare’s chief actuary, who works for President Obama. We can debate whether that’s good or bad. What’s not up for debate: ObamaCare in fact “will cut Medicare benefits for seniors.”
Second, it is also true — ipso facto – that ObamaCare “will ration health care.” To ration is to limit consumption. When ObamaCare reduces coverage for Medicare Advantage enrollees and reduces access to care for all Medicare enrollees, it limits seniors’ consumption of medical care. We can debate whether that’s good or bad. What’s not up for debate: that is rationing.
Finally, yes, it is technically false that ObamaCare “will slash Medicare payments to doctors.” But since current law will slash Medicare payments to doctors if Congress does nothing, and since an earlier version of ObamaCare would have eliminated those cuts, but ObamaCare’s architects dropped that provision so as to make ObamaCare appear deficit-neutral… well, perhaps the public can be forgiven if it confuses “eliminating a provision that would have prevented cuts in Medicare payments to doctors” with “slashing Medicare payments to doctors.”
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
