Archive for March, 2011

How Dare Conservatives Stand athwart ObamaCare Yelling, Stop!

Posted by Michael F. Cannon

In a column for Kaiser Health News, Michael L. Millenson, President of Health Quality Advisors LLC, laments that conservatives in the U.S. House are approaching ObamaCare like, well, conservatives.  He cites comments by unnamed House GOP staffers at a recent conference:

The Innovation Center at the Centers for Medicare & Medicaid Services? “An innovation center at CMS is an oxymoron,” responded a  Republican aide…”Though it’s great for PhDs who come to Washington on the government tab.”

There was also no reason the government should pay for “so-called comparative effectiveness research,” another said.

“Everything’s on the chopping block,” said yet another.

No government-funded comparative-effectiveness research?  The horror!  For my money, those staffers (and whoever hired them) should get a medal.

Millenson thinks conservative Republicans have just become a bunch of cynics and longs for the days when Republicans would go along with the left-wing impulse to have the federal government micromanage health care:

After all, the McCain-Palin health policy platform in the 2008 presidential election called for coordinated care, greater use of health information technology and a focus on Medicare payment for value, not volume. Once-and-future Republican presidential candidates such as former governors Mike Huckabee (Ark.), Mitt Romney (Mass.) and Tim Pawlenty (Minn.), as well as ex-Speaker of the House Newt Gingrich, have long promoted disease prevention, a more innovative federal government and increased use of information technology. Indeed, federal health IT “meaningful use” requirements can even be seen as a direct consequence of Gingrich’s popularization of the phrase, “Paper kills.”

He even invokes the father of modern conservatism, William F. Buckley, as if Buckley would disapprove of conservatives standing athwart ObamaCare yelling, Stop!

Millenson’s tell comes toward the end of the column, when he writes:

traditional GOP conservatives… [have] eschewed ideas in favor of ideological declarations.

Eschewed ideas in favor of…ideas?  My guess is that what’s really troubling Millenson is that congressional Republicans are eschewing left-wing health care ideas in favor of freedom.

Better late than never.  Now if only GOP governors would do the same.

Republicans Are Right to Cut the IRS Budget

Posted by Daniel J. Mitchell

One of my many frustrations of working in Washington is dealing with perpetual-motion-machine assertions. The classic example is Keynesian economics, which is based on the notion that you magically create additional economic activity by having the government spend money instead of allowing the private sector to decide how it gets spent (in an especially bizarre display of this thinking, Nancy Pelosi actually said that subsidizing unemployment was the best way to create jobs).

Another example of this backwards analysis can be found in the debate over the IRS budget. The President is resisting a GOP proposal to modestly trim the IRS’s gargantuan $12.5 billion budget and his argument is that we should actually boost funding for the tax collection bureaucracy since that will mean more IRS agents squeezing more money out of more taxpayers.

Here are some excerpts from an Associated Press report about the controversy.

Every dollar the Internal Revenue Service spends for audits, liens and seizing property from tax cheats brings in more than $10, a rate of return so good the Obama administration wants to boost the agency’s budget.House Republicans, seeing the heavy hand of a too-big government, beg to differ. They’ve already voted to cut the IRS budget by $600 million this year and want bigger cuts in 2012. …IRS Commissioner Doug Shulman told the committee Tuesday that the $600 million cut in this year’s budget would result in the IRS collecting $4 billion less through tax enforcement programs. The Democrat-controlled Senate is unlikely to pass a budget cut that big. But given the political climate on Capitol Hill, Obama’s plan to increase IRS spending is unlikely to pass, either. Obama has already increased the IRS budget by 10 percent since he took office, to nearly $12.5 billion. The president’s budget proposal for 2012 would increase IRS spending by an additional 9 percent — adding 5,100 employees. …Obama’s 2012 budget proposal for the IRS includes $473 million and 1,269 new positions to start implementing the health care law.

Unlike Keynesian economics, there actually is some truth to Obama’s position. The fantasy estimate of $10 of new revenue for every $1 spent on additional bureaucrats is clearly ludicrous, but it is equally obvious that many Americans would send less money to Washington if they didn’t have to worry about a coercive and powerful tax-collection bureaucracy that had the power to throw them in jail.

This is an empirical question, at least with regards to the narrow issue of whether more IRS agents “pay for themselves” by shaking down sufficient numbers of taxpayers. Reducing the number of IRS bureaucrats by 90 percent, from about 100,000 to 10,000, for instance, surely would be a net loss to the government since the money saved on IRS compensation would be trivial compared to the loss of tax revenue.

But that doesn’t mean that a reduction of 10,000 or 20,000 also would lead to a net loss. And it certainly does not mean that adding 10,000 or 20,000 more IRS agents will result in enough new revenue to compensate for the salaries and benefits of a bigger bureaucracy. Even left-wing economists presumably understand the concept of diminishing returns.

But let’s assume that the White House is correct and that more IRS agents would be a net plus from the government’s perspective. The Administration would like us to reflexively endorse a bigger and more aggressive IRS, but public policy should not be based on what is a “net plus” for the government.

There are two ways to promote better tax compliance. The Obama approach, as we’ve read above, is to expand the size and power of the IRS. Up to a point, this policy can be “successful” in extracting additional money from the productive sector of the economy.

The alternative approach, by contrast, seeks better compliance by lowering tax rates and reforming/simplifying tax systems. This course of action boosts compliance by making evasion and avoidance less attractive. People are much less likely to cheat if the government isn’t being too greedy, and they’re also more likely to comply if they think there is less waste, fraud, corruption, and favoritism in the tax code.

Let’s now put this discussion in context. Obama wants more IRS agents in large part to enforce his new scheme for government-run healthcare. Yet that’s a perfect example of what I modestly call Mitchell’s Law – politicians doing one bad thing (expanding the IRS) only because they did another bad thing (enacting a health care bill that made the tax code even more convoluted and punitive).

So instead of making the IRS bigger in response to a bad healthcare law, why not repeal that bad law and shrink the size of the IRS? Even better, why not junk the entire tax code so we can replace the IRS with a system that is honest and fair?

And if these big steps are not immediately feasible, at least cut the IRS budget so that awful laws are enforced in a less destructive manner.

This Center for Freedom and Prosperity video has additional details about the national nightmare we call the IRS.

This Week in Government Failure

Posted by Tad DeHaven

Over at Downsizing the Federal Government, we focused on the following issues this week:

Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.

Mark Helprin’s Convoluted Case for a Large(r) Navy

Posted by Christopher Preble

Wednesday’s Wall Street Journal featured an op ed by Mark Helprin making the case for a large navy (may be paywalled). Or, at least, that was what I took away from it. To be honest, it was a little hard to tell.

I was going to let it drop, but by coincidence I was at the Naval Academy today, giving a guest lecture to two different classes, and the experience has inspired me to pick apart examine Helprin’s article.

I do so because I fundamentally agree with Helprin that we should have a strong navy. I say this because I believe that the Founders were correct to privilege the Navy over the Army (recall that the Constitution calls for maintaining a navy, but raising an Army only as required). I also have several parochial reasons for favoring the Navy over the other services: I served in the Navy; grew up in Maine, in the shadow of Bath Iron Works and the Brunswick Naval Air Station; and the name Preble is hallowed in naval history. Edward Preble (pictured), a distant ancestor, was among the founders of the American navy, and there have been several naval vessels bearing his name. The museum on the grounds of the Naval Academy is named Preble Hall.

Suffice it to say, if I believed that the U.S. Navy was in danger of losing its edge, I would support an aggressive plan to reverse its fortunes. If I thought that we could no longer defend the seaborne approaches to the continental United States, I would be calling for a crash program to reform the service. But it isn’t, and we aren’t. Helprin’s article features misleading information and dubious logic.  An argument poorly made is worse than no argument at all.

The basic gist of Helprin’s op ed is that the U.S. Navy is too small. We had over 1,000 ships at the end of World War II, and now we have only 286. (I could point out that we had thousands and thousands of jeeps and propeller-powered fighter planes at the end of World War II. Now we have none. That doesn’t mean that our conventional land forces and air forces are less capable today than they were in 1945.) He goes on to explain that we need a larger navy to defeat the pirates who are assaulting ships off the Horn of Africa. Russia and China, he claims, are challenging us on the high seas, or soon will do so. He repeats the tired conventional wisdom that the global trading system depends upon a single dominant power to enforce the rules and punish wrongdoers. Great Britain served that role in the 19th century; the U.S. Navy must do so now.

None of these claims are true. Piracy is a nuisance best handled by a coalition of navies contributing forces to escort vulnerable ships, and to carry out punitive raids, not a single global U.S. sheriff that treats every body of water as though it were synonymous with the Gulf of Mexico. The United States is not, as he absurdly claims, on the cusp of the “gratuitious abdication” of our naval supremacy. The U.S. Navy dwarfs any other navy, or combination of navies, both in terms of numbers of ships, and in terms of effective striking power. The global trading system is far more resilient, and far more complex, than Helprin claims; it doesn’t make sense for the U.S. Navy to commit itself to policing every sea lane on the planet. The many beneficiaries of global trade should share in the costs of keeping the seas free and open.

There is a kernel of truth to Helprin’s contention that the Navy should not put all its eggs in “a small number of super ships [which] could be in only a limited number of places at a time.” He seems to appreciate that “the loss of just a few of them would be catastrophic.” But he doesn’t finish that thought. As with many things pertaining to military spending, it isn’t what you spend so much as where and how you spend it. In short, numbers of ships are misleading. What types of ships? At what cost? 

How you answer depends upon what you expect them to be doing. It makes no sense to fight pirates with aircraft carriers. Likewise, it would be foolish to park a 90,000-ton target in the Taiwan Strait, in range of China’s latest anti-ship missiles. A single Ford-class aircraft carrier is projected to cost, in average, about $12 billion. For reference, we could purchase at least six new Arleigh Burke-class destroyers with the same amount of money. 

In the paper that I published with Ben Friedman last year, we support the completion of the USS Ford (CVN-78), but would shift the remaining CVN funds to fielding smaller aircraft carriers that launch primarily unmanned aerial vehicles.  Meanwhile, we think it makes sense to build small, ocean-going warships that can perform escort duties and counter-piracy missions, when required. But the Navy’s current small vessel, the littoral combat ship (LCS), is designed for missions close to shore, and is far too costly. Small frigates or corvettes could be designed with similar capabilities, and at far less cost.

Helprin’s greatest error is in conflating numbers of ships with effective striking power. But he also misses the opportunity costs associated with investing too many resources in the wrong place. The true strength of our Navy is its people, including the exceptionally bright and motivated men and women who I had the pleasure of meeting with today. As they prepare to enter the fleet, the country owes it to them to give them a set of missions that is vital to the nation’s security, and to provide them with the tools to accomplish them. But we shouldn’t reflexively buy into the claim that more = better.

Spending Growth: Mandatory Programs

Posted by Tad DeHaven

While Congress haggles over Republican ambitions to trim $61 billion in funding for domestic discretionary programs, it’s important to remember that mandatory (or “entitlement”) spending is the main driver of recent and future budget growth.

The following chart compares fiscal 2007 spending to the president’s proposal for fiscal 2012 for the largest areas of overall federal spending:

Note that the area of spending that has increased the most dramatically is “other mandatory.” Major programs in this category range from food stamps to retirement and disability benefits for federal workers. The following chart shows the increase in spending for the largest of these programs:

This area of spending, and the programs that it consists of, are often forgotten in the debate over how to rein in our extraordinary deficits and mounting debt. That needs to change.

Regulation, The FDA, And Shortages Of Hospital Drugs

Posted by Walter Olson

In recent weeks the press has been reporting widespread alarms about shortages of many frequently used hospital drugs [L.A. Times/Chicago Tribune, Scranton Times-Tribune, KMGH (Colorado hospitals swapping drugs in short supply), The Columbian] The drugs running short include various antibiotics, anesthetics, chemotherapy drugs and others, including many generic compounds long since approved by the federal Food and Drug Administration (FDA). “The most troubling aspect is that it is critical drugs for which there are limited alternatives. Many are involved in cancer care and surgery,” one hospital pharmacist told the Chicago Tribune’s reporter.

While a variety of factors have played a role in the shortages, including lawsuits and economic retrenchment by some drugmakers, there seems to be little dispute that one major factor is the federal government’s widely publicized crackdown in recent years on pharmaceutical manufacturing and quality-control practices, which has meant that closing down a production line or halting shipments of a drug for a while is often the only way to be sure of staying in compliance with demanding new substantive benchmarks or paperwork requirements.

The lesson? To some Senators, it’s that we need to intensify regulation yet further:

The drug shortages have gained the attention of members of Congress. This month, Sens. Amy Klobuchar (D-Minn.) and Bob Casey (D-Pa.) introduced legislation that would require drugmakers to give the FDA an early notification “when a factor arises that may result in a shortage,” according to a joint statement.

Which prompts Overlawyered commenter Greg S. to write:

In other words, when critical shortages of pharmaceuticals arise because of a tough new regulatory environment in Washington, the impulse of those in Congress is to address the problem by adding more regulations – i.e., by adding another bureaucratic compliance requirement. And how, exactly, will notifying the FDA help with the shortage? And what if the “factor” that’s causing the shortage is the FDA’s rules themselves – will the company find itself facing investigation and retaliation if it is perceived as blaming the FDA for the shortage?

The Other For-Profit College Scandal

Posted by Neal McCluskey

Because the evidence of wrongdoing and evasion is so clear, and the effect has been so damaging, I have devoted a lot of pixels to the GAO’s horrendous ”secret shopper” report on for-profit colleges, as well as the stonewalling about what caused the initial report to be so biased. A potentially even bigger story, though, is what appears to be the machinations of an unholy alliance of Department of Education officials, Senate HELP Committee chairman Tom Harkin (D-IA), and Wall Street short-sellers hoping to make big bucks off the demise of for-profit schools. This Daily Caller article, and the connected video of Senator Tom Coburn (R-OK), are good places to start learning more about this, as is the website of Citizens for Responsibility and Ethics in Washington.

The problems with understanding scandals like this, of course, are trying to get the truth about things that have gone on almost entirely in real or virtual back rooms; knowing what is legal and what isn’t; and just figuring out who’s who. Such scandals also reveal little about whether for-profit schools are actually more or less effective than other higher ed sectors, arguably the main public policy concern.

What this sort of thing does start to reveal, though, is just how far out of public view policy is often made, as well as how people try to profit directly from government action. In other words, it’s a great case study in public-choice theory, and just how un-Schoolhouse Rock Washington really is.

So I can’t tell you everything about who said what to whom. However, at the very least it is clear, for instance, that famed short seller Steve Eisman had a huge amount to gain by testifying that for-profits are bad and there is a “bubble” in proprietary higher ed about to burst. After all, were either the Education Department or Senator Harkin — or both — to use his testimony to attack for profits, as indeed they have, Eisman would have a highly profitable self-fulfilling prophecy on his hands.

No matter how you feel about for-profit colleges – and my feelings are decidedly mixed– learning about how policy is really made can be a very unsettling thing. In fact, it can make you feel more than just a little sick.

I’m Not So Sure I Like Your Mental Activity

Posted by Michael F. Cannon

The latest federal judge to declare ObamaCare constitutional claimed that Congress can regulate “mental activity,” like the mental activity of choosing not to purchase health insurance.  Or shoes and ships and sealing wax.  Or my book.

National Review editor Rich Lowry has an excellent column explaining why this latest, ahem, legal victory for ObamaCare “delivered a more telling blow against the law in the course of ruling it constitutional than critics have in assailing it as a travesty…It’s the most self-undermining defense of the constitutionality of a dubious statute since then–solicitor general Elena Kagan told the Supreme Court that under campaign-finance reform, the government could ban certain pamphlets.”

Mitch Daniels’s ObamaCare Problem

Posted by Michael F. Cannon

That’s the title of my latest column at National Review Online.  An excerpt:

Mitt Romney isn’t the only Republican presidential hopeful with an Obamacare problem: Indiana governor Mitch Daniels, were he to become the GOP’s nominee, could also undermine the repeal campaign that has united the party’s base and independent voters.

Among his liabilities:

Daniels’s decision to accept Obamacare funds and move forward with implementation is further undermining the repeal effort. Yesterday, federal judge Roger Vinson reversed his initial order forbidding the Obama administration to implement the law. He did so in part because plaintiff states such as Indiana are implementing it, which he said “undercut” their own argument that he should block it.

But all is not lost for Daniels.

Daniels can spare himself and the repeal movement such setbacks by following the lead of Florida governor Rick Scott (R.) and Alaska governor Sean Parnell (R.) and flatly refusing to implement any aspect of Obamacare. Daniels could even organize another letter in which his fellow governors all make the same announcement.

A move like that could separate him from the pack.

Pro-Choice Activists Become Skeptics of Regulation

Posted by David Boaz

In the Richmond Times-Dispatch, Barton Hinkle notes that the Virginia General Assembly has just passed “tough new regulations on abortion clinics.” And

Suddenly, outraged liberals are sounding remarkably like libertarian advocates of laissez-faire capitalism and the industries they defend.

For instance, abortion-rights supporters already are warning that the heavy hand of government will impose requirements so absurd and so economically burdensome that they will force clinics to close their doors. “What they’ll do is put a burden of extra cost that is not backed up by sound science,” said one abortion provider who spoke on condition of . . . whoops! Actually, those were the words of Alva Carter Jr., chairman of a New Mexico dairy industry group, who was protesting new groundwater pollution regulations last April.

“The scale of the . . . current assault is unprecedented,” complained Planned Parenthood spokes — no, that was The Wall Street Journal, raging last November against the EPA. The paper said the agency “has turned a regulatory firehose on U.S. business and the power industry in particular.”

“The massive red tape . . . threatens to strangle . . . the industry,” complained — well, that was Investor’s Business Daily, writing about the Dodd-Frank financial bill last year. The paper cited a report by the American Bankers Association warning that “the coming ‘tsunami of regulations’ could wipe out hundreds of smaller banks.” Substitute “abortion clinics” for “smaller banks,” and you have the Virginia debate in a nutshell. (And yes, let’s stipulate right here that many so-called conservatives believe in limited government everywhere except the uterus.)

“They could require things that are completely unnecessary.” That actually was a quote from an abortion-rights supporter: Shelley Abrams, the director of A Capital Women’s Clinic in Richmond.

And she is entirely right. Sometimes government does require things that are not strictly necessary. And those requirements impose a heavy financial burden. This is hardly a revelation. Small-government advocates have been saying it for many years. Yelling it, actually, at the top of their lungs. To little avail.

Example: Supporters of abortion rights now worry that even existing clinics might have to obtain a Certificate of Public Need from the state. To which one might reply: Why should they be different? For years, certain voices in Virginia have been suggesting that the COPN process — essentially, a government permission slip for health-care providers — creates an unnecessary market entry barrier. They have argued that government has no business deciding whether a particular community needs a particular health-care facility.

He goes on to note that

when free-marketeers and industry groups gripe about the burden of governmental regulation, they often get truth-squadded by deeply skeptical liberals. On Monday, the AP’s “Spin Meter” gave the gimlet eye to predictions that the Obama administration’s new smog regulations could destroy more than 7 million jobs. The news service pointed out that the researcher who came up with the number was “industry-sponsored.” (Boo.) It lamented the “imprecise economic models” used. (Hiss.) And it pointed out that “those opposed to government regulations rarely mention the potential benefits to society.” Amen, brother.

Hinkle hopes that people concerned about the burden that regulation imposes on abortion clinics will eventually come to recognize that regulation also imposes costs and burdens on every other business.

Jerry Taylor and I have both noted in the past the differing media treatment of abortion and other science and health issues. Looking at two NPR stories on the same day, I praised one on the dangers of abortion pills:

It was a good example of careful, cautious reporting. But why are journalists seemingly much more cautious in reporting medical risks involving abortion than in reporting other kinds of risks? There are plenty of critics of the “junk science” involved in the Vioxx stories; why aren’t they interviewed in Vioxx stories? The numbers were small in the Vioxx study, as in the case of the abortion drugs, but that fact was dismissed in one report and emphasized in the other.

Cato’s Jerry Taylor noticed something similar in a Wall Street Journal column 11 years ago (January 3, 1995; not online). He noted that the Journal of the National Cancer Institute

caused quite a stir by publishing an epidemiological study suggesting that women who have abortions are 50% more likely to develop breast cancer than women who do not….”Not so fast,” countered epidemiologists; a 1.5 risk ratio (as epidemiologists put it) “is not strong enough to call induced abortion a risk factor for breast cancer.”

Taylor agreed that a 1.5 risk ratio is below the appropriate level of concern. But he wondered why “the same risk ratio that was so widely pooh-poohed by scientists as insignificant and inconclusive when it comes to abortion was deemed by the very same scientists an intolerable health menace when it comes to secondhand smoke. Actually, that’s not quite true. The 1.3 risk factor for a single abortion was significantly greater than the really hard to detect 1.19 risk ratio for intensive, 40-year, day-in-day-out pack-a-day exposure to secondhand smoke (as figured by the EPA).”

Sen. DeMint Taking the Lead on Education Reform In South Carolina

Posted by Adam Schaeffer

South Carolina is one of the few states where school choice supporters have been working to pass a great education tax credit program that’s broad-based and well-structured (please excuse me if I sound like a cattle-breeder or wine-taster).

Senator Jim DeMint has been a real champion of choice for SC and the country, and he has a great new video promoting education tax credits (brought to you  by South Carolinians for Responsible Government, the guys in the trenches for good policy there).

The lead-in hits it perfectly; school choice is about self government, and public education means an educated public, not government-run schools.

But I’m a sucker for the fiscal stuff. And with the economy and government budgets in the state they’re in, citizens want to know first and foremost whether any new program is going to cost them more money. Jump to 7:23 in the video for a great take on how education tax credits save money.

Have a look, like it on YouTube, pass it around, post it on Facebook . . . spread the word . . .

Corrected Link

Posted by John Samples

Yesterday I looked at some criticisms of Justin Amash, a new House member from Michigan. I noted that Amash explained his votes on his Facebook page. However, I gave the wrong link for Amash’s page. His official page may be found here which comprises his explanations for his votes.