Archive for July, 2011
ObamaCare Supporters Are Over-Interpreting Oregon Medicaid Study
Columbia Business School economist Ray Fisman has a piece at Slate.com discussing the first-year results of the Oregon Health Insurance Experiment. In brief, when Oregon transferred an average of $3,000 from taxpayers to poor people in the form of Medicaid coverage, it did those poor people some good.
Fisman’s interpretation of the results is different from mine in mainly two respects. First, I describe the one-year benefits of Medicaid coverage as modest; he says they’re “enormous.”
A more fundamental difference concerns whether expanding Medicaid was a cost-effective use of the taxpayers’ money. Fisman writes:
Given the added expense, did the Medicaid expansion prove to be cost-effective? That is, did the treatment group actually have better health outcomes?
That’s not what cost-effectiveness means. For Medicaid to be cost-effective, it must (A) produce benefits and (B) do so at the same or a lower cost than the alternatives.
The OHIE establishes only that there are some (modest) benefits to expanding Medicaid (to poor people) (after one year). It tells us next to nothing about the costs of producing those benefits, which include not just the transfers from taxpayers but also any behavioral changes on the part of Medicaid enrollees, such as reductions in work effort or asset accumulation induced by this means-tested program. Nor does it tell us anything about the costs and benefits of alternative policies.
Just as some opponents of ObamaCare over-interpreted previous Medicaid studies, Fisman and other ObamaCare supporters are over-interpreting the OHIE.
Al Qaeda’s Mythical Unity
The mythical al Qaeda is a hierarchical organization. After losing its haven in Afghanistan, it cleverly decentralized authority and shifted its headquarters to Pakistan. But central management still dispatches operatives globally and manages affiliates according to a strategy.
The real al Qaeda is a fragmented and unmanageable movement. In the 1990s, it achieved limited success in getting other jihadists to join in attacking the West. It was not managerial innovation but the U.S. invasion of Afghanistan and other governments’ pressures that destroyed the limited hierarchy al Qaeda Central had achieved. Its scattered remnant in Pakistan controls little locally and less abroad. The leaders have cachet but lack the material incentives that real managers distribute to exercise authority. Al Qaeda became bunches of guys with diminished capability.*
The myth is destructive to counterterrorism. Because tightly-run organizations are better at mass violence than disparate movements, the myth creates needless fear that encourages overly ambitious and expensive policies, like the war in Afghanistan. The myth increases the number of enemies we face, taking focus from real ones. Most jihadist militants hate Americans but don’t try to kill us. They fight locally. Attacking them risks making them into what we fear they are and stoking nationalistic resentment that increases their popularity.
My anecdotal sense is that events since 9/11 have increasingly brought commentators around to truth. Even so, the media, for simplicity’s sake, tends towards the myth. And the Obama administration, despite improving upon its predecessors’ absurdly broad definition of our terrorist enemies, still overstates al Qaeda Central’s unity and control of affiliates. More importantly, U.S. policies still pay insufficient attention to the distinction among various al Qaeda entities.
NCLB Is a Failure. It’s Nothing Personal.
Education writer RiShawn Biddle has offered a spirited response to my blog post yesterday about the failure of the No Child Left Behind act. In it, he asserts that NCLB has advanced school choice, and links to an earlier essay that ostensibly presented his case. Summarizing it, Biddle writes that:
The impact of No Child on advancing choice… starts with the law’s Adequate Yearly Progress requirements. Thanks to the data culled, the low quality of education in traditional district schools was exposed for all to see, providing parents and school choice activists with the information they needed to push for the advancement of choice.
No thanks. The poor performance of U.S. schooling has been evident to a great many people for a very long time. The bestseller Why Johnny Can’t Read was first published in 1955. Over the past 40 years, the NAEP’s Long Term Trends (LTT) tests have revealed stagnation in math and reading and decline in science toward the end of high school. In contrast to the consistent and nationally representative results of the NAEP LTTs, the NCLB is tied to state-administered tests that are so often corrupted by tinkering with their content and cut scores that they are largely worthless for measuring achievement at a single point in time let alone for measuring trends.
Biddle also claims that NCLB
exposed the long-running gamesmanship by states looking to define proficiency downward (a fact that Cato has used to its own advantage in arguing against expanding federal education policy); this, in turn, has rallied more reformers to move toward advancing school choice.
In reality, NCLB exacerbated the gamesmanship of state-level tests by giving state officials incentives to show the appearance of progress rather than actual progress. Moreover, it was not NCLB that exposed this fraud that was partially of its own making. For that we can thank… the NAEP. It was by comparing unreliable state test scores to far more reliable NAEP scores that it was discovered just how badly public schools in many states have been lying to families about their children’s performance. Even Secretary of Education Arne Duncan has noted this fact, saying in 2009 that:
When states lower [their own academic] standards, they are lying to children and they are lying to parents. Those standards don’t prepare our students for the world of college or the world of work. When we match NAEP scores and state tests, we see the difference. Some states, like Massachusetts compare very well. Unfortunately, the disparities between most state tests and NAEP results are staggeringly large.
[Ironically, Duncan seems to have benefited from the absence of such a comparison while he was head of Chicago Public Schools, riding into his current position on the wings of a supposed “Chicago Miracle” that appears, based on NAEP scores, to have been a mirage induced by fanciful state tests.]
Biddle then goes on to praise NCLB’s “focus on graduation rates,” which he claims “forced states to present realistic numbers.” While it is true that many states had been reporting meaningless graduation statistics prior to NCLB, it is not at all clear that the law has improved matters. On the contrary, Nobel Prize winning economist James Heckman concluded from his exhaustive statistical study of the subject that NCLB appears to have fostered further cheating with graduation rates—what he calls “strategic behavior” by states and districts to present inflated graduation rate figures in order to avoid NCLB penalties. So, once again, it appears that NCLB is obfuscating rather than illuminating educational performance in America.
Finally, a note about Biddle’s characterization of my and my colleagues’ work at Cato’s Center for Educational Freedom. Apparently discomfited by my criticism of NCLB, Biddle dubs us dogmatic ideological purists, unthinking and blindered, and claims that we praise or attack policies based on our “worldview,” etc. etc. While I can understand becoming exercised as a result of a policy debate, I cannot understand why someone who wants to be taken seriously would stoop to such obviously fatuous ad hominem attacks. My last paper was a regression study of the link between the performance of charter school networks and the grant funding they receive. It has multiple technical appendices, several of them added in response to peer reviews. Anyone who doubts its findings is welcome to repeat it and see if they obtain different results. The paper I wrote before that was a regression study of the regulatory burdens imposed by voucher and tax credit programs. It, too, can be repeated by other researchers if they wish to verify its findings. The term for this kind of testable, repeatable work is science, not “dogma” or “ideology” or “world view.” My colleagues are likewise engaged in empirical research and we derive our policy recommendations from that research. So our conclusions are indeed very narrowly constrained, but not by ideology. They are constrained by what works, and what does not work, in the real world.
Oregon Health Insurance Experiment: No Vindication of ObamaCare
The Oregon Health Insurance Experiment is the first experiment since the dawn of time that randomly assigns some households to receive health insurance (Medicaid) for purposes of comparing their medical consumption, health outcomes, and financial security to similar households that do not receive Medicaid coverage. Some of the nation’s top health economists have released the first batch of results from the OHIE.
At National Review (Online), I summarize the OHIE’s first-year results and offer the following analysis:
Supporters of President Obama’s health-care law may tout these benefits, but the OHIE does not provide the vindication they seek. First, despite being eligible for Medicaid, 13 percent of the control group had private health insurance — suggesting that on some dimension, Medicaid’s eligibility rules are already too broad.
Second, the OHIE extended coverage to the most vulnerable population of uninsured Americans, yet the improvements in health and financial security are so far apparently modest. At higher income levels, where individuals have greater baseline access to health insurance and medical care, the benefits of expanding coverage are likely to be smaller and the costs (to the extent that crowd-out is higher at higher income levels) will be greater.
Third, supporters must show not only that expanding coverage improves health but also that it does so at a lower cost to taxpayers than alternative policies. Health economists generally agree that discrete programs promoting highly effective treatments (for hypertension, diabetes, etc.) could produce health gains as large as expanding health insurance would, but at far less expense. Reducing taxes could plausibly reduce financial strain to a similar degree by expanding job creation.
Finally, the OHIE illuminates an unflattering feature of the push for Obamacare. For a century, the Left has advocated universal health insurance despite not knowing what benefits it might bring. In 2010, Congress and President Obama vastly expanded Medicaid without waiting for the results of the one study that might tell them what taxpayers would get in return for their half a trillion dollars. As the law’s supporters seek to cajole doctors into practicing evidence-based medicine, it is no small irony that they themselves dove head-first into evidence-free policymaking.
To the Church of Universal Coverage, the benefits of universal coverage, whatever those might be, are an article of faith.
Does Asia Need a Larger U.S. Handout?
Yesterday, AEI scholars Dan Blumenthal and Michael Mazza authored an interesting op-ed in the Wall Street Journal with a perplexing title: “Asia Needs a Larger U.S. Defense Budget.” There are a couple of more sensible arguments you could make: For instance, that Asian countries need larger defense budgets, or that U.S. interests in Asia require larger military expenditures that Asian countries can’t or won’t make themselves . Blumenthal and Mazza gesture at both of those arguments but don’t really make either one. As such, the piece is an emblem of what’s wrong with the Asia policy discussion–to the extent it exists–in Washington today.
In the opening paragraph, the authors state that “it is…difficult to assess how much cuts [to military spending] will cost tomorrow,” but in the next sentence defy that claim by promising that “in Asia, the price will be unacceptably high.” Either it is difficult to assess how much cuts will cost tomorrow, or we know that the price of cuts in Asia will be unacceptably high, but not both. The authors also are apparently unaware of the facts when they argue that U.S. military spending has been “slashed.” It hasn’t even been cut. (For its part, the Asia studies department at AEI was last seen disseminating wildly inflated estimates of Chinese military spending and then refusing to answer queries about how they came up with the figures.)
Blumenthal and Mazza then swerve widely to avoid explaining China’s military buildup, writing that
The international trade that has fueled the region’s economic boom is dependent upon the immeasurable strategic tasks undertaken by the U.S. military–from keeping safe maritime shipping to reassuring friends and allies while deterring China and North Korea.
The reason that China is building up its military forces and narrowly targeting them at securing their sea lines of communication (and perhaps a bit further out) is that they quite rationally do not want to rely on the eternal beneficence of the United States to do it for them, particularly when prominent Asia scholars mention in the same breath deterring and containing China as a primary goal of the U.S. in Asia.
There are other contradictions. For instance, Blumenthal and Mazza assert flatly that
If America skimps on its military, China will become the regional hegemon.
That’s one possibility, but aren’t there others? One paragraph later, the authors allow that sure there are: the alternative is that
Asian countries might find ways to resist Chinese pressure themselves.
So then maybe it’s not foreordained that China will run amok in East Asia absent Washington as its balancer-of-first-resort. But that brings us back around to the weirdness of the title of the piece: saying that Asia needs a larger U.S. defense budget is like saying that Greece needs more German stabilization money. (While we’re here, AEI calling for more military spending is like rock legend Bruce Dickinson calling for more cowbell.)
These kinds of arguments ought to at least try to show why the best way to achieve German (or American) interests is to dole out more largesse to third parties. That may or may not be true, but it would be good to at least see an argument to that effect, rather than all the hand waving and then backing down from the strongest claims in the article.
I’m Willing to Go Along with President Obama’s ‘Balanced Approach’ to Deficit Reduction, but Only if We Use Honest Math
The President has issued an ultimatum that more tax revenue must be part of budget negotiations. Indeed, he endlessly repeats his desire for a “balanced approach,” implying that as much as 50 percent of the deficit reduction in any agreement should come from higher revenues.
Because I am a thoughtful, middle-of-the-road, pragmatic guy, I’m willing to accept the President’s ultimatum. I do have one tiny request, however, and that is for any such deal to be based on honest math.
What I mean by this is that I don’t want politicians to approve a budget that results in more spending, but then claim that they “cut spending” because the budget didn’t grow even faster. I want a spending cut to mean less spending (gee, what a novel idea).
And when they talk about new revenue, I want to see how much revenue the IRS is collecting this year, and measure revenue increases against that number. After all, the crowd in Washington should be happy to get more money, even if it is the result of benign factors such as more jobs being created, companies earning higher profits, and people getting more pay.
I assume these are reasonable requests. After all, this is how businesses and households operate their budgets, and I’m sure the political insiders wouldn’t want to use dishonest numbers to mislead voters (perish the thought!).
So what would a balanced approach look like, assuming we want to use honest math? The answer isn’t that complicated. I started with the latest estimates from the Congressional Budget Office for spending and revenues for this fiscal year (FY2011). I then assume, in the interest of a “balanced approach,” that spending should be cut by 5 percent each year and that revenues should climb by 5 percent each year.
The results, as illustrated by the graph, are remarkable. If we use a 50-50 deal of higher revenue and lower spending, we balance the budget in just five years. The President is right!
I Guess the ‘You Are All Criminals Act’ Didn’t Have the Same Ring
If you thought it was the height of cynicism when legislators dubbed a massive expansion of government surveillance power the “USA Patriot Act” (recently extended—really!—under the heading of small business legislation), feast your eyes upon the Protecting Children from Internet Pornographers Act of 2011, on which the House Judiciary Committee is slated to hold a hearing next Tuesday. What kind of monster would dare be on the record opposing that bill?
As you may have already guessed, the handful of provisions in the bill that really deal specifically with child porn are a fig leaf for its true purpose: A sweeping data retention requirement meant to turn Internet Service Providers and online companies into surrogate snoops for the government’s convenience. Any provider of an “electronic communication” or “remote computing” service—meaning broadband providers like Comcast, but also companies like Google—would have to retain records of the “temporarily assigned network address” (such as an IP address) associated with each account for 18 months. Some of the other provisions in the act seem perfectly reasonable (though I don’t know enough to say whether they’re necessary), but as a hearing earlier this year made crystal clear, it’s the data retention requirement that the government really cares about.
Thanks to an unwise Supreme Court decision dating from the 70s, information about your private activites loses its Fourth Amendment protection when its held by a “third party” corporation, like a phone company or Internet provider. As many legal scholars have noted, however, this allows constitutional privacy safeguards to be circumvented via a clever two-step process. Step one: The government forces private businesses (ideally the kind a citizen in the modern world can’t easily avoid dealing with) to collect and store certain kinds of information about everyone—anyone might turn out to be a criminal, after all. No Fourth Amendment issue there, because it’s not the government gathering it! Step two: The government gets a subpoena or court order to obtain that information, quite possibly without your knowledge. No Fourth Amendment problem here either, according to the Supreme Court, because now they’re just getting a corporation’s business records, not your private records. It makes no difference that they’re only keeping those records because the government said they had to.
Your Year in Wiretaps, by the Numbers
Last week—on the Thursday before a major holiday weekend—the annual Wiretap Report was finally released by the Administrative Office of the U.S. Courts, fully two months behind schedule (the first time in over a decade it’s been so late). While we often focus on the growth of the surveillance state in the context of national security and the War on Terror—such as foreign intelligence wiretaps, which aren’t counted in this report—it’s clear that surveillance is on the rise for ordinary law enforcement purposes as well. State and federal investigators obtained 3,194 wiretap orders in 2010, an increase of 34 percent over the previous year, and a whopping 168 percent increase over 2000. Only one wiretap application was denied—which you can choose to take as evidence that law enforcement is extremely scrupulous in seeking applications, or that judges tend to rubber stamp them, according to your preferred level of paranoia. Just half the states reported any wiretaps, and nearly 68 percent of the total 1,987 state wiretaps were attributable to just three states: California, New York and New Jersey.
The average wiretap order swept up the communications of 118 people (since, of course, each individual target converses with many people, including many innocent people). If there were no overlap between wiretap orders, that would imply 376,892 people affected. Since it’s common for multiple orders to be sought as part of a single investigation, however, many of the same people are presumably being counted as having been caught under more than one wiretap order. Even on the wildly charitable assumption that only a third of those were unique individuals, though, that would still be well over 125,000 people spied upon, many innocent of any wrongdoing.
Questioning the Beijing Consensus
Two good op-eds take a critical look at the so-called Beijing Consensus that purports to be an alternative to liberalism because of China’s economic success under authoritarian rule with its mix of interventionist and market-oriented policies. The key to China’s impressive progress in the past few decades has of course been its move from extreme poverty and a highly repressed economy toward economic freedom. In today’s Wall Street Journal, Liu Junning, a champion of liberal democracy in China, reminds readers of that fact and of “The Ancient Roots of Chinese Liberalism” (as noted in an earlier post by David Boaz). Writing in an Indian daily, Cato senior fellow Deepak Lal explains that state capitalism has not been the source of Chinese growth and warns against “China’s Hubris,” which is leading to a more assertive state and a decrease in personal liberty.
Cato Video on $2 Trillion in Spending Cuts
A new video produced by Cato’s Caleb Brown and Austin Bragg does a typically stellar job of visualizing the alleged $2 trillion in spending cuts currently being negotiated on Capitol Hill as part of a deal to raise the debt ceiling.
The video is based on my recent chart, which shows that $2 trillion in cuts over ten years is relatively small considering that the federal government is projected to spend almost $46 trillion over that same time frame. Indeed, rather than actually cutting spending, federal spending (and debt) would continue to grow – just at a slightly lower rate.
The video also highlights Chris Edwards’ concern that the cuts will be phony: instead of actual terminations in programs or reductions in entitlements, there is a strong possibility that budget gimmicks will be used to arrive at the savings.
Liberalism and Debate in China
The Asian edition of the Wall Street Journal has just published essays by two Chinese liberal scholars who have spoken and written for the Cato Institute. Mao Yushi created quite a storm in China with his article on the website of Caixin magazine criticizing Mao Zedong (no relation). He received threatening phone calls and warning visits. Nevertheless, he has now published a version of the essay in English, translated by my former colleague Jude Blanchette, now working in China for the Atlas Economic Research Foundation. It’s still pretty tough:
Mao Zedong was once a god. With the uncovering of more and more documents and information, he is gradually returning to human form.
Some still view Chairman Mao as a god, however, and view any critical discussion of him as blasphemous….
Mao not only created suffering for China, he exported his theory to the world so that all could share in his cruelty. He encouraged armed revolution in Malaysia, India, Thailand, the Philippines, Burma, Indonesia, Nepal and Sri Lanka. Perhaps Mao’s greatest student was Pol Pot, who stands as the most ruthless killer in recent history. More than 30 years after his death, the world is still dealing with Mao’s legacy….
After Mao’s death, Hua Guofeng and Ye Jianying seized the Gang of Four, and China’s Supreme Court sentenced them to death. Yet the leader of the Gang of Four can still be glimpsed hanging above the Gate of Heavenly Peace and his picture is printed on the money we use every day.
Meanwhile, Liu Junning tells Journal readers that Maoism is not the whole of China’s heritage. Indeed, he says (as noted in Libertarianism: A Primer and The Libertarian Reader), Laozi (Lao-tzu or Lao-tse) was one of the earliest exponents of ideas we might now call liberal or libertarian:
Indeed, what we now call Western-style liberalism has featured in China’s own culture for millennia. We first see it with philosopher Laozi, the founder of Taoism, in the sixth century B.C. Laozi articulated a political philosophy that has come to be known as wuwei, or inaction. “Rule a big country as you would fry a small fish,” he said. That is, don’t stir too much. “The more prohibitions there are, the poorer the people become,” he wrote in his magnum opus, the “Daodejing.”
For Mencius, a fourth-century B.C. philosopher and the most famous student of Confucius, a kingdom would be able to defend itself from outside attack if the king “runs a government benevolent to the people, sparing of punishments and fines, reducing taxes and levies. . . .”
Note that Laozi and other classical thinkers also drew a connection between good, limited government in general and prosperity in particular.
To say that the narrative of liberty vs. power is uniquely “Western” is to turn a blind eye to the struggles of those who have gone before us. Individual rights are not a Western development any more than paper and gunpowder are inventions that are uniquely Chinese. Is Marxism “German”? Is Buddhism “Indian”? Of course not. When ideas are born, they take flight into the world to be used, improved or discarded by all of humanity. Constraints on political power and the protection of individual rights belong to all….
China will truly prosper only when individuals such as Liu Xiaobo, Ai Weiwei and the many other Chinese patriots who speak for reform are safe in the knowledge that they can do so without a late-night knock on the door from the government.
My own thoughts on the ideas of the American Revolution and of the Chinese Communist Party appeared at the Britannica Blog on Monday.
Is There Still Time?
The Washington Post says that “there is a real question as to whether [Texas governor Rick] Perry has waited too long” to begin a presidential campaign. And that Sarah Palin is dithering “even as the window for announcing narrows” and “time is running out for her.” Fox News agrees that “time is running out” for any new presidential candidates.
That’s the conventional wisdom. But I’m old enough to think about history.
Barry Goldwater announced his candidacy for president on January 3, 1964, about nine weeks before the New Hampshire primary. A decade later, Ronald Reagan announced his challenge to President Gerald Ford on November 20, 1975. After that unsuccessful race, he announced another, this time successful candidacy, on November 13, 1979.
I’m not suggesting that Sarah Palin, Rick Perry, or Chris Christie is another Ronald Reagan or even another Goldwater. Nor am I unaware of the changes in the campaign process. But I do wonder if a candidate with real appeal really has to announce his or her candidacy so many months before earlier candidates did.
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