The Ethos of Universal Coverage
Associated Press photojournalist Noah Berger captured this thousand-word image near the Occupy Oakland demonstrations last month.
(AP Photo/Noah Berger)
Many Cato@Liberty readers will get it immediately. They can stop reading now.
For everyone else, this image perfectly illustrates the ethos of what I call the Church of Universal Coverage.
Like everyone who supports a government guarantee of access to medical care, the genius who left this graffiti on Kaiser Permanente’s offices probably thought he was signaling how important other human beings are to him. He wants them to get health care after all. He was willing to expend resources to transmit that signal: a few dollars for a can of spray paint (assuming he didn’t steal it) plus his time. He probably even felt good about himself afterward.
Unfortunately, the money and time this genius spent vandalizing other people’s property are resources that could have gone toward, say, buying him health insurance. Or providing a flu shot to a senior citizen. This genius has also forced Kaiser Permanente to divert resources away from healing the sick. Kaiser now has to spend money on a pressure washer and whatever else one uses to remove graffiti from those surfaces (e.g., water, labor).
The broader Church of Universal Coverage spends resources campaigning for a government guarantee of access to medical care. Those resources likewise could have been used to purchase medical care for, say, the poor. The Church’s efforts impel opponents of such a guarantee to spend resources fighting it. For the most part, though, they encourage interest groups to expend resources to bend that guarantee toward their own selfish ends. The taxes required to effectuate that (warped) guarantee reduce economic productivity both among those whose taxes enable, and those who receive, the resulting government transfers.
In the end, that very government guarantee ends up leaving people with less purchasing power and undermining the market’s ability to discover cost-saving innovations that bring better health care within the reach of the needy. That’s to say nothing of the rights that the Church of Universal Coverage tramples along the way: yours, mine, Kaiser Permanente’s, the Catholic Church’s…
I see no moral distinction between the Church of Universal Coverage and this genius. Both spend time and money to undermine other people’s rights as well as their own stated goal of “health care for everybody.”
Of course, it is always possible that, as with their foot soldier in Oakland, the Church’s efforts are as much about making a statement and feeling better about themselves as anything else.
Bailout Coming for the Postal Service?
The U.S. Postal Service is in financial trouble. Undermined by advances in electronic communication, weighed down by excessive labor costs and operationally straitjacketed by Congress, the government’s mail monopoly is running on fumes and faces large unfunded liabilities. Socialism apparently has its limits.
While the Europeans continue to shift away from government-run postal monopolies toward market liberalization, policymakers in the United States still have their heads stuck in the twentieth century. That means looking for an easy way out, which in Washington usually means a bailout.
Self-interested parties – including the postal unions, mailers, and postal management – have coalesced around the notion that the U.S. Treasury owes the USPS somewhere around $50-$75 billion. (Of course, “U.S. Treasury” is just another word for “taxpayers.”) Policymakers with responsibility for overseeing the USPS have introduced legislation that would require the Treasury to credit it with the money.
Explaining the background and validity of this claim is very complicated. Fortunately, Michael Schuyler, a seasoned expert on the USPS for the Institute for Research on the Economics of Taxation, has produced such a paper.
At issue is whether the USPS “unfairly” overpaid on pension obligations for particular employees under the long defunct Civil Service Retirement System. The USPS’s inspector-general has concluded that the USPS is owed the money. The Office of Personnel Management, which administers the pensions of federal government employees, and its inspector-general have concluded otherwise. Again, it’s complicated and Schuyler’s paper should be read to understand the ins and outs.
Therefore, I’ll simply conclude with Schuyler’s take on what the transfer would mean for taxpayers:
Given the frighteningly large federal deficit and the mushrooming federal debt, a $50-$75 billion credit to the Postal Service and debit to the U.S. Treasury will be a difficult sell, politically and economically. Although some advocates of a $50-$70 billion transfer assert it would be “an internal transfer of surplus pension funds” that would allow the Postal Service to fund promised retiree health benefits “at no cost to taxpayers,” the reality is that the transfer would shift more obligations to Treasury, which would increase the already heavy burden on taxpayers, who ultimately pay Treasury’s bills. (The Congressional Budget Office (CBO) prepares the official cost estimates for bills before Congress. Judging by how it has scored some earlier postal bills, CBO would undoubtedly report that the transfer would increase the federal budget deficit.) For those attempting to reduce the federal deficit, the transfer would be a $50-$70 billion setback.
Sounds like a bailout to me.
See this Cato essay for more on the U.S. Postal Service and why policymakers should be moving toward privatization.
Chutzpah in the Bailout Nation
Bloomberg reporter Andrew Frye plays it deadpan here. I don’t think I need to comment, either, except to note that the taxpayers’ commitment to AIG peaked at $182 billion:
American International Group Inc.’s mortgage insurer does more business in Republican-leaning states as it signs up more reliable customers than those in “more liberal” areas, Chief Executive Officer Robert Benmosche said.
“All of the states where we’re a leader, where we’re the No. 1 insurer, are red states, all of the states where we’re at the bottom are blue states,” Benmosche, 66, said yesterday at a conference in Washington. “Part of what we found out is that our model is about culture and it’s about the attitude in the public. And what we find is where there’s more of a tendency for people to be more liberal, more that the government is responsible for what happens to me.”
Benmosche oversees an insurer propped up by more than $40 billion in government capital while competing mortgage guarantors operate without U.S. Treasury Department assistance.
More on chutzpah in the Bailout Nation here and here.
Postal Service Announces $8.5 Billion Loss
The U.S. Postal service has announced a net loss of $8.5 billion for fiscal 2010. Since 2006, the USPS has lost $20 billion, and the organization is close to maxing out its $15 billion line of credit with the U.S. Treasury. Although the USPS has achieved some cost savings, they haven’t been enough to overcome a large drop in revenue due to the recession and the greater use of electronic alternatives by the public.
The USPS is required to make substantial annual payments to pre-fund retiree health care benefits. Last year, Congress allowed the USPS to postpone $4 billion of its fiscal 2009 into the future. However, Congress did not provide similar relief on this year’s required payment of $5.5 billion.
Critics of the retiree health care pre-funding requirement argue that no other federal agencies or private companies face such obligations. The argument is largely irrelevant for two reasons. First, the federal government’s financial practices are nothing to emulate. Second, very few private sector workers even receive retiree health care benefits.
In 2008, only 17 percent of private sector workers were employed at a business that offered health benefits to Medicare-eligible retirees, down from 28 percent in 1997. The actual number of private sector workers receiving these benefits is even lower as not all employees employed at the 17 percent of businesses that offers retiree health benefits are eligible to receive them.
The retiree health care benefit pre-funding requirement has become a rallying cry for the postal unions, as any threat to USPS solvency is a threat to the excessive compensation and benefits they’ve been able to extract from the postal service for their membership over the years.
Policymakers should properly view the retiree health care benefit as a symbol of postal labor excess, which continues to weigh the USPS down like an anchor. Therefore, they should avoid allowing the USPS to further postpone these payments into the future, which could lead to a taxpayer bailout. Instead, policymakers should recognize that the USPS’s financial woes require bolder action: privatization.
The GM ‘Turnaround’ in Bastiat’s View
GM’s long-rumored initial public stock offering will take place Thursday and self-anointed savior of the U.S. auto industry, Steven Rattner, is pretty bullish about the prospect of investors turning out in droves.
I’ve been saying for a while that I thought the government’s exposure [euphemism for taxpayer losses] in the auto bailout was in the $10-billion to $20-billion range.
But since investor interest has pushed the initial price up from the $26-to-$29 per share range to the $32-$33 range, Rattner now believes:
[T]his exposure is in the single-digit billion range, and arguably potentially better.
I won’t argue with Rattner’s numbers. After all, they affirm one of my many criticisms of the bailout: that taxpayers would never recoup the value of their “investment.” My bigger problem is with Rattner’s cavalier disregard for the other enduring—and arguably more significant—costs of the auto bailouts.
Rattner is like the foil in Frederic Bastiat’s excellent, but not-famous-enough, 1850 parable, That Which is Seen and That Which is Unseen. Rattner touts what is seen, namely that GM and Chrysler still exist. And they exist because of his and his colleagues’ commitment to a plan to ensure their survival, along with the hundreds of thousands (if not millions, as some “estimates” had it) of jobs that were imperiled had those companies vanished. (For starters, I very much question even what is seen here. I am skeptical of the counterfactual that GM and Chrysler would have disappeared and that there would have been significantly more job loss in the industry than there actually was during the recession and restructuring. But I’ll grant his view of what is seen because, frankly, the specifics are irrelevant in the final analysis).
End ED — From the Left!
It’s no secret that expelling the U.S. Department of Education is something that a lot of libertarians, and conservatives who haven’t lost their way, would love to do. What’s not nearly so well known is that there are also people on the left who dislike ED. Now, they don’t dislike it because it and the programs it administers clearly exist in contravention of the Constitution, or because its massive dollar-redistribution programs have done no discernable good. They dislike it because, especially since the advent of No Child Left Behind, it strong-arms schools into doing things left-wing educators often disagree with or resent, like pushing phonics over whole language, or imposing standardized testing. Many also truly believe in local control of schools, though often with power consolidated in the hands of teachers.
Case in point is a guest blog post over at the webpage of the Washington Post’s Valerie Strauss. The entry is by George Wood, principal of Federal Hocking High School in Ohio and executive director of the Forum for Education and Democracy. He writes:
Everybody dislikes bureaucracies, but for different reasons. The “right” complains they are unresponsive, full of “feather-bedders,” and a waste of taxpayer money. The “left” complains they are unresponsive, full of people who are too busy pushing paper to see the real work, and too intrusive into local, democratic decision-making. Maybe we should unite all this new energy for making government more responsive and efficient around the idea of eliminating a bureaucracy that was probably a bad idea in the first place.
Remember that the Department of Education was a payoff by President Jimmy Carter to teacher unions for their support. Before that, education was part of the Department of Health, Education and Welfare.
That’s where I propose returning it. Here are several reasons why:
First, the current structure of the national Department of Education gives it inordinate control over local schools. The federal government provides only about 8% of education funding. But through through NCLB, Race to the Top, and innovation grants, they are driving about 100% of the agenda. Clearly this is a case of a tail wagging a very big dog.
Second, by separating education from health and welfare, we have separated departments that should be working very closely together. We all know, even if some folks are loath to admit it, that in order for a child to take full advantage of educational opportunities he or she needs to come to school healthy, with a full stomach, and from a safe place to live.
But the federal initiatives around education seldom take such a holistic approach; instead, competing departments engage in bureaucratic turf wars that, while fun within the Beltway, are tragic for children in our neighborhoods.
Third, whenever you create a large bureaucracy, it will find something to do, even if that something is less than helpful. After years of an “activist” DOE, we do not see student achievement improving or school innovation taking hold widely. We have lived through Reading First, What Works, and an alphabet soup of changing programs with little to show for it.
In fact, DOE has often been one of the more ideological departments, engaging in the battles such as phonics vs. whole language. Who needs it?
Who needs it, indeed!
As I have touched upon repeatedly since last week’s election, now is the time to launch a serious offensive against the U.S. Department of Education. I have largely concluded that because of the wave of generally conservative and libertarian legislators heading toward Washington, as well as the powerful tea-party spirit powering the tide. But this is a battle I have always thought could be fought with a temporary alliance of the libertarian right and educators of the progressive left who truly despise top-down, one-size-fits-all, dictates from Washington. There are big sticking points, of course — for instance, many progressives love federal money “for the poor” — but this morning, I have a little greater hope that an alliance can be forged.
Enough Community College PDA
Yesterday, President Obama hosted the White House Summit on Community Colleges, and in-your-face love was in the air. President Obama and Second Lady Jill Biden, a community college professor, couldn’t keep their hands off their signficant other, lavishing all sorts of praise on their favorite little schools.
Swooned Dr. Biden about the dreamy things community colleges do for their students:
They are students like the mother who shared her experience with us on the White House website of working towards a degree while raising three children and straddling financial challenges. Now employed and the holder of a Bachelor’s and a Master’s degree, she wrote, “Community colleges didn’t just change my life, they gave me my life.”
Community colleges do that every day.
Ick!
The President, too, couldn’t hide his affection:
So I think it’s clear why I asked Jill to travel the country visiting community colleges -– because, as she knows personally, these colleges are the unsung heroes of America’s education system. They may not get the credit they deserve. They may not get the same resources as other schools. But they provide a gateway to millions of Americans to good jobs and a better life.
Like the guy with the locker next to Mr. and Mrs. Lovebird, all I can say is “oh, come on!”
Community colleges might be a good option for some people, but they are hardly paragons of educational success. Quite the opposite: According to the U.S. Department of Education, they have the worst graduation rates of any two-year sector of higher education. Only around 22 percent of public, two-year college students graduate within three years, versus roughly 49 percent of private, not-for-profit attendees and about 59 percent of private, for-profit students.
Wait! What’s that? Private, for-profit institutions outperform super-cute community colleges…by a lot? But they’re the ugliest, meanest, least popular kids in school! Nobody likes them!
Oh, I know what’s going on here! For-profit schools cost a lot more than community colleges, right? That’s why they’re so disliked.
That’s true if you look at tuition prices. But community colleges get big subsidies from government, especially state and local taxpayers. So they might actually cost a lot, it’s just that they sneak the money out of your back pocket and then congratulate themselves for charging students so little.
When you look at government expenditures per-pupil, including aid to schools and students, it becomes clear that community colleges are, in fact, just as mean and greedy as for-profits. Indeed, former Clinton administration economist Robert Shapiro has calculated that they are actually more costly to taxpayers than for-profit schools (see table 24). According to his calculations, two-year public schools cost taxpayers $6,919 per student, while private, for-profits cost just $3,628.
No wonder the summit turned my stomach! At the same time the administration and its allies in Congress are bashing for-profit schools, the President has a love fest with community colleges that are generally much worse. Unfortunately, it leaves you concluding that for-profits could walk on water and it wouldn’t matter: As long as they’re honest about trying to make a buck, they’ll be beaten up in the parking lot and never invited to any of the cool summits.
Federal Employees and College Costs
For a long time now I’ve been writing about how student aid fuels explosive college costs, while Chris Edwards and Tad DeHaven have been highlighting the ever-cushier compensation of federal workers. Well, I’m pleased to have finally discovered a direct linkage between these topics: A new U.S. Office of Personnel Management report on student loan repayment programs for federal workers.
According to the report, in calendar year 2009 “36 Federal agencies provided 8,454 employees with a total of more than $61.8 million in student loan repayment benefits.”
Now, 8,454 employees is a small chunk of the entire, roughly 2-million-person federal workforce. Still, $61.8 million isn’t anything to sniff at, and loan forgiveness is one more perk that needs to be considered when thinking of federal worker compensation. And then there’s the trajectory of forgiveness: According to the report, spending on student-loan forgiveness by federal agencies in 2009 was “more than 19 times” bigger than it was in 2002. Were things to continue at that rate, in 2017 the cost would be almost $1.2 billion, and then you’d almost be talking real money!
The important point from a student-aid perspective is to emphasize something that must never be forgotten: While many analyses of student aid will only count grants – because they don’t ever have to be paid back — as “aid,” the reality is that that hugely under counts the true cost of federal aid to taxpayers. In addition to grants, taxpayers fund all federal student loans (and eat them when they aren’t repaid), help finance work-study, and pay for federal expenses that people taking federal education tax credits don’t pay for. So when you look just at federal grants, the bill for taxpayers in the 2008-09 school year was about $24.8 billion (see table 1). Add in loans, credits, and work-study, however, and the bill suddenly balloons to nearly $116.8 billion.
“But wait,” will say the only-grants-are-aid crowd, “isn’t a lot of that $116.8 billion loan money that will be paid back?” Yup — it’s just that at least $61.8 million of that repayment is coming, once again, from beleaguered federal taxpayers. And that, to be sure, is just the tip of the federal loan-forgiveness iceberg.
Congress Begins Conference on Financial Regulation
Today begins the televised political theatre that Barney Frank has been waiting months for: the first public meeting of the House and Senate conferees on the two financial regulation bills. While there are a handful of important differences between the House and Senate bills, these differences are overshadowed by what the bills have in common. The most important, and tragic, commonality is that both bills ignore the real causes of the financial crisis and focus on convenient political targets.
As our financial system was brought to its knees by an exploding housing bubble, fueled by government mandates and distortions, one would think, just maybe, that Congress would roll back these distortions. Despite their role in contributing to the crisis and the size of their bailout, however, neither bill barely mentions Fannie Mae and Freddie Mac. Except, of course, to continue their favored and privileged status, such as their exemption from a proposed new “consumer protection” agency. What we really need is a new “taxpayer protection” agency.
Nor will either bill change the government’s meddling in what is probably the most important price in the economy: the interest rate. Given the overwhelming evidence that loose monetary policy was a direct cause of the housing bubble, one might expect Congress to spend time and effort preventing the Fed from creating another bubble. Not only does Congress ignore the issue, the Senate won’t even allow GAO to look at the Fed’s conduct of monetary policy.
Instead of spending the next few weeks gazing into the camera, Congress should stop and gaze into the mirror. This was a crisis conceived and born in Washington DC. The Rayburn building serving as the proverbial back-seat of the housing bubble.
Robin Hood and the Tea Party Haters
What is it with modern American liberals and taxes? Apparently they don’t just see taxes as a necessary evil, they actually like ‘em; they think, as Gail Collins puts it in the New York Times, that in a better world “little kids would dream of growing up to be really big taxpayers.” But you really see liberals’ taxophilia coming out when you read the reviews of the new movie Robin Hood, starring Russell Crowe. If liberals don’t love taxes, they sure do hate tax protesters.
Carlo Rotella, director of American Studies at Boston College, writes in the Boston Globe that this Robin Hood is “A big angry baby [who] fights back against taxes” and that the movie is “hamstrung by a shrill political agenda — endless fake-populist harping on the evils of taxation.” You wonder what Professor Rotella teaches his students about America, a country whose fundamental ideology has been described as “antistatism, laissez-faire, individualism, populism, and egalitarianism.”
At the Village Voice, Karina Longworth dismisses the movie as “a rousing love letter to the Tea Party movement” in which “Instead of robbing from the rich to give to the poor, this Robin Hood preaches about ‘liberty’ and the rights of the individual as he wanders a countryside populated chiefly by Englishpersons bled dry by government greed.” Gotta love those scare quotes around “liberty.” Uptown at the New York Times, A. O. Scott is sadly disappointed that “this Robin is no socialist bandit practicing freelance wealth redistribution, but rather a manly libertarian rebel striking out against high taxes and a big government scheme to trample the ancient liberties of property owners and provincial nobles. Don’t tread on him!” The movie, she laments, is “one big medieval tea party.”
Moving on down the East Coast establishment, again with the Tea Party hatin’ in Michael O’Sullivan’s Washington Post review:
Ridley Scott’s “Robin Hood” is less about a band of merry men than a whole country of really angry ones. At times, it feels like a political attack ad paid for by the tea party movement, circa 1199. Set in an England that has been bankrupted by years of war in the Middle East — in this case, the Crusades — it’s the story of a people who are being taxed to death by a corrupt government, under an upstart ruler who’s running the country into the ground.
Man, these liberals really don’t like Tea Parties, complaints about lost liberty, and Hollywood movies that don’t toe the ideological line. As Cathy Young notes at Reason:
Whatever one may think of Scott’s newest incarnation of the Robin Hood legend, it is more than a little troubling to see alleged liberals speak of liberty and individual rights in a tone of sarcastic dismissal. This is especially ironic since the Robin Hood of myth and folklore probably has much more in common with the “libertarian rebel” played by Russell Crowe than with the medieval socialist of the “rob from the rich, give to the poor” cliché. At heart, the noble-outlaw legend that has captured the human imagination for centuries is about freedom, not wealth redistribution….The Sheriff of Nottingham is Robin’s chief opponent; at the time, it was the sheriffs’ role as tax collectors in particular that made them objects of loathing by peasants and commoners. [In other books and movies] Robin Hood is also frequently shown helping men who face barbaric punishments for hunting in the royal forests, a pursuit permitted to nobles and strictly forbidden to the lower classes in medieval England; in other words, he is opposing privilege bestowed by political power, not earned wealth.
The reviewers are indeed tapping into a real theme of this Robin Hood, which is a prequel to the usual Robin Hood story; it imagines Robin’s life before he went into the forest. Marian tells the sheriff, ”You have stripped our wealth to pay for foreign adventures.” (A version of the script can be found on Google Books and at Amazon, where Marian is called Marion.) Robin tells the king the people want a charter to guarantee that every man be “safe from eviction without cause or prison without charge” and free “to work, eat, and live merry as he may on the sweat of his own brow.” The evil King John’s man Godfrey promises to “have merchants and landowners fill your coffers or their coffins….Loyalty means paying your share in the defense of the realm.” And Robin Hood tells the king, in the spirit of Braveheart‘s William Wallace, “What we ask for is liberty, by law.”
Dangerous sentiments indeed. You can see what horrifies the liberal reviewers. If this sort of talk catches on, we might become a country based on antistatism, laissez-faire, individualism, populism, and egalitarianism and governed by a Constitution.
School Vouchers vs. Tax Credits
NRO editor Robert VerBruggen has weighed in a couple of times this week on the relative merits of school vouchers and education tax credits, raising interesting and important issues.
In response to my earlier post today about an education tax credit case now before the U.S. Supreme Court, VerBruggen writes:
If the Supreme Court buys this logic — which I suppose is sound on its face — it could lead to some very interesting programs. Any time it’s illegal for a government to fund something directly, it could simply make a dollar-for-dollar “tax credit” program for it, allowing sympathetic taxpayers to technically “donate” — but actually just redirect the taxes they’d otherwise have to pay — to the cause.
This is actually an argument presented by critics of the program in their brief asking the Supreme Court not to hear the appeal that it… just decided to hear. The fact that this argument is fallacious is no doubt one reason that the Supreme Court decided to reject critics’ request. Here’s where it goes wrong:
Under a constitutional tax credit program such as Arizona’s, the state has no power to pressure/encourage taxpayers to do anything that the state could not do directly. Taxpayers can choose to give no money to religious charities, or to give all their money to them. The state is unable to affect their decisions in any way.
As Ilya Shapiro and I pointed out in Cato’s amicus brief in this case, this is identical to the law pertaining to federal charitable tax deductions. Religious charities get more tax deductible donations than any other kind of entity, and the Supreme Court has repeatedly upheld their constitutionality because the decisions regarding such donations are left entirely to the unfettered choices of private citizens.
The Case for Auditing the Fed
Recently, the Federal Reserve has significantly altered the procedures and goals that it had followed for decades. Rep. Ron Paul (R-TX) has introduced a bill calling for an audit of the Fed.
Remarkably, there is significant opposition to such oversight, and the political prospects for undertaking such an audit are relatively bleak. In a new paper, Cato scholar Arnold Kling examines the processes and outcomes on which an audit should focus, and looks at opposition to the audit:
We should document why the Fed took each step, what the expected results were, and whether those results were achieved. …The profit or loss of the Fed’s investments would provide a very helpful indicator of whether the Fed’s actions served the economy as a whole or merely transferred wealth from ordinary taxpayers to bank shareholders.
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