Archive for May, 2011
Journalism and Generality
The media makes it hard for ordinary people to be libertarians. In large part, this is because journalism is in the business of selling panic—panic about terrorism, panic about drugs, panic about food, panic about pornography, panic about our health care system. If it’s not an emergency, it’s not news. To the lazy journalist, everything becomes an emergency—and emergencies always—always—demand state action.
The media makes things hard for the would-be libertarian in other ways, too. Consider this story from today’s Washington Post, about… well, it’s hard to say, actually:
Senate Democrats unveiled a plan Tuesday to save $21 billion over the next decade by eliminating tax breaks for the nation’s five biggest oil companies, a move designed to counter Republican demands to control the soaring national debt without new taxes.
With the proposal, Democrats sought to reframe the debate over debt reduction to include fresh revenue as well as sharp cuts in spending. For the first time, Democratic leaders suggested an equal split between spending cuts and new taxes — “50-50,” said Senate Majority Leader Harry M. Reid (Nev.).
That represents a larger share for taxes than has been proposed by either President Obama or the bipartisan commission he appointed to recommend how to cut the national debt.
So far, the Democratic tax agenda is focused on ending subsidies for big oil companies, a hugely popular proposal involving what Democrats see as a prime example of wasteful giveaways in the tax code. By raising the issue, Democrats are trying to force Republicans either to drop their rigid stance against new taxes or to defend taxpayer subsidies for some of the world’s most profitable corporations, including Exxon Mobil, Shell, BP, Chevron and ConocoPhillips.
The proposal came in response to remarks Tuesday by House Speaker John A. Boehner (R-Ohio), who said raising taxes is “off the table.” A day earlier, he gave a speech demanding more than $2 trillion in spending cuts in exchange for GOP support for an increase in the legal limit on government borrowing through the end of next year.
Where am I confused, you ask? On almost everything a libertarian ought to care about. I’ll explain.
One of the key aspects of any good law is generality—that is, equality before the law. As F. A. Hayek put it:
[T]hough government has to administer means which have been put at its disposal (including the services of all those whom it has hired to carry out its instructions), this does not mean that it should similarly administer the efforts of private citizens. What distinguishes a free from an unfree society is that in the former each individual has a recognized private sphere clearly distinct from the public sphere, and the private individual cannot be ordered about but is expected to obey only the rules which are equally applicable to all….
The general, abstract rules, which are laws in the substantive sense, are… essentially long-term measures, referring to yet unnkown cases and containing no references to particular persons, places, or objects. Such laws must always be prospective, never retrospective, in their effect (The Constitution of Liberty, chapter 14, section 2).
Now, with every passing day our government stomps all over this generality requirement again and again, chiefly in the economic sphere. But is it doing so on the front page of today’s Washington Post? That’s a good question.
John Boehner’s Spending and Debt Promise
House Speaker John Boehner has promised to tie substantial spending cuts to upcoming debt-limit legislation. He said spending cuts will have to be at least as large as the dollar value of the allowed debt increase. Thus, if the legislation increased the legal debt limit by $2 trillion, then Congress would have to cut spending over time by at least $2 trillion.
How can we be sure that spending cuts are real?
There are only two types of solid and tough-to-reverse spending cuts—legislated changes to reduce entitlement benefit levels and complete termination of discretionary programs. Republicans will have to define what time period they are talking about, but let’s assume it’s the standard 10-year budget window.
- Entitlements: The legislation, for example, could change the indexing formula for initial Social Security benefits from wages to prices. The Congressional Budget Office says that change would reduce spending by $137 billion over 10 years (2012-2021). Other options include raising the retirement age for Social Security and raising deductibles for Medicare.
- Discretionary: Each session of Congress decides the following year’s discretionary spending. Promises of discretionary spending cuts beyond one year are meaningless. Thus, the various promises in Republican and Democratic budget plans to freeze various parts of discretionary spending through 2021 or reduce spending to 2008 levels over the long term have no weight. Those are not real cuts.
The only way to get real cuts in discretionary spending—cuts that would be tough to reverse out in later years—is complete program termination and repeal of the program’s authorization. That way, policymakers in future years would generally need at least 60 votes in the Senate to reinstate the spending.
Thus, if the GOP promises to save $50 billion over 10 years by reducing the levels of Title 1 grants to the states for K-12 schools, that is not a real and solid cut. However, if they pass a law to repeal Title 1 spending altogether, that cut may well be sustained over the long term.
To make spending cuts even more secure, the GOP should also insist on a statutory cap on overall outlays with a supermajority requirement to break, as I’ve outlined here. For program termination ideas, see www.DownsizingGovernment.org.
In sum, the GOP needs to ensure that spending cuts tied to the debt-limit vote are either:
- Changes to entitlement laws to reduce benefit levels, or
- Discretionary program terminations.
Promises to hold down future discretionary spending levels and partial program trims are not real spending cuts.
Clinton, Obama, and Hayek
President Obama has been saying that if the United States government can find and eliminate Osama bin Laden after ten years of searching, it can do anything:
Already, in several appearances since the raid, Obama has described it as a reminder that “as a nation there is nothing that we can’t do,” as he put it during an unrelated White House ceremony Monday. On Sunday night, during his first comments about the operation, he linked it to American values, saying the country is “once again reminded that America can do whatever we set our mind to.”
This is, of course, nonsense. Finding bin Laden, difficult as it proved to be, was an incomparably simple task compared to using coercion and central planning to bring about desired results in defiance of economic reality. You can’t deliver better health care to more people for less money by reducing the role of incentives and markets, even if you set your mind to it. As Russell Roberts said about a similar concept, “If we can put a man on the moon, then…”:
Putting a man on the moon is an engineering problem. It yields to a sufficient application of reason and resources. Eliminating poverty is an economic problem (and by the word “economic” I do not mean financial or related to money), a challenge that involves emergent results. In such a setting, money alone—in the amounts that a non-economic approach might suggest, one that ignores the impact of incentives and markets—is unlikely to be successful.
Obama should listen to Bill Clinton, who last fall seemed to be channeling Hayek:
Friedrich Hayek, The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
Bill Clinton, 9/21: “Do you know how many political and economic decisions are made in this world by people who don’t know what in the living daylights they are talking about?”
Educational Freedom in Pennsylvania
The Pennsylvania state House has just passed an expansion of its existing k-12 scholarship-donation tax credit program. The vote was a deafening 190 to 7 in a state that has voted Democratic in every one of the last five presidential elections.
Nevertheless, there is serious opposition to this expansion of education tax credits in the Senate, where several prominent lawmakers prefer a voucher bill. It’s not clear which path the legislature will ultimately take, but there seems to be considerable agreement on the goal: giving parents true freedom of choice in education.
A key point to consider, then, is which type of program is most likely to preserve the freedom and diversity of the education marketplace, thereby giving families a meaningful range of alternatives to choose from. I ran a regression study on precisely this question last fall (now forthcoming in the peer-reviewed Journal of School Choice). What I found is that vouchers impose a large and statistically highly significant burden of additional regulation on private schools while tax credits do not.
This is not the only advantage of the tax credit program, but it is a compelling one.
HHS Plays Chicken Little — Again
USA Today reports on a new Obama administration study:
On average, uninsured families can pay only about 12% of their hospital bills in full. Families with incomes above 400% of the poverty level, or about $88,000 a year for a family of four, pay about 37% of their hospital bills in full, according to the Department of Health and Human Services study.
Oy, where to begin?
This is pre-existing conditions all over again. In the hope of saving ObamaCare from the gallows, the Obama administration is blowing a real but relatively small problem way out of proportion.
The best data indicate that the problem of the uninsured not being able to pay their medical bills is real but relatively small. “Uncompensated care” for the uninsured accounts for just 2.8 percent of health care spending. To put that in perspective, 30 percent of Medicare spending is pure waste, according to the Dartmouth Atlas. Moreover, studies show that the uninsured who do pay their bills pay so much more than private insurance does that they more than make up for the uninsured who don’t pay their bills. That is, total uncompensated care may be negative.
This HHS report adds nothing to our understanding of this problem. Everyone already knows that nearly everybody would have a hard time paying an expensive hospital bill if they didn’t have health insurance.
In fact, this report detracts from our understanding of the problem. It essentially says that if all uninsured people were to experience a hospitalization, only some of them would be able to pay the entire bill for some hospitalizations—not necessarily their own hospitalization—with their liquid assets. That’s as non-illuminating as saying that very few “D” students could afford to pay four years of college tuition (say, $100,000) with the money in their bank account:
- Just like few “D” students are headed to college, very few of the uninsured are going to be hospitalized. Not only are most of the uninsured young and healthy, but most of them buy insurance as they get older.
- The “D” students who do go to college probably won’t be attending the most expensive colleges. Likewise, the uninsured who are hospitalized are likely to have relatively less-expensive episodes of care.
- Of the “D” students who attend college, some would be able to pay for some of their tuition from their bank accounts. But rather than tell us how much of these hypothetical medical bills the uninsured could pay, HHS reports the number that would be unable to pay these hypothetical medical bills “in full,” and that total billings for those hypothetical hospitalizations—not the unpaid amount—account for 95 percent of medical care provided to the uninsured.
- Some of those “D” students could obtain student loans and pay off their tuition over time. Likewise, some of the uninsured will be able to borrow money or sell their houses or cars to pay their medical bills. But HHS doesn’t account for the ability of the uninsured to borrow, nor does it count their ability to tap non-financial assets like cars and houses.
In short, HHS bent over backward to make this problem appear bigger than it is. Moreover, they couched their misleading findings in ways that lent themselves to even greater exaggeration. For example, the above quote from USA Today,
uninsured families can pay only about 12% of their hospital bills in full.
paints a far darker picture than what HHS actually found:
On average, uninsured families can only afford to pay in full for about 12% of the admissions to hospital (hospitalizations) they might experience. [Emphasis added.]
It’s almost as if HHS was hoping reporters would misreport their findings in a way that made the problem sound worse.
Filed under: Cato Publications; General; Government and Politics; Health Care
Postal Vision 2020
Postal Vision 2020 is a conference scheduled for June in Arlington, VA, that will discuss the U.S. Postal Service’s long-term prospects in our increasingly digitized world. Here’s how the Washington Post’s Ed O’Keefe frames the gathering:
As mail volume continues to plummet and more Americans use the Internet to pay bills and keep in touch, Google executives, social media experts and some of the most passionate tech evangelists are planning to meet in Crystal City in mid-June to sort out how to save and remake the nation’s mail delivery service.
That sounds like a good group for discussing ideas on how to “remake the nation’s mail delivery service” given that the USPS is the antithesis of companies like Google. Creative, innovative, entrepreneurial, and competitive are words that one would associate with Google—not the government’s mail monopoly. However, should these folks be getting together to discuss saving the USPS? That notion strikes me as akin to having Henry Ford come up with ideas on saving the horse and buggy.
As I discuss in a Cato essay on the USPS, the socialist mail enterprise cannot survive in its current form—at least not without a reintroduction of taxpayer subsidies. The USPS’s revenue base has been irrevocably undermined by the growth in digital communications, and congressional micromanagement makes sufficient cost-cutting extremely difficult. Thus, I would argue that the goal should be to create a market for postal services rather than to “save” the USPS:
Policymakers resistant to reform often depict the USPS as a “national asset” that “binds the nation together.” But these days, it’s the Internet and our telecommunications networks that bind families and businesses together across the nation. It’s time to let go of the nostalgia for the USPS and bring America’s postal services into the 21st century with privatization, open competition, and entrepreneurial innovation.
Unfortunately, the sclerosis at the USPS is a reflection of the sclerosis in Congress. As Chris Edwards and I have repeatedly discussed with each other, it is incredibly difficult for Congress to think outside the box on policy. One reason is that because the federal government has become so massive, policymakers have little time to devote to big ideas like transforming the USPS. That, of course, assumes that policymakers are interested in such big ideas. For many members of Congress, interest in the USPS doesn’t go much further than franking privileges and naming post offices.
Let’s Copy the Baltic Nations and Really Cut Spending
All the talk of spending cuts in Washington is fictitious. Even the House Republican Study Committee budget allows spending to increase, on average, by 1.7 percent each year for the next decade. The Ryan budget, which critics deride for its “savage” cuts, allows spending to rise by an average of 2.8 percent each year. And Obama’s budget allows spending to climb, on average, by 4.7 percent each year—which is more than twice the projected rate of inflation.
Too bad American policymakers can’t copy the Baltic nations of Estonia, Latvia, and Lithuania. Like the United States, these nations got in fiscal trouble, thanks to the combination of excessive spending and an economic downturn triggered by falling real estate prices.
But unlike the United States, these nations didn’t follow the Keynesian policy of more deficit spending. Lawmakers in the Baltic nations recognized, to borrow the words of Dan Hannan, that “you cannot spend your way out of recession or borrow your way out of debt.”
So they reduced spending. Not in the Washington sense, where politicians get to increase spending and call it a cut because outlays didn’t rise even faster. The Baltic nations imposed real cuts. And not just for one year, but in both 2009 and 2010. Here’s the data from the European Union for the Baltic nations.
Interestingly, it appears that fiscal restraint has been very successful for the Baltic nations. After suffering a steep downturn, economic growth has returned. Amazingly, Estonia is even back to having a budget surplus.
It’s also worth noting that other nations have enjoyed great success with fiscal restraint. This video shows how Canada, Ireland, Slovakia, and New Zealand dramatically reduced the burden of government spending by freezing or capping outlays. Not quite as impressive as what’s happened in the Baltics, but definitely very good compared to what’s been happening in the United States.
Want Privacy? Nevermind. We Want to Censor!
Senator Chuck Schumer rounds out a trifecta of bloggable moments from the Senate Judiciary Subcommittee on Privacy, Technology, and the Law’s hearing this morning.
Ignoring the subject of the “mobile privacy” hearing, Schumer queried the witnesses from both Google and Apple on whether they will accede to his demand that they reject certain “apps” on Android phones and iPhones. The applications Senator Schumer dislikes alert people on their mobile phones to the locations of DUI checkpoints.
Senator Schumer says these apps “allow drunk drivers to evade police checkpoints,” but that statement fails to include other parties who might rightly wish to avoid police checkpoints—such as law-abiding citizens who wish to live free in this country, for example.
Recently, I landed at Harford’s Bradley International Airport late on a Friday night, heading to a Saturday morning meeting in Northampton, Massachusetts. From my shuttle bus to a remote rental car area, I saw a DUI checkpoint. After I completed the arrangements for my car, I asked the agent how I might leave so as to avoid the checkpoint. I wanted neither the delay nor the impingement on my sober liberty that a police checkpoint represents. He cheerfully directed me to a route I could freely travel.
Senator Schumer wants to prevent conversations like this from taking place on a mass scale, facilitated by advanced technologies. He stands a good chance of succeeding—RIM has already given in—because Google and Apple have repeat business before the federal government. Senator Schumer can raise their regulatory costs far higher than the value of allowing minor, but controversial apps on their systems.
If Senator Schumer succeeds, our right to freely and efficiently communicate about police activity will diminish in a way that is effectively insulated from First Amendment challenge. Privacy and freedom be damned. There are drunk drivers to catch.
Want Privacy? We Start by Blinding You!
As I noted earlier, the Senate Judiciary Committee’s Subcommittee on Privacy, Technology, and the Law held a hearing this morning entitled: “Protecting Mobile Privacy: Your Smartphones, Tablets, Cell Phones and Your Privacy.” In it, Sentor Richard Blumenthal (D-CT) engaged in a fascinating colloquy with Google’s Alan Davidson.
Blumenthal pursued Davidson about the year-old incident in which Google’s Street View cars collected data on the location of WiFi nodes and mistakenly gathered snippets of “payload data”—that is, the data traveling over open WiFi networks in the moments when their Street View cars were passing by.
Some payload data may have contained personal information including passwords. Google has meekly been working with data protection authorities around the world since then, hoping once and for all to delete this unneeded and unwanted data.
Blumenthal was prosecutorial in tone, but made a classic prosecutor’s error: He asked questions to which he didn’t know the answers.
Isn’t “payload data” extremely valuable for mapping WiFi networks?, queried Senator Blumenthal.
Davidson’s answer, and the consensus of panelists: Ummmm, no, not really.
(If you were to map pay phones, it wouldn’t matter whether people were talking on them, either, or what they were saying.)
Despite looking foolish, Senator Blumenthal persisted, asking Davidson whether collecting “payload data” should be illegal. Davidson demurred, but it’s a fascinating question.
Should it be against the law to collect data from open WiFi networks? That is, to observe radio signals passing your location on a public street? Should the government determine when you can collect radio signals, or what bands of the radio spectrum you may observe? What should you be allowed to do with information carried on a radio signal that you inadvertently capture?
If the government should have this power, the same logic would support making it illegal to collect photons that arrive at your eyes or that enter your camera lens. The government might proscribe collecting sound waves that come to your ears or microphone.
Laws against observing the world around you would certainly protect privacy! Let the government blind us all, and privacy will flourish. But this is not privacy protection anyone should want.
To understand privacy, you have to understand a little physics. As I said in an earlier comment on Google’s collection of open WiFi data:
Given the way radio works, and the common security/privacy response—encryption—it’s hard to characterize data sent in the clear as private. The people operating them may have wanted their communications to be private. They may have thought their communications were private. But they were sending out their communications in the clear, by radio—like a little radio station broadcasting to anyone in range.
Trying to protect privacy in unencrypted radio broadcasts (like public displays or publically made sounds) is like trying to reverse the flow of a river—it’s a huge engineering project. Senator Blumenthal would start to protect your privacy by blinding you to the world around you. Then narrow exceptions would determine what radio signals, lights, and sounds you are allowed to observe…
Yes, Says Virginia, There Are Limits on Federal Power
Today, the Fourth Circuit became the first appellate court in the nation to enter the Obamacare fray. It heard two very similar cases back-to-back, Liberty University’s, in which the government won in the district court, and the Commonwealth of Virginia’s, in which Judge Henry Hudson struck down the individual mandate back in December. Going into the hearing, Virginia Attorney General Ken Cuccinelli’s legal team had done a wonderful job setting out the reasons why Hudson was correct and why Congress went too far in asserting the unprecedented power to compel people to enter into contracts with private insurance companies. I was proud to sign Cato’s brief supporting that position and continue to maintain that the federal government cannot require people to buy goods or services under the guise of regulating interstate commerce. Moreover, the individual mandate is the linchpin of the overall legislative scheme (as everyone concedes), so if it falls, the rest of the law—at least its central provisions—must fall with it.
Indeed, the Fourth Circuit judges—a Clinton appointee and two Obama appointees, in a random selection unfortunate to the challengers—struggled with the idea that Congress could regulate “inactivity.” The government—which has now determined that the challenges are so serious as to send the solicitor general to argue in lower courts—claimed that Congress can do anything it wants relating to anything that in any way affects a national market such as that for health care. Given that decisions not to buy insurance, or to self-insure, or not to pay for health care until presented with a bill, clearly have a substantial effect on interstate commerce, the argument went, Congress can require people to buy health insurance. The judges seemed to agree to a certain extent but were still troubled by the textual truism that a power to “regulate” implies an active object or activity that is being regulated. And indeed, if a “decision” not to buy something or the state of not having acquired something is all that is required to invoke congressional jurisdiction, then the Constitution’s enumerations of federal power mean absolutely nothing.
The government is understandably unconcerned with articulating a principled limit on its own power, and this particular panel of judges may find some way to avoid dealing with the activity/inactivity conundrum, but one can only hope that the Supreme Court ultimately rejects the claim that Congress can grant itself unlimited power simply by legislating in an area of great national concern.
Starting at 2pm Eastern, you can stream the oral arguments from the Court’s website here.
Want Privacy? Increase Government Surveillance!
This morning, the Senate Judiciary Committee’s Subcommittee on Privacy, Technology, and the Law had a hearing entitled: “Protecting Mobile Privacy: Your Smartphones, Tablets, Cell Phones and Your Privacy.”
Among the witnesses was Deputy Assistant Attorney General Jason Weinstein from the Department of Justice’s Criminal Division. Weinstein made a gallingly Orwellian pitch: If you want privacy protection, increase government surveillance.
From his written statement:
ISPs may choose not to store IP records, may adopt a network architecture that frustrates their ability to track IP assignments and network transactions back to a specific account or device, or may store records for only a very short period of time. In many cases, these records are the only evidence that allows us to investigate and assign culpability for crimes committed on the Internet. In 2006, forty-nine Attorneys General wrote to Congress to express “grave concern” about “the problem of insufficient data retention policies by Internet Service Providers.”
Without more customer data retention by ISPs, and without greater government access to this data, the government won’t be able to prosecute crimes, some of which threaten privacy, Weinstein said in his spoken comments.
So there you have it. Turn more data over to the government so we can protect your privacy. War is peace. Freedom is slavery.
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