Hurting the Sick Is Not Good Politics
I was glad to see James Pinkerton engage my criticism of Louisiana Gov. Bobby Jindal’s (R) endorsement of federal price controls for health insurance. I was even more pleased to see that Pinkerton has his own blog devoted to developing a Serious Medicine Strategy.
If I understand Pinkerton, his argument is essentially: it’s all well and good for some unelectable wonk in the “citadel of libertarian thinking” to “uphold ivory-tower free-market purity” by opposing price controls. But Republicans need “art-of-the-possible solutions” to win elections, and 90 percent of the public support those price controls. “Everyone has a right to his or her principled position,” Pinkerton writes, “but the majority has rights, too.”
Two problems.
First, Pinkerton suggests that libertarians oppose price controls for reasons that only matter to libertarians, and therefore may be safely ignored. Problem is, price controls hurt people. Were Pinkerton to explore the merits of Jindal’s proposal, he would soon conclude that imposing price controls on health insurance taxes the healthy, reduces everyone’s health insurance choices, and creates even greater incentives for insurers to shortchange the sick. (Turns out that what Larry Summers said about price controls applies to health insurance, too.) As John Cochrane explains, those price controls also block innovative products that would provide more financial security and better medical care to the sick.
But Pinkerton’s advice for Republicans is, essentially: “Do what’s popular now, even if it hurts people and voters end up blaming Republicans for it later.” How is that a good strategy?
Second is this idea that “the majority has rights.” Majorities don’t have rights. Individuals have rights. For example, you have the right to negotiate the terms of your health insurance contract with the individuals at this or that insurance company. Majorities may attain power, but that’s the opposite of rights. (See the Bill of Rights.)
Finally, a couple of important odds and ends. Pinkerton suggests it is “un-libertarian” to be “pro-life,” or to “support the police, the military, and other upholders of public order,” or to “support government restrictions on…euthanasia.” Writing from the “citadel of libertarian thinking,” I can assure him he is wrong. Might I suggest Pinkerton read the relevant chapters from The Encyclopedia of Libertarianism? (The health care chapter is a page-turner!) Also, I did not “denounce Jindal” any more than Pinkerton denounced me. I criticized his ideas, and I respect the man.
(Cross-posted at Politico’s Health Care Arena.)
Filed under: Government and Politics; Health, Welfare & Entitlements
Nobody Considers Health Insurance Mandates a Tax? Really??
As my colleague Jeffrey Miron noted earlier today, when grilled by George Stephanopolous on whether the so-called “individual mandate” is a tax increase, Obama replied, “Nobody considers that a tax increase….You can’t just make up that language and decide that that’s called a tax increase…My critics say everything is a tax increase.”
Where do Obama’s critics get these wacky ideas? From a bunch of nobodies, that’s who!
Princeton economist Uwe Reinhardt, quoted by Larry Summers (1987):
[Just because] the fiscal flows triggered by mandate would not flow directly through the public budgets does not detract from the measure’s status of a bona fide tax.
Economist Larry Summers, Obama’s National Economic Council chair (1989):
Economists have generally devoted little attention to mandated benefits regarding them as simply disguised tax and expenditure measures… Essentially, mandated benefits are like public programs financed by benefit taxes… [If] the mandated benefit is worthless to employees, it is just like a tax from the point of view of both employers and employees…There is no sense in which benefits become ‘free’ just because the government mandates that employers offer them to workers.
Columbia University economist Sherry Glied, Obama’s appointee to HHS Assistant Secretary for Planning and Evaluation, in the New England Journal of Medicine (2008):
The mandate is in many respects analogous to a tax. It requires people to make payments for something whether they want it or not. One important concern is that the government will provide insufficient funds for the subsidies intended to accompany the mandate. In that case, the mandate will act as a very regressive tax, penalizing uninsured people who genuinely cannot afford to buy coverage.
Congressional Budget Office (2009):
Under some proposals, firms would be required to make payments to the federal government if they chose not to offer health insurance to their employees, and individuals who did not comply with the requirement to obtain insurance would have to pay a penalty. Such payments would be equivalent to a tax or a fine, and the government’s receipts should be recorded in the budget as federal revenues.
Here’s a question: if an individual mandate is not a tax, why exempt anybody? If an employer mandate isn’t a tax, why exempt small businesses?
Filed under: Cato Publications; General; Health, Welfare & Entitlements; Tax and Budget Policy
Obama’s Health Care Speech in Plain English
Hell of a speech last night, eh? Here are a few of my favorite gems.
Under this plan, it will be against the law for insurance companies to deny you coverage because of a pre-existing condition.
Translation: I, Barack Obama, ignoring thousands of years of failed price-control schemes, will impose price controls on health insurance. I will force insurers to sell a $50k policies for $10k. What could go wrong?
We were losing an average of 700,000 jobs per month.
True. And your employer mandate would kill hundreds of thousands of low-wage jobs that would never come back.
They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime. We will place a limit on how much you can be charged for out-of-pocket expenses…. And insurance companies will be required to cover, with no extra charge, routine checkups and preventive care.
Translation: Boy! Are we going to force you to buy a lot of coverage!
I will make sure that no government bureaucrat or insurance company bureaucrat gets between you and the care that you need.
…except for the bureaucrats I proposed to put between you and your doctor.
Some… supported a budget that would have essentially turned Medicare into a privatized voucher program. That will never happen on my watch. I will protect Medicare.
Translation: I will never let seniors control their own health care dollars. I will never give up Washington’s control over your health care decisions. Mmmmuuuuhahahahahaha!
…there are too many Americans counting on us to succeed.
Translation: There are too many lobbyists counting on me to succeed: drug-industry lobbyists, health-insurance lobbyists, physician-cartel lobbyists, large-employer lobbyists, hospital lobbyists….
It’s a plan that asks everyone to take responsibility for meeting this challenge – not just government and insurance companies, but employers and individuals.
Translation: I’m going to tax the hell out of you, but I don’t want you to notice how much I’m going to tax you. So I’m going to tax employers and insurance companies, and they’re going to pass the taxes on to you. Most of the taxes won’t even show up in the government’s budget. It’s all very clever. No, seriously – just ask my economic advisor Larry Summers.
It’s a plan that incorporates ideas from Senators and Congressmen; from Democrats and Republicans – and yes, from some of my opponents in both the primary and general election.
Translation: I may have savaged your ideas in the past, called them irresponsible…risky…dangerous…whatever. But that wasn’t about principle; I just wanted to become president. Now that I’m president, I need a win. So you’ll help me, won’t you? Hey, where’s Hillary?
Would Summers Be Any Worse than Bernanke?
As I have argued elsewhere, Bernanke’s record as both a Fed governor and Chair suggest we be better off with a new Fed Chair come January 2010, when Bernanke’s term as Chair expires. Outside of those who believe the bailouts have saved capitalism, two very reasonable arguments are put forth for keeping Bernanke at the helm: 1) in a time of crisis, the markets need certainty and dislike change; and 2) the alternatives, such as Larry Summers, would be worse. Both these points have real merit, however I believe in both cases the pros of change outweigh the cons of staying the course with Bernanke. I will save the “certainty” debate for another time, for now, let’s ask ourselves: Would Summers really be any worse than Bernanke?
Before I make the case for Summers, I do want to make clear, President Obama, and the country, would best be served by a “Carter picks Volcker” type moment. Go outside the Administration, go beyond the usual circle of easy-money, new Keynesians. The Fed lacks creditability in two (at least two) important areas: bailouts and inflation. And one doesn’t even need to go outside of the Federal Reserve System to find candidates. Topping my list would be Jeff Lacker (Richmond Fed), Gary Stern (Minn Fed) and Charles Plosser (Philly Fed). Any of these three know the workings of the Fed, have the respect of the Fed staff, and have taken strong positions on both “too big to fail” and easy money. In the case of Gary Stern, it would seem especially appropriate, as his early warnings (see his 2004 book on bank bailouts) were largely ignored and dismissed. If we want to reward and promote those who got it right, these guys are at the top of the list.
But let’s reasonably suppose that Obama wants someone close, someone he personally knows and will stick with tradition by picking a member of his own administration. Without going into any detail, picking Romer would offer little substantial difference with keeping Bernanke. The case for Summers is essentially that here is one instance where his enormous ego would be an asset. One easily gets the sense that when Summers sits next to President Obama, Summers is thinking to himself just how lucky the President is to be sitting next to Larry Summers. One can call Summers lots of things, starstruck is not one of them. Given what we now need most in a Fed Chair is true independence, from especially the Administration but also from Congress, Summers is the only qualified economist close to the President who displays even the slightest streak of independent thinking. Bernanke, in contrast, has endlessly pandered to the Administration and to Congressional Democrats. Summers has been willing on occasion to actually defend the sanctity of contract (remember the debates over the AIG bonuses), a rarity on the Left, and more than Bernanke was willing to say.
So forced to choose between Bernanke and Summers, the need for an independent Fed Chair willing to take on the Administration and Congress, when appropriate, makes Summers a far better choice. That said, here’s to encouraging Obama go outside his comfort zone and pick someone who has the will to remove excess liquidity from the system before the next bubble gets going.
My Question for the President
President Obama will hold a press conference tonight to answer questions about his health care reform proposal. This is what I would ask him:
Mr. President, during your campaign, you said, “I can make a firm pledge…Under my plan, no family making less than $250,000 a year will see any form of tax increase.” You also said that “no one will pay higher tax rates than they paid in the 1990s.”
Your National Economic Council chairman, Larry Summers, has written that employer mandates “are like public programs financed by benefit taxes.” Under the House health reform bill, an uninsured worker earning $50,000 per year, with no offer of coverage from her employer, would face a 15.3-percent federal payroll tax, a 25-percent federal marginal income tax rate, an 8-percent reduction in her wages (to pay the employer penalty), plus a 2.5 percent uninsured tax. In total, her effective marginal federal tax rate would reach 50.8 percent.
Do you stand by those pledges, and would you therefore veto any employer mandate or individual mandate as a tax on the middle class?
(Add it to the questions I posed here and here.)
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
Is Obama Making America like Sweden?
If only.
Just as the Obama administration takes over another once-great American company, Sweden is busy privatizing. As the Christian Science Monitor reported recently:
Last week, the country’s center-right government began selling off state-owned pharmacies, one of the country’s few remaining nationalized companies, as part of an ambitious program of liberal economic reforms started in 2006. In the same week, a study by the Swedish Unemployment Insurance Board revealed that almost half of the country’s jobless lacked full unemployment benefits. Many opted out of the state scheme when the cost of membership was raised last year; others were ineligible.
State pensions, schools, healthcare, public transport, and post offices have been fully or partly privatized over the last decade, making Sweden one of the most free market orientated economies in the world, analysts say.
Please, President Obama, send Larry Summers to Sweden to get some new ideas for economic reform.
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