Obama on Health Care: Half Right
President Obama gave what seems like his thousandth exclusive health care interview last night, this one to ABC News’s Charles Gibson. In trying to sell his health care plan, the president warned that if Congress does not pass legislation controlling health care costs, the federal government “will go bankrupt.” He also warned that unless health care is reformed, “your premiums will go up.”
The president is absolutely correct about that. The only problem is that, according to the president’s own chief health care actuary, the bills that Congress is now considering do nothing to restrain either federal health care spending or total health care costs. In fact, Rick Foster, chief actuary at the Center for Medicare and Medicaid Services (CMS) says that if Congress passes the bill now before the Senate, health care spending will actually increase by $234 billion more over the next 10 years than if we did nothing.
And, according to the Congressional Budget Office, the congressional bills do little or nothing to reduce the growth in insurance premiums. Even if a bill passes, premiums will roughly double by 2016, and keep rising after that. But for millions of Americans the bill will actually make things worse. According to CBO, the Senate bill would actually increase insurance premiums by 10-13 percent for Americans who buy their insurance through the non-group market, that is those who don’t receive insurance from their employer. Those 10-13 percent increases are over and above the increases that would occur if we did nothing.
On the other hand, if the president were really serious about controlling health care costs and lowering premiums, he wouldn’t need to spend trillions of dollars and take over one-sixth of the US economy; he could try some of the ideas written about here, and here, and here.
The Audacity of Hypocrisy
In his ongoing effort to micromanage the U.S. economy President Obama used his Dec. 12 weekly radio address to promote his proposed Consumer Financial Protection Agency. It will be filled with bureaucrats second-guessing entrepreneurs and is sure to improve the performance of our financial institutions — much in the manner of the SEC’s bureaucrats alertly nailing Bernie Madoff just 30 years into his Ponzi scheme. Never mind that the federal government had much more to do with the financial meltdown than the banks did, the real knee-slapper in his address was his claim that the CFPA “would bring new transparency and accountability to the financial markets…” This, from a man demanding passage of a 2000-page health care reform bill that no one, including Mr. Obama, has read. So much for transparency and accountability.
Disappointing Start for Immigration Reform
The good news is that a bill has been introduced in the House this week under the broad heading of immigration reform. Even during a recession, Congress should be working to change our immigration system to reflect the longer-term needs of our economy for foreign-born workers.
The bad news is that the actual bill put in the hopper by Rep. Luis Gutierrez, D-IL, on Tuesday would do nothing to solve the related problems of illegal immigration and the long-term needs of our economy.
As I argued in a recent blog post and a Washington Times op-ed, immigration reform must include expanded opportunities for legal immigration in the future through a temporary worker visa.
Any so-called reform that is missing this third leg will be doomed to fail. We will simply be repeating the mistakes of the 1986 Immigration Reform and Control Act, which granted amnesty to 2.7 million illegal workers and ramped up enforcement, but made no provision for future workers. Rep. Jeff Flake, R-AZ, agrees.
A Few Notes on Climate Change
As the Copenhagen Climate Conference is taking place, it is appropriate to clarify once again what is more or less accurately known about the climate of our planet and about climate change.
Obviously, a brief post can not substitute for detailed studies of professionals in a variety of scientific disciplines – climatology, atmospheric physics, chemistry, geology, astronomy, and economics. However, a short post can summarize basic theses on the main trends in climate evolution, on its forecasts, and on its actual and projected effects.
1. The Earth’s climate is constantly changing. The climate was changing in the past, is changing now and, obviously, will be changing in the future – as long as our planet exists.
2. Climatic changes are largely cyclical in nature. There are various time horizons of climatic cycles – from the annual cycle known to everyone to cycles of 65-70 years, of 1,300 years, or of 100,000 years (the so called Milankovitch cycles).
3. There is no fundamental disagreement among scientists, public figures and governments about the fact that the climate is changing. There is a broad consensus that climate changes occur constantly. The myth, created by climate alarmists, that their opponents deny climate change is sheer propaganda.
4. Current debate among climatologists, economists and public figures is not about the fact of climate change, but about other issues. In particular, disagreements exist on:
- Comparative levels of modern day temperatures (relative to the historically observed),
- The direction of climate change depending on the length of record,
- The extent of climate change,
- The rate of climate change,
- Causes of climate change,
- Forecasts of climate change,
- Consequences of climate change,
- The optimal strategy for human beings to respond to climate change.
5. Unbiased answers to many of these issues are critically dependent on a chosen time horizon – whether it is 10 years, or 30 years, or 70 years, or 1000 years, or 10,000 years, or hundreds of thousands or millions of years. Depending on the time horizon, the answers to many of these questions may be different, even opposite.
Government and GDP
The expansion in government and poor state of the economy got me thinking about how government growth is reflected in measured gross domestic product. So here is a wonky look at the treatment of government in the Bureau of Economic Analysis GDP data.
Data notes: By “government,” I mean total federal, state, and local. For 2009, I’m using the average of second and third quarter data. All data from BEA Tables here.
GDP measures total production. In 2009, government production was 20.7 percent of U.S. GDP. Government production is roughly the sum of government value-added (the stuff it produces itself) and government purchases. The first item, government value-added, was 12.4 percent of GDP and mainly consists of employee compensation. For example, the Pentagon produces output by adding together fighter pilots, which it hires, and fighter jets, which it buys.
A more commonly cited measure of government is total government spending. In 2009, that was 38 percent of GDP. The difference between this number (38 percent) and the production number (20.7 percent) is 17.3 percent, and represents the sum of government interest payments and transfer payments to individuals and businesses.
Figure 1 shows how the three measurements of government size have changed over time. Government production has remained fairly stable as a share of the economy, but total government spending has soared. The growing gap between these two lines mainly represents the massive growth in transfer (or subsidy) programs, such as Social Security.
Rick Santorum and Limited Government?
Scary news today from Washington Post columnist Kathleen Parker: despite losing his reelection bid in 2006, former senator Rick Santorum is still thinking about running for president. He tells Parker that he represents the Ronald Reagan issue trinity: the economy, national security and social conservatism. And he’s the limited-government guy:
Both pro-life and pro-traditional family, Santorum is an irritant to many. But he insists that such labels oversimplify. Being pro-life and pro-family ultimately mean being pro-limited government.
When you have strong families and respect for life, he says, “the requirements of government are less. You can have lower taxes and limited government.”
But Santorum is no Reaganite when it comes to freedom and limited government. He told NPR in 2005:
One of the criticisms I make is to what I refer to as more of a libertarianish right. You know, the left has gone so far left and the right in some respects has gone so far right that they touch each other. They come around in the circle. This whole idea of personal autonomy, well I don’t think most conservatives hold that point of view. Some do. They have this idea that people should be left alone, be able to do whatever they want to do, government should keep our taxes down and keep our regulations low, that we shouldn’t get involved in the bedroom, we shouldn’t get involved in cultural issues. You know, people should do whatever they want. Well, that is not how traditional conservatives view the world and I think most conservatives understand that individuals can’t go it alone. That there is no such society that I am aware of, where we’ve had radical individualism and that it succeeds as a culture.
He declared himself against individualism, against libertarianism, against “this whole idea of personal autonomy, . . . this idea that people should be left alone.” Andrew Sullivan directed our attention to a television interview in which the senator from the home state of Benjamin Franklin and James Wilson denounced America’s Founding idea of “the pursuit of happiness.” If you watch the video, you can hear these classic hits: “This is the mantra of the left: I have a right to do what I want to do” and “We have a whole culture that is focused on immediate gratification and the pursuit of happiness . . . and it is harming America.”
Parker says that Santorum is “sometimes referred to as the conscience of Senate Republicans.” Really? By whom? Surely not by Reaganites, or by people who believe in limited government.
Spending Our Way Into More Debt
Huge deficit spending, a supposed stimulus bill, and financial bailouts by the Bush administration failed to stave off a deep recession. President Obama continued his predecessor’s policies with an even bigger stimulus, which helped push the deficit over the unimaginable trillion dollar mark. Prosperity hasn’t returned, but the president is persistent in his interventionist beliefs. In his speech yesterday, he told the country that we must “spend our way out of this recession.”
While a dedicated segment of the intelligentsia continues to believe in simplistic Kindergarten Keynesianism, average Americans are increasingly leery. Businesses and entrepreneurs are hesitant to invest and hire because of the uncertainty surrounding the President’s agenda for higher taxes, higher energy costs, health care mandates, and greater regulation. The economy will eventually recover despite the government’s intervention, but as the debt mounts, today’s profligacy will more likely do long-term damage to the nation’s prosperity.
Some leaders in Congress want a new round of stimulus spending of $150 billion or more. The following are some of the ways that money might be spent from the president’s speech:
- Extend unemployment insurance. When you subsidize something you get more it, so increasing unemployment benefits will push up the unemployment rate, as Alan Reynolds notes.”
- More infrastructure spending. This will lead to misallocation of resources since only markets can allocate resources efficiently. Governments allocate capital on the basis of politics instead of economics.
- “Cash for Caulkers.” This would be like Cash for Clunkers except people would get tax credits to make their homes more energy efficient. Any program modeled off “the dumbest government program ever” should be put back on the shelf.
- More Small Business Administration lending. A little noticed SBA program created by the stimulus bill offered banks an “unprecedented” 100 percent guarantee on loans to small businesses. The program has an anticipated default rate of 60 percent. Small businesses need lower taxes and fewer regulations, not a government program that perpetuates more moral hazard.
- More aid to state and local governments. State and local government should be using the recession to implement reforms that will prevent them from going on another unsustainable spending spree when the economy recovers. Also, we need fewer state and local government employees – not more – as they’re becoming an increasing burden on taxpayers.
The president said his administration was “forced to take those steps largely without the help of an opposition party which, unfortunately, after having presided over the decision-making that led to the crisis, decided to hand it to others to solve.” Mr. President, nobody has forced you to do anything. You’ve chosen to embrace – and expand upon – the big spending policies that were a hallmark of your predecessor’s administration.
Use Your Law Deferment to Work for Liberty!
Many law firms are asking their incoming first-year associates to defer their start dates (from a few months to a full year) and are offering stipends to these deferred associates to work at public interest organizations. Cato has been running a deferred associates program for the last few months and we are now extending it for as long as top-notch candidates want to ride out the economy with us.
The Cato Institute invites third-year law students and others facing firm deferrals to apply to work at our Center for Constitutional Studies. This is an opportunity to assist projects ranging from Supreme Court amicus briefs to policy papers to the Cato Supreme Court Review. Start and end dates are flexible. Interested students and graduates should email a cover letter, resume, transcript, and writing sample, along with any specific details of their deferment (timing, availability of stipend, etc.) to Jonathan Blanks at jblanks@cato.org.
Please feel free to pass the above information to your friends and colleagues. For information on Cato’s programs for non-graduating students, contact Joey Coon at jcoon@cato.org.
Copenhagen: Let the Games Begin!
25,000 bureaucrats, factota, hangers on, and representatives of various environmental organizations have just converged on Copenhagen for the UN’s latest “Conference of the Parties (COP) to its infamous 1992 climate treaty. Expect a lot of heat, not much light, and a punt right into our next election.
President Obama says that the US will agree to a “politically binding” reduction of our emissions of carbon dioxide to a mere 17% of 2005 levels by 2050. This will allow the average American the carbon dioxide emission of the average citizen in 1867. Obama’s pronouncement has stepped all over the toes of the US Senate, which really doesn’t want to vote on similar legislation this election year. Jim Webb, a democrat heretofore very loyal to the President recently wrote Obama a very tersely worded note reminding him that the power to commit the nation to such a regulation lies with the Senate, not with the Commander-in-Chief.
The UN’s own climate models show that even if every nation that has obligations under the failed Kyoto Protocol (which is supposed to be replaced by the Copenhagen Protocol) did what Obama wants, that only 7% of prospective warming would be prevented by 2100. The world’s largest emitter—China—was exempt then, and won’t agree to these reductions now.
Instead they will agree to reduce “carbon intensity”—the amount of carbon dioxide emitted per unit GDP—by 20% per decade. This is nothing but business as usual for a developing or robust economy. In fact, when President George W. Bush said that was our global warming policy, he was roundly booed. The Chinese announcement—already telegraphed, is being greeted with unmitigated praise by the same environmentalists who beat on Bush for the exact same policy. India has just announced that there is no way that they will agree to any emission reductions unless we pay them lotsa money. Obama thinks that’s a good idea, too. Polling data, anyone?
Since there’s no way that India and China will agree to large reductions, the real result of Copenhagen is that the climate can will be kicked down the road to the next COP, which begins on November 8, 2010, right down the road in Mexico City. That’s six days after our Congressional election, guaranteeing that cap-and-tax will be on the voters’ minds when they close the curtain on the current Congress.
Is Trade Policy Obsolete?
That is one of the conclusions in my new paper, “Made on Earth: How Global Economic Integration Renders Trade Policy Obsolete.”
For hundreds of years, trade policy has been premised on the assumptions that exports are good, imports are bad, and the interests of domestic producers are tantamount to the “national interest.” Though that mercantilist worldview has never been accurate, its persistence as a pillar of trade policy into the 21st century is especially confounding given the emergence and proliferation of disaggregated production processes, transnational supply chains, and cross-border investment. Those trends have blurred any meaningful distinctions between “our” producers and “their” producers and speak to a long chain of interdependent economic interests between product conception and consumption.
Monday Links
- Three decades of politics and failed policies at HUD.
- Michael D. Tanner on the Senate Sell-Outs: “At a time of 10.2 percent unemployment, they voted to make it more expensive to hire workers, especially low-wage workers. With the economy struggling, they voted for $485 billion in tax hikes. They voted to raise the payroll tax, limit your flexible spending account, and tax your health insurance plan. This is moderation?”
- The limits of U.S. power in Afghanistan: “Even if more troops were better deployed, the odds of reasonable success in reasonable time at reasonable cost are long.”
- Republican and Democratic senators pushing for subsidizing prayer.
- In Washington next week? Tom Palmer will be here Tuesday, Dec. 1 to discuss his new book, Realizing Freedom. Can’t make it? Watch live online.
- Podcast: “Money, Greed and God“
Homeownership Myths
In a recent Washington Post op-ed, Professor Joseph Gyourko, chair of the Wharton School’s Real Estate Department, lists what he sees as the five biggest myths about homeownership. Given the central role of federal housing policy, particularly Fannie Mae and Freddie Mac, in our recent financial crisis, it is worth following Professor Gyourko’s suggestion and question whether a national policy of ownership, all the time for everyone, really makes sense.
Professor Gyourko’s five myths:
1. Housing is a great long-term investment.
2. The homebuyer tax credit makes buying a house more affordable.
3. Homeowners are better citizens.
4. It’s safe to buy a house with a very low downpayment.
5. Owning is always cheaper than renting.
You’ll have to read the op-ed to see his explanations. An important qualification on his analysis is that in many cases what can be good for the buyer, such as putting no money down, may not be good for the economy if it results in additional foreclosures.
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