Public Housing for the Dead
The HUD Inspector General’s Office released an audit earlier this week on the department’s progress in making sure local public housing agencies aren’t subsidizing the deceased. According to the report, local “agencies made an estimated $15.2 million in payments on behalf of deceased tenants that they should have identified and corrected.”
The audit found the following “significant weaknesses:”
- HUD and local agencies did not have effective policies related to deceased tenants.
- Local agencies did not provide accurate and reliable information to HUD.
- HUD and local agencies did not safeguard assets to ensure correct assistance payments.
This report is a small illustration of the fundamental problems with the federal government subsidizing local governments. The local public housing agencies are supposed to be monitoring how money is spent and reporting to HUD. HUD is supposed to be monitoring the local public housing agencies. But no one does a very good monitoring job, despite the piles of regulations and paperwork that every level of government has to deal with for such subsidies. The muddled web of responsibilities also makes it easy for fraud artists to take advantage.
Last week, HUD’s IG reported that the department is sending $220 million in stimulus funds to local agencies already known to misspend taxpayer dollars.
The government is sending millions of dollars in stimulus aid to communities and housing agencies that federal watchdogs have concluded are unable to spend it appropriately, increasing the risk that the money will be wasted.
Since July, auditors working for the Department of Housing and Urban Development’s inspector general have scrutinized at least 22 cities, counties and housing authorities in 15 states and Puerto Rico to measure whether they can handle stimulus funds effectively. Only six, they found, could do so.
The rest — in line to receive more than $220 million in stimulus aid — had shortcomings ranging from poor management to inadequate staffing that threatened their ability to spend the money quickly and appropriately, a series of audit reports show.
According to a HUD spokesperson, the department is “spending millions of dollars to help local officials spend stimulus money effectively.” Maybe that’s true, but all monitoring help is a pure loss to taxpayers and the private sector economy.
Even when the federal oversight does find problems, the money often keeps flowing anyway. As the article notes:
USA TODAY reported in April that HUD planned to send $300 million in stimulus money to public housing authorities that had been repeatedly faulted by outside auditors for mishandling other forms of federal aid. Congress gave the Obama administration permission to withhold stimulus money from some of those agencies, but HUD opted earlier this year not to do so.
For more on fraud and abuse in federal programs, including housing subsidies, see this essay.
Thursday Links
- A Financial Super-Regulator: The dangers of giving the Fed too much power.
- The financial regulators’ pipe dream: “Most new regulation will do nothing to limit crises because markets will innovate around it. Worse, some regulation being considered by Congress will guarantee bigger and more frequent crises.”
- The shape of things to come? More war will come before peace in the Middle East, says journalist and foreign affairs analyst Leon Hadar.
- The illegal cigarette trade in Ireland reaches “epidemic proportions“ after the government imposes draconian regulations on tobacco products.
- Podcast: “Too Big to Fail Is Just Too Big“
Federal Education Results Prove the Framers Right
Yesterday, I offered the Fordham Foundation’s Andy Smarick an answer to a burning question: What is the proper federal role in education? It was a question prompted by repeatedly mixed signals coming from U.S. Secretary of Education Arne Duncan about whether Washington will be a tough guy, coddler, or something in between when it comes to dealing with states and school districts. And what was my answer? The proper federal role is no role, because the Constitution gives the feds no authority over American education.
Not surprisingly, Smarick isn’t going for that. Unfortunately, his reasoning confirms my suspicions: Rather than offering a defense based even slightly on what the Constitution says, Smarick essentially asserts that the supreme law of the land is irrelevant because it would lead to tough reforms and, I infer, the elimination of some federal efforts he might like.
While acknowledging that mine is a ”defensible argument,” Smarick writes that he disagrees with it because it “would presumably require immediately getting rid of IDEA, Title I, IES, NAEP, and much more.” He goes on to assert that I might ”argue that doing so is necessary and proper because it’s the only path that squares with our founding document, but policy-wise it is certainly implausible any time soon.” Not far after that, Smarick pushes my argument aside and addresses a question to ”those who believe that it’s within the federal government’s authority to do something in the realm of schools.”
OK. Let’s play on Smarick’s grounds. Let’s ignore what the Constitution says and see what, realistically, we could expect to do about federal intervention in education, as well as what we can realistically expect from continued federal involvement.
First off, I fully admit that getting Washington back within constitutional bounds will be tough. That said, I mapped out a path for doing so in the last chapter of Feds In The Classroom, a path that doesn’t, unlike what Smarick suggests, require immediate cessation of all federal education activities. Washington obviously couldn’t be pulled completely out of the schools overnight.
Perhaps more to Smarick’s point, cutting the feds back down to size has hardly been a legislatively dead issue. Indeed, as recently as 2007 two pieces of legislation that would have considerably withdrawn federal tentacles from education — the A-PLUS and LEARN acts – were introduced in Congress. They weren’t enacted, but they show that getting the feds out of education is hardly a pipe dream. And with tea parties, the summer of townhall discontent, and other recent signs of revolt against big government, it’s hardly out of the question that people will eventually demand that the feds get out of their schools.
Of course, there is the other side of the realism argument: How realistic is it to think that the federal government can be made into a force for good in education? It certainly hasn’t been one so far. Just look at the following chart plotting federal education spending against achievement, a chart that should be very familiar by now.
Filed under: Education and Child Policy; General; Law and Civil Liberties
Understanding the Consequences of Internet Regulation
In an effort to achieve “network neutrality” online, the FCC is starting to write new regulations for Internet providers. Reuters reports:
U.S. communications regulators voted unanimously Thursday to support an open Internet rule that would prevent telecom network operators from barring or blocking content based on the revenue it generates.
The proposed rule now goes to the public for comment until Jan. 14, after which the Federal Communications Commissions will review the feedback and possibly seek more comment. A final rule is not expected until the spring of next year.
Cato Director of Information Policy Studies Jim Harper appeared on Fox News this week to discuss the FCC decision. “This is governmental tinkering with a market place that is working really well and growing right now,” said Harper. “The last thing we need is to cut that off.”
There are ways to achieve net neutrality without regulation, says Timothy B. Lee:
An important reason for the Internet’s remarkable growth over the last quarter century is the “end-to-end” principle that networks should confine themselves to transmitting generic packets without worrying about their contents. Not only has this made deployment of internet infrastructure cheap and efficient, but it has created fertile ground for entrepreneurship. On a network that respects the end-to-end principle, prior approval from network owners is not needed to launch new applications, services, or content.
…Like these older regulatory regimes, network neutrality regulations are likely not to achieve their intended aims. Given the need for more competition in the broadband marketplace, policymakers should be especially wary of enacting regulations that could become a barrier to entry for new broadband firms.
Filed under: General; Telecom, Internet & Information Policy
To Make Health Care Affordable, Don’t Add Regulations — Repeal Them
David Freddoso of the Washington Examiner reveals how the monopolies that states enjoy over licensing doctors, nurses, and other clinicians reduce access to care for low-income Americans:
Stan Brock just wants to help. The former co-star of “Wild Kingdom” wants to deliver free medical, dental and vision care to the poor. Whereas most politicians talk about “bending the cost curve” in health care, Brock simply wants to break it – to provide care free of charge, at the hands of unpaid volunteer doctors and dentists using donated equipment.
Brock’s group, Remote Area Medical, wants to bring its services to Washington, and soon. He wants his volunteer eye doctors to grind new glasses on the spot for those having trouble seeing.
He wants his dentists to pull rotten teeth and perform root canals in badly neglected mouths. He wants to give checkups and HIV tests to the uninsured and the underinsured. No questions asked.
The only question is whether the bureaucrats will let him do it.
That sounds like hyperbole. It’s not. Read the whole thing (it’s short) and you’ll learn how in-state clinicians shamelessly use monopolistic licensing laws to protect themselves from competition — even at the cost of denying medical care to poor people.
Yesterday, Cato released a study where I advocate breaking up the state’s licensing monopolies and making state-issued licenses portable. Such a law would completely solve Remote Area Medical’s problem.
This Cato study by economist Shirley Svorny reveals how clinician licensing laws do more harm than good.
(Cross-posted at Cato@Liberty Politico’s Health Care Arena.)
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Taking Over Everything
“My critics say that I’m taking over every sector of the economy,” President Obama sighed to George Stephanopoulos during his Sunday media blitz.
Not every sector. Just
- health care
- energy
- local schools
- banks
- insurance companies
- automobile companies
- compensation at financial firms
- newspapers
- the internet
This president and his Ivy League advisers believe that they know how an economy should develop better than hundreds of millions of market participants spending their own money every day. That is what F. A. Hayek called the “fatal conceit,” the idea that smart people can design a real economy on the basis of their abstract ideas.
This is not quite socialism. In most of these cases, President Obama doesn’t propose to actually nationalize the means of production. (In the case of the automobile companies, he clearly did.) He just wants to use government money and government regulations to extend political control over all these sectors of the economy. And the more political control achieves, the more we can expect political favoritism, corruption, uneconomic decisions, and slower economic growth.
Filed under: Finance, Banking & Monetary Policy; Tax and Budget Policy
Eye of Neutrality, Toe of Frog
I won’t go on at too much length about FCC Chairman Julius Genachowski’s speech at Brookings announcing his intention to codify the principle of “net neutrality” in agency rules—not because I don’t have thoughts, but because I expect it would be hard to improve on my colleague Tim Lee’s definitive paper, and because there’s actually not a whole lot of novel substance in the speech.
The digest version is that the open Internet is awesome (true!) and so the FCC is going to impose a “nondiscrimination” obligation on telecom providers—though Genachowski makes sure to stress this won’t be an obstacle to letting the copyright cops sniff through your packets for potentially “unauthorized” music, or otherwise interfere with “reasonable” network management practices.
And what exactly does that mean?
Well, they’ll do their best to flesh out the definition of “reasonable,” but in general they’ll “evaluate alleged violations…on a case-by-case basis.” Insofar as any more rigid rule would probably be obsolete before the ink dried, I guess that’s somewhat reassuring, but it absolutely reeks of the sort of ad hoc “I know it when I see it” standard that leaves telecoms wondering whether some innovative practice will bring down the Wrath of Comms only after resources have been sunk into rolling it out. Apropos of which, this is the line from the talk that really jumped out at me:
This is not about protecting the Internet against imaginary dangers. We’re seeing the breaks and cracks emerge, and they threaten to change the Internet’s fundamental architecture of openness. [....] This is about preserving and maintaining something profoundly successful and ensuring that it’s not distorted or undermined. If we wait too long to preserve a free and open Internet, it will be too late.
To which I respond: Whaaaa? What we’ve actually seen are some scattered and mostly misguided attempts by certain ISPs to choke off certain kinds of traffic, thus far largely nipped in the bud by a combination of consumer backlash and FCC brandishing of existing powers. To the extent that packet “discrimination” involves digging into the content of user communications, it may well run up against existing privacy regulations that require explicit, affirmative user consent for such monitoring. In any event, I’m prepared to believe the situation could worsen. But pace Genachowski, it’s really pretty mysterious to me why you couldn’t start talking about the wisdom—and precise character—of some further regulatory response if and when it began to look like a free and open Internet were in serious danger.
Why Wall Street Loves Obama
Was it just me, or did there seem to be a whole lot of applause during Obama’s Wall Street speech? Remember this was a room full of Wall Street executives. The President even started by thanking the Wall Street execs for their “warm welcome.”
While of course, there was the obligatory slap on the wrist, that “we will not go back to the days of reckless behavior and unchecked excess,” but there was no mention that the bailouts were a thing of the past. Indeed, there is nothing in Obama’s financial plan that would prevent future bailouts, which is why I believe there was such applause. The message to the Goldman’s of the world, was, you better behave, but even if you don’t, you, and your debtholders will be bailed out.
The president also repeatedly called for “clear rules” and “transparency” – but where exactly in his plan is the clear line dividing who will or will not be bailed out? That’s the part Wall Street loves the most; they can all say we’ve “learned the lesson of Lehman: Wall Street firms cannot be allowed to fail.” At least that’s the lesson that Obama, Geithner and Bernanke have taken away. The truth is we’ve been down this road before with Fannie and Freddie. Politicians always called for them to do their part, and that their misdeeds would not be tolerated. Remember all the tough talk after the 2003 and 2004 accounting scandals at Freddie and Fannie? But still they got bailed out, and what new regulations were imposed were weak and ineffective.
As if the applause wasn’t enough, as Charles Gaspario points out, financial stocks rallied after the president’s speech. Clearly the markets don’t see his plan as bad for the financial industry.
It would seem the best investment Goldman has made in recent years was in its employees deciding to become the largest single corporate contributor to the Obama Presidential campaign. That’s an investment that continues to yield massive dividends.
Public Information and Public Choice
One of the high points of last week’s Gov 2.0 Summit was transparency champion Carl Malamud’s speech on the history of public access to government information — ending with a clarion call for government documents, data, and deliberation to be made more freely available online. The argument is a clear slam-dunk on simple grounds of fairness and democratic accountability. If we’re going to be bound by the decisions made by regulatory agencies and courts, surely at a bare minimum we’re all entitled to know what those decisions are and how they were arrived at. But as many of the participants at the conference stressed, it’s not enough for the data to be available — it’s important that it be free, and in a machine readable form. Here’s one example of why, involving the PACER system for court records:
The fees for bulk legal data are a significant barrier to free enterprise, but an insurmountable barrier for the public interest. Scholars, nonprofit groups, journalists, students, and just plain citizens wishing to analyze the functioning of our courts are shut out. Organizations such as the ACLU and EFF and scholars at law schools have long complained that research across all court filings in the federal judiciary is impossible, because an eight cent per page charge applied to tens of millions of pages makes it prohibitive to identify systematic discrimination, privacy violations, or other structural deficiencies in our courts.
If you’re thinking in terms of individual cases — even those involving hundreds or thousands of pages of documents — eight cents per page might not sound like a very serious barrier. If you’re trying to do a meta-analysis that looks for patterns and trends across the body of cases as a whole, not only is the formal fee going to be prohibitive in the aggregate, but even free access won’t be much help unless the documents are in a format that can be easily read and processed by computers, given the much higher cost of human CPU cycles. That goes double if you want to be able to look for relationships across multiple different types of documents and data sets.
Filed under: Government and Politics; Telecom, Internet & Information Policy
We’re Terribly Czarry
My former colleague Dave Weigel makes the excellent point that the supposed explosion of “Czars” under this administration is, in significant part, a function of journalists trying to make the same old “deputy undersecretary” sound sexier. Which is a shame, since it means that the pernicious and the benign get lumped together under the same sensationalist label — one whose public effect is to normalize the idea of unaccountable individuals within the executive branch given sweeping powers to solve specific problems, whether or not that picture is accurate.
I don’t know how much it can be attributed to the Czarmania, but I’m especially puzzled by the apparent emergence of legal scholar and prospective OIRA Adminstrator Cass Sunstein as the new hot bogeyman for conservatives. The Office of Information and Regulatory Affairs, which Sunstein’s been tapped to head, was created in 1980 and is precisely the sort of agency conservatives should love — tasked with catching inefficient and excessively burdensome regulations before they go into effect. It has, unsurprisingly, been most active under conservative presidents, and is one of the few offices where fans of limited government should want a vigorous, influential, and intellectually formidable director at the helm.
Now, Cass Sunstein is not somebody I agree with on a great number of things. On the day he’s tapped for a seat on the Supreme Court bench, I’ll break out in hives. But it’s awfully hard to imagine any realistic alternative — anyone Obama might actually have appointed — who would be better in the OIRA post from a limited government perspective. (I considered some of the specific concerns being raised about Sunstein back in the spring and found that they ranged from exaggerated to simply mendacious.) That’s one reason hardcore progressives have, in fact, been freaking out over his nomination. They must be pinching themselves now that it seems Glenn Beck is out to do their work for them. Say what you will about the tenets of “libertarian paternalism,” but at least it’s an ethos that would demand a far lighter touch on markets than the unreconstructed technocracy of your average regulator.
Picture Don Draper Stamping on a Human Face, Forever
Last week, a coalition of 10 privacy and consumer groups sent letters to Congress advocating legislation to regulate behavioral tracking and advertising, a phrase that actually describes a broad range of practices used by online marketers to monitor and profile Web users for the purpose of delivering targeted ads. While several friends at the Tech Liberation Front have already weighed in on the proposal in broad terms — in a nutshell: they don’t like it — I think it’s worth taking a look at some of the specific concerns raised and remedies proposed. Some of the former strike me as being more serious than the TLF folks allow, but many of the latter seem conspicuously ill-tailored to their ends.
First, while it’s certainly true that there are privacy advocates who seem incapable of grasping that not all rational people place an equally high premium on anonymity, it strikes me as unduly dismissive to suggest, as Berin Szoka does, that it’s inherently elitist or condescending to question whether most users are making informed choices about their privacy. If you’re a reasonably tech-savvy reader, you probably know something about conventional browser cookies, how they can be used by advertisers to create a trail of your travels across the Internet, and how you can limit this. But how much do you know about Flash cookies? Did you know about the old CSS hack I can use to infer the contents of your browser history even without tracking cookies? And that’s without getting really tricksy. If you knew all those things, congratulations, you’re an enormous geek too — but normal people don’t. And indeed, polls suggest that people generally hold a variety of false beliefs about common online commercial privacy practices. Proof, you might say, that people just don’t care that much about privacy or they’d be attending more scrupulously to Web privacy policies — except this turns out to impose a significant economic cost in itself.
The truth is, if we were dealing with a frictionless Coaseian market of fully-informed users, regulation would not be necessary, but it would not be especially harmful either, because users who currently allow themselves to be tracked would all gladly opt in. In the real world, though, behavioral economics suggests that defaults matter quite a lot: Making informed privacy choices can be costly, and while an opt-out regime will probably yield tracking of some who would prefer not to be under conditions of full information and frictionless choice, an opt-in regime will likely prevent tracking of folks who don’t object to tracking. And preventing that tracking also has real social costs, as Berin and Adam Thierer have taken pains to point out. In particular, it merits emphasis that behavioral advertising is regarded by many as providing a viable business model for online journalism, where contextual advertising tends not to work very well: There aren’t a lot of obvious products to tie in to an important investigative story about municipal corruption. Either way, though, the outcome is shaped by the default rule about the level of monitoring users are presumed to consent to. So which set of defaults ought we to prefer?
Filed under: Regulatory Studies; Telecom, Internet & Information Policy
The European Union Stops Banning Ugly Veggies
The European Union has helped create a continental European market and knock down protectionist barriers, which is good. But it also has created another opportunity for meddling bureaucrats to interfere with people’s lives.
Now consumer protests have led to at least one victory for liberty. Reports London’s Sun newspaper:
Now the European Commission has finally scrapped the 20-year ban on 26 types of fruit and veg including asparagus, celery and aubergines.
They ruled they can now be sold – as long as they are labelled as “intended for processing”.
Sainbury’s spokeswoman Lucy Maclennan said: “We are delighted to have played a part in winning the wonky veg war against these bonkers EU regulations.”
Tesco spokesman Adam Fisher said: “It’s not before time. We welcome this move.”
And last night it was predicted the change could see some prices fall by 40 PER CENT.
A Commission official said: “Times have changed – now household budgets are tighter and there is the problem of wasting food.”
One bad regulation down. Who knows how many to go?
Filed under: International Economics and Development; Regulatory Studies; Trade and Immigration
Injustice of State Subsidies
My colleague Chris Edwards made a good point yesterday in his post on the injustice of federal subsidies. The wrangling between the states to haul in the federal largesse is wasteful, and getting worse. But the underlying issue in the article Chris cites — a state using taxpayer money to lure a company away from another state — is another wasteful activity that is all too common.
Instead of competing with other states to attract industry by lowering taxes and reducing regulations, it seems most state governors prefer a politically opportunistic method I call “press release economics.” Here’s how it works:
A state “economic development” agency offers an out-of-state company (or even an out-of-country company) tax breaks and/or direct subsidies to locate some or all of its business operations in that state. Most likely, the business would have located there anyhow due to myriad factors including demographics, transportation logistics, and workforce capabilities. Sometimes several states will engage in a “bidding war” to get a business to set up shop within their borders. The governor of the “winning” state will then issue a press release citing the new jobs and capital his administration has just brought to the state. The locating company usually tells the press that the winning state’s package helped seal the deal. The company and the governor’s press staff then typically arrange a photo-op at an orchestrated ground-breaking ceremony for the new facilities.
If a state is already bleeding jobs, as is often the case in the current economy, such press releases and photo-ops can be a political coup. Moreover, the governor will have given up, or foregone, relatively little in tax revenue in comparison to, say, cutting the state corporate income tax. This also leaves the governor with more money to spend on various vote-buying programs. I’m picking on governors, but the legislature generally prefers the press-release economics route for similar reasons. And if you’re a governor, why risk the headache of engaging the legislature in a fight over reducing corporate taxes, unemployment taxes, or any other tax — including personal income taxes and sales taxes — that effect industry when you can take the easy win?
Am I too cynical? Actually, I had first-hand experience with this issue when I worked in state government. My suggestion that the governor eliminate or reduce the state’s high corporate income tax rate, and “pay for it” — at least in part — by getting rid of the state’s corporate welfare apparatus, was routinely ignored for the reasons I cited above. That one would be hard-pressed to find support among the economics profession for the state corporate welfare give-away game means little to the majority of policymakers and their minions who naturally favor short-term political gain over long-term economic gain. That other companies already located within the state are stuck paying the regular tax rate, and are thus put at a competitive disadvantage, is a secondary or non-concern as well.
Another issue that I won’t delve into here is the fact that these giveaways often blow up in a state’s face when the locating company ends up not producing the jobs it promised and/or it relocates to another state or country after pocketing the free taxpayer money. Anyhow, journalists should be on the lookout for more press-release economics schemes coming from the states as revenues remain tight and politicians become desperate to demonstrate they’re “doing something.” Journalists should examine a state’s tax structure when a taxpayer giveaway is announced to see if perhaps the governor is masking economic-unfriendly fiscal policies.
Note: South Carolina Gov. Mark Sanford proposed late last year to do exactly what I recommended: eliminate the state’s corporate income tax, offset in part by the elimination of corporate tax incentives. There is hope.
The Quiet War against School Choice
First, the Democrats in Washington for all intents and purposes killed the District of Columbia’s proven voucher program, but did it with Ninja-like stealth. The weapons: Nearly impossible reauthorization requirements, late Friday announcements, and politically expedient promises to keep kids currently attending good schools from being very publicly booted.
Now it’s Milwaukee’s turn. The new Democratic majority in Madison is on its way to cutting the value of individual vouchers while raising public school per-pupil expenditures, and even worse, is larding new regulations on private schools participating in the choice program. Perhaps the most ridiculous proposed reg: Requiring all participating private schools with student bodies that are more than 10 percent limited English proficient to provide a “bilingual-bicultural education program.” As if one of the major benefits of choice isn’t that parents can choose such programs if they think they are best for their kids, and can select something else if they don’t! But, of course, political decisions aren’t primarily about what parents want and kids need.
Thankfully, there is a resistance forming to the assault in Milwaukee, with choice advocates now refusing to remain quiet after naively doing so when they were told that fighting back would only make things worse. The choice-supporting national media is also speaking up. But one can’t help but fear that it may be too little, too late.
Prosperity in Washington
The current Attorney General, Eric Holder, left DC’s Covington and Burling to return to the Justice Department, where he held a senior post during the Clinton years. Holder’s mission is to supposedly ”rein in the free market excesses of the last eight years.” Bush’s people are done with their own crackdown and are now returning to DC’s big law firms to warn their client business firms about the coming crackdown by Holder’s prosecutors. This is sorta like the GOP legislators who are now trying to lodge complaints about Obama’s spending. Despite the rhetoric, both sides aggrandize federal power and then enrich themselves (pdf) while advising businesspeople on how to comply with myriad regulations from the alphabet agencies.
For related Cato work, go here and here.
The Economic Case for Health Care Reform
There’s an old Yiddish saying that, “If my bubba had wheels she’d be a trolley.” So goes the logic of the Obama administration in their paper released yesterday, “The Economic Case for Health Care Reform.” Their claim is that reducing health care costs would help the economy. Yes, if health care costs were reduced it would likely help the economy, though we should remember that the health care industry is part of the economy.
There is nothing in Obamacare, however, that will reduce costs. In fact, expanding coverage may cause costs to rise. One study by MIT’s Amy Finkelstein suggests that the prevalence of insurance itself has roughly doubled the cost of health care. So, if Obama succeeds in expanding insurance coverage, it’s very likely to increase the cost of care.
Take Massachusetts for example. Three years ago, Massachusetts governor Mitt Romney signed into law one of the most far-reaching experiments in health care reform since President Bill Clinton’s ill-fated attempt at national health care. Proponents promised the reforms would reduce health care costs, suggesting the price of individual insurance policies would be reduced by 25-40 percent. In reality, however, insurance premiums rose by 7.4 percent in 2007, 8-12 percent in 2008, and are expected to rise 9 percent this year. This is compared to a nationwide average increase of 5.7 percent over the same three years. Nationally, on average, health insurance for a family of four costs $12,700; in Massachusetts, coverage for the same family costs an average of $16,897.
In fact, since the bill was signed, health care spending in the state has increased by 23 percent. Thus, despite individual and employer mandates, the creation of an insurance connector and other measures that increase insurance regulations, Massachusetts has failed to bring costs down.
President Obama and Congressional leaders have endorsed expanding coverage in similar ways to Massachusetts. The proposals would undoubtedly make it easier for some people to get coverage, but would also raise insurance costs for the young and healthy, making it more likely they would go without coverage. This leaves two choices: revert to the individual mandate (President Obama opposed the mandate as a candidate) or increase subsidies to try to cut costs to young and healthy individuals, thereby adding to the already substantial cost of the proposed plans.
Ultimately, controlling costs requires someone to say “no,” whether the government (as in single-payer systems with global budgets), insurers (managed care) or health care consumers themselves (by desire or ability to pay). In reality, any health care reform will have to confront the fact that the biggest single reason costs keep rising is that the American people keep buying more and more health care.
Simultaneously Destroying and Subsidizing the Auto Industry
The Obama Administration has announced new fuel-economy regulations and emissions rules that will boost the cost of new car by at least $1300. This is probably another nail in the coffin of the American automobile industry, but Jerry Taylor is the guy to provide thoughtful analysis. When I read about the new White House scheme, the first thing that came to my mind was this extremely clever video (yes, I am envious that my videos are not this creative) about the type of car we will all be driving if politicians continue to run amok:
Sarbanes-Oxley under Attack… from the Supreme Court!
Today the Supreme Court agreed to review a case brought by our friends at the Competitive Enterprise Institute that challenges the constitutionality of the Public Company Accounting Oversight Board (PCAOB, pronounced “peek-a-boo”). The constitutional problem with the PCAOB — there are many policy problems — is that its officers are appointed in an unconstitutional manner.
Under the Appointments Clause of Article II, section 2, the president has the exclusive power to appoint and remove government officials. The members of the PCAOB – which enforces the massive regulatory scheme Sarbanes-Oxley imposes on public companies – are appointed by the SEC, however, which then has limited supervisory/removal power. While this structural defect may seem like a minor technicality, what it means is that the awesome power to set accounting standards — not least Sarbox section 404, which has cost the economy over a trillion dollars — impose taxes, and levy criminal and civil penalties is vested in a bunch of unaccountable bureaucrats. Entities with similar authority, even those having a modicum of political independence, such as the IRS Commissioner and Federal Reserve governors, are all vetted by the president and the Senate.
The court below (the D.C. Circuit), however, held that PCAOB members are inferior officers and, as such, Congress “may limit and restrict the power of removal as it deems best for the public interest.” But this gets the Constitution backwards; Congress isn’t allowed to insulate important decisionmakers from political accountability. As CEI’s press release says:
If the President can pick and remove the PCAOB members, as the Appointments Clause requires, he will be on the hook for their policy failures, and thus have an interest in making them develop sound policies that protect investors and don’t stifle economic growth. He won’t be able to blame the red tape on an unaccountable agency whose officials he doesn’t select or control.
The Court will hear the case, Free Enterprise Fund v. PCAOB — which I previously blogged about here – in late fall.
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