Archive for the ‘General’ Category
‘Biggest Crackdown Ever’ Shows Medicare’s Anti-Fraud Efforts Are a Fraud
The Obama administration somehow continues to garner positive coverage for arresting (alleged) Medicare fraudsters who bilk the program for, say $295 million. See this CBS News report:
Combating fraud is a good thing, but $295 million is chicken feed compared to the $100 billion or so that Medicare and Medicaid lose to fraudulent and other improper payments each year.
Instead of merely parroting the government’s press releases on its anti-fraud efforts, it would be nice to see some media outlet examine why Medicare and Medicaid fraud is so prevalent, so persistent, and why politicians have no incentive to do anything serious to combat it. They could start with this article and this video:
Government and Job Creation: Help or Hindrance?
I recently posted four charts eviscerating Obama’s record on jobs.
My Cato colleagues, Caleb Brown and Austin Bragg, have a good complement to those charts. They’ve put together a short video looking at how government spending and regulation undermine job creation.
Caleb says he will be doing more excellent videos like this, which is very encouraging since there is so much more ground to cover — particularly when trying to educate people in Washington.
One thing he should explain is that jobs don’t exist without profits. As I explained in a New York Post column last year, employers “only create jobs when they think that the total revenue generated by new workers will exceed the total cost of employing those workers.”
This seems like an elementary observation, but it’s one that most politicians don’t seem to understand. Or don’t care to understand.
That certainly seems to be the case at 1600 Pennsylvania Avenue. The president will speak tonight and supposedly will propose a $300 billion plan. He’ll claim, of course, that this new “stimulus” package will boost growth.
But a look at the various components that reportedly will be in his plan doesn’t create a sense of optimism. Especially since it appears that he’s mostly recycling proposals that already have failed at least once.
Maybe the President should copy the policies of a former resident of the White House, who also had to deal with a deep downturn, but managed to produce dramatically better results.
Grading the Likely Components of Obama’s New Stimulus Plan
President Obama will be unveiling another “jobs plan” tomorrow night, though Democrats are being careful not to call it stimulus after the failure of the $800 billion package from 2008.
But just as a rose by any other name would smell as sweet, bigger government is not good for the economy, regardless of how it is characterized.
Here are the most likely provisions for Obama’s new stimulus, as reported by the Associated Press, along with a grade reflecting whether the proposals will be effective.
-
Payroll tax relief – C – This proposal won’t do any harm, but it probably won’t have much positive impact because people generally don’t make permanent decisions on creating jobs and expanding output on the basis of temporary tax cuts.
But, to be fair, if the tax cut keeps getting extended, people may begin to view it as a semi-permanent part of the tax code, which would make it a bit more potent.
-
Extended unemployment benefits – F – I agree with Paul Krugman and Larry Summers, both of whom have written that you extend joblessness when you pay people to be unemployed for longer and longer periods of time.
And I recently produced a chart showing how long-term unemployment has jumped sharply since Obama entered the White House, a dismal result that almost surely is related to the numerous expansions of unemployment benefits.
-
New-hire tax credit – D – This proposal actually would subsidize employment rather than joblessness, so it’s an improvement over extending unemployment benefits, but it’s unclear how the IRS can effectively enforce such a scheme.
This approach was tried already, as part of HIRE Act of 2010 (which was infamous for the FATCA provision), and it obviously didn’t generate great results. Simply stated, giving special tax breaks to companies with high employee turnover is not an effective approach.
-
School construction subsidies – F – The federal government should have no role in education. Period.
That being said, the economic flaw of school construction spending-cum-stimulus is that government spending must be financed with either taxes or borrowing, both of which divert resources from the productive sector of the economy. Simply stated, Keynesian spending does not work.
-
Temporary expensing of business investment – B – The current tax code penalizes new business investment by forcing companies to “depreciate” those costs rather than “expense” them, thus forcing companies to artificially overstate profits. Temporary expensing mitigates this foolish bias.
But temporary tax cuts, as noted above, are unlikely to have a permanent impact on growth. Temporary expensing, however, will encourage companies to accelerate planned investment to take advantage of better tax treatment, so it can lead to more short-term economic activity (albeit perhaps by reducing economic activity in future years).
The only good news – at least relatively speaking – is that Obama supposedly will propose to misallocate $300 billion of resources, significantly less than what was squandered as part of the 2009 faux stimulus.
But the bad news is that the AP story also notes that “Obama has said he intends to propose long-term deficit reduction measures to cover the up-front costs of his jobs plan.” Translated into English, that means the gimmicks and new spending in the plan proposed tomorrow night will lead to proposed tax hikes at some point in the future.
More taxes and more spending. Hey, it worked for the Greeks, right?
A U.S. Troop Presence in Iraq Does Not Serve U.S. Security Interests
Many years ago, longer than I care to remember, I wrote an op ed wondering aloud “Who Will Decide When We Leave Iraq?” More than five and a half years later, we still don’t know the answer to that question.
Sure, we have an agreement with the Iraqis to leave by the end of this year. All U.S. troops are supposed to be gone, although a very large diplomatic presence, including perhaps thousands of security contractors, will remain. George W. Bush presided over the negotiation of the deal, and then passed it off to his successor. When he drew down to fewer than 50,000 troops over the summer, on a path to zero by January 1, 2012, Barack Obama was merely implementing the policy. He cannot fairly be accused of doing anything other than what his predecessor would have done. If it is a mistake for Obama to preside over a troop withdrawal, then it was a mistake for Bush to negotiate one.
But maybe we’re not leaving? Defense Secretary Leon Panetta is reportedly supporting a deal for 3,000 to 4,000 troops to remain in a training capacity past the end of the year, provided a deal can be struck with the Iraqis.
Those few Americans who are still paying attention to Iraq cannot be enthusiastic about this. We have long since tired of the ruinous, pointless war. The cheerleaders for invading Iraq said it would be a cakewalk, and that the costs would be paid for by Iraqi oil revenues, not U.S. taxpayers. It has instead consumed nearly $800 billion in U.S. taxpayer dollars, claimed the lives of over 4,400 U.S. troops, and wounded many thousands more. The costs of caring for the wounded and recapitalizing equipment will likely top an additional $1 trillion.
Haven’t we had enough already?
Apparently not.
A handful of U.S. senators are appalled to learn not that U.S. troops might be staying in Iraq, but rather that the administration is contemplating a troop withdrawal. (Is this news to them?) When they learned that the administration was trying to retain a U.S. troop presence beyond the end of this year, Diane Feinstein, Joseph Lieberman, John McCain and Lindsay Graham, complained that the numbers being contemplated were insufficient. They claimed that such a draw down would imperil the fragile gains made in the country over the past few years, and expose the few troops left behind to serious harm.
That last point might be true. It isn’t clear to me why 3,000 troops makes much more sense than 30,000 or 300. But the essential fact is that the presence in Iraq, any presence, is unnecessary. Bush made many mistakes in Iraq, beginning with the decision to invade. He was correct to determine that the mission must end. It does not serve U.S. security interests to remain in that country indefinitely.
At the time when I wrote that earlier op ed, in early 2006, I pointed to President Bush’s insistence that we would only stay so long as the Iraqis wanted us there, and suggested that the Iraqs might ultimately determined whether we stayed or went. Bush might have been gambling that the Iraqis would not ask us to leave, at least not right away, and the polling data at the time suggested that was a safe bet.
It isn’t any longer. A few people here in the United States might want U.S. troops to stay in Iraq; but very few Iraqis agree.
Realist IR scholars will repeat ad nauseum the mantra from Thucydides: “The strong do what they can; the weak suffer what they must.” To the extent that this is true, no U.S. president would gamble this country’s security on the whims of a nascent parliamentary democracy rife with anti-American sentiment. We would never hand such a decision over to the Iraqis if it was truly vital to our national security to remain there.
It isn’t. It never has been. The Iraq war was a war of choice; we can choose to leave. We should.
Why Congressional Budget Office Estimates and Policy Options Are Taken Much Too Seriously
Coercive redistribution and diversity in the interests of its constituent groups are essential features of the modern welfare state. Disagreement over perceived consequences of social policy creates the demand for publicly justified “objective” evaluations. If there were no coercion, redistribution and intervention would be voluntary activities and there would be no need for public justification for voluntary trades.
−James J. Heckman (winner of the 2000 Nobel Prize in Economics), “Accounting for Heterogeneity, Diversity and General Equilibrium in Evaluating Social Programs,” National Bureau of Economic Research Working Paper No. 7230, July 1999.
Three Strikes and You’re Out
When the Wall Street Journal, the Financial Times and the New York Times agree on the merits of a policy, readers will understandably be confused.
At the annual rendezvous of central bankers in Jackson Hole, Wyoming this past weekend, the IMF’s new managing director Christine Lagarde asserted that Europe’s banks should be recapitalized. This, she claimed, would make the banks “safer” and improve the chances for European growth.
On August 29th, I wrote that Ms. Lagarde had misdiagnosed Europe’s banking problems and is confused. Indeed, her prescription would be deflationary and put more stress on Europe’s fragile economies.
On August 30th, I criticized the Wall Street Journal‘s editorial which praised Ms. Lagarde’s recapitalization ideas. Strike one.
On August 31st, I commented on the F.T.‘s effusive endorsement of Ms. Lagarde’s recapitalization proposals. Strike two.
With the New York Times, we have strike three. Ms. Lagarde’s recapitalization ideas are out.
Recapitalizing banks in the middle of economic troubles is a dangerous and unwise course. For more on this issue, I recommend Prof. Tim Congdon’s book Money in a Free Society which Encounter Books will release in October. Prof. Congdon’s book is profound and I am pleased that its dust jacket will carry my endorsement:
Prof. Tim Congdon, one of the world’s most eminent monetarists, employs his multiple talents and experience – as a first-rate scholar, market economist and financial journalist – to unravel the mysteries of modern money and banking systems. His most careful and anxious attention to the arguments proffered in the great canonical works and debates of the past is unmatched. This, coupled with his mastery of the tricky intricacies of modern money, will ensure that readers of “Money in a Free Society” are richly rewarded. Among other things, they will learn that Nobelist Paul Krugman and the Chairman of the Federal Reserve Ben S. Bernanke have a tenuous grasp on both economic theory and reality, rendering their analyses of the current crisis wrong and/or irrelevant.
Keynesian Economics in a Cartoon
I’ve written extensively about the flaws of Keynesian economics, and I’ve even narrated a video on the flaws of Keynesian theory.
But this clever cartoon may be more effective than anything I’ve ever done.
If you like cartoons that teach economics, check out this gem. It’s not on Keynesianism, but it’s very good.
Mill, Constant & Macaulay 1; Lind 0
Jason Kuznicki is generous indeed to describe Michael Lind’s latest screed against libertarians and classical liberals as merely “uninformed.” Of the many absurdities in Lind’s piece, the one that caught my eye was his description of the Nineteenth Century trio of John Stuart Mill, Benjamin Constant and Thomas Babington Macaulay as advocates of “autocracy,” the only evidence he proffers for this view being that none of the three thinkers embraced current thinking about universal suffrage. That the fight against “autocracy” might historically have been a multifaceted affair fought on many fronts besides the extension of the franchise — involving issues of civil liberty, the rule of law, freedom of conscience, separation of powers, federalism, and curbs on arbitrary governance on which these thinkers wrote works still highly relevant today — does not restrain Lind from sloughing them all into a rhetorical pit better suited to de Maistre or Schmitt. Mill and Constant never get another mention, but Lind lingers to insult Macaulay as supposedly wishing “to limit voting rights to those who drink champagne and ride in carriages.”
Readers might never guess from this that perhaps the best known episode of Macaulay’s career as an orator in the British Parliament — the one that “made his name,” per Wikipedia — came with his speeches in favor of expanding the franchise in the historic Reform Act of 1832. (Not long before, his famous maiden speech had deployed every resource of eloquence on behalf of the cause of removing the civil disabilities of the Jews.) Lind’s “champagne and carriages” slur would be less than accurate even as applied to many of the hidebound Tories of the time. But to apply it to the best-remembered Whig advocate of a measure extending the franchise to ten-pound (middle-class) householders is — well, “uninformed” seems a bit mild.
It would be hazardous indeed for one’s sense of history to be shaped by perusing the writings of Michael Lind.
More Confusion, Now From the F.T.
Yesterday, the Wall Street Journal’s editorial endorsed IMF managing director Christine Lagarde’s call to recapitalize Europe’s banks. Today, the Financial Times’ leader, “Ugly truths from a bold Lagarde” showers Ms. Lagarde’s proposal with praise.
The F.T. speculates that “Perhaps Ms. Lagarde has seen the light with new advisers.” There is evidence to suggest that this conjecture is not true. In July 2011, when the IMF filed its Article IV consultation report on Mexico, the IMF made clear that increasing banks’ capital-asset ratios would act as a drag on Mexico’s money supply and economic growth. In consequence, the IMF counseled Mexico to call a “time out” on increasing banks’ capital-asset ratios. Contrary to the F.T.’s conjecture, the IMF (or at least important elements within the IMF) hold views that directly contradict Ms. Lagarde’s.
Confusion over Confusion
On August 29th, I penned “Lagarde Confused, Again.” In it, I argued that Christine Lagarde, the new managing director of the International Monetary Fund, misdiagnosed Europe’s banking crisis.
Ms. Lagarde’s assertion that Europe’s banks “need urgent recapitalization” is based on faulty economics. While the higher capital-asset ratios that Ms. Lagarde extols are intended to strengthen banks (and economies), higher ratios destroy money and are “deflationary.” This is not what a struggling Europe needs. Indeed, higher capital-asset ratios imposed on Europe’s banks at this juncture would virtually ensure that Euroland would take another dive. In consequence, some of the banks that were made “safer” by Ms. Lagarde’s medicine would go to the wall.
Today, the Wall Street Journal‘s lead editorial “A TARP for Europe?” adds to the confusion by enthusiastically endorsing Ms. Lagarde’s prescription.
Federal Spending Hits $4.1 Trillion
If you looked at the new CBO report on the budget, you may have noticed that federal spending this year will be $3.6 trillion.
In fact, federal spending this year will top $4 trillion. But virtually all reporters and budget wonks (including me) routinely use the lower number when discussing total federal spending. I don’t think the higher $4 trillion number even appears anywhere in the CBO report.
The $3.6 trillion figure is “net” outlays. But “gross” outlays, or total spending, is quite a bit higher. The difference is caused by “offsetting collections” and “offsetting receipts.” These are revenue inflows to the government that are netted against spending at the program level, agency level, or government-wide level. Some examples are national park fees, Medicare premiums, and royalties earned on mineral deposits. There are hundreds of these cash inflows to the government that offset reported spending.
Details on these revenue offsets can be found in Chapter 16 of OMB’s Analytical Perspectives (pdf). In fiscal year 2010, net federal outlays were $3.456 trillion, but gross outlays were $4.057 trillion. Thus, gross outlays were 17 percent larger than widely reported net outlays.
In FY 2011, OMB expects gross outlays to be about 15 percent larger than net outlays. Thus, gross outlays this year will be $4.1 trillion, compared to net outlays of $3.6 trillion. As a share of GDP, gross outlays will be about 27.3 percent of GDP, compared to net outlays of 23.8 percent.
Accounting for offsets in this manner is a long-standing convention, but it is one of the sneaky ways that Washington tries to hide its large intrusion into the economy. Certainly, the CBO and OMB should include more prominent presentations of gross outlays in their regular budget updates.
For citizens and reporters, a rule-of-thumb to remember is that total federal spending is 3 to 4 percentage points of GDP larger than usually reported by officials.
Nearly Two-Thirds of ObamaCare’s Supposed Beneficiaries Think It Won’t Help Them
Here are a few takeaways from the Kaiser Family Foundation’s most recent monthly poll.
1. Nearly Two Thirds of ObamaCare’s Supposed Beneficiaries Think It Won’t Help Them.
ObamaCare‘s actual beneficiaries are politicians, government bureaucrats, insurance companies, drug manufacturers, etc.—but that’s another blog post for another time.
The law’s supposed beneficiaries are the uninsured. Yet 61 percent of them think the law will either not help them or will hurt them (see pie chart below). The main takeaway: Congress can repeal ObamaCare and its supposed beneficiaries won’t even care.
2. Some of the Uninsured Who Think ObamaCare Will Help Them Are Wrong.
One respondent said that under ObamaCare, you “can go to the doctor with no problems, unlike now you have to worry about insurance and bills.” Yeah. Good luck with that.
3. ObamaCare Is Less Popular than Ever.
In August 2011, support for ObamaCare hit an all-time low in the KFF poll:
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
