The Pelosi Bill’s High Water Mark
Democrats are having difficulty corralling 218 votes for the Pelosi bill because Americans do not want government to be as big and as powerful as the House leadership does. Pro-life Democrats do not want a government so big that it can force taxpayers to fund abortions. Pro-choice Democrats do not want a government so big that it uses subsidies to restrict access to abortion coverage. Other Democrats don’t want a government so big that it turns the United States into a welfare magnet.
The American people don’t want the Democrats’ approach to health care generally. The more time the public has to digest ObamaCare, the more they dislike it:
And the Pelosi bill is the most expensive and extreme version of ObamaCare. Opposition will climb higher when the public learns the bill costs some $1.5 trillion more than Democrats claim.
Even a majority vote would not necessarily indicate majority support for the Pelosi bill. Rep. Jim Cooper (TN) and other Democrats are voting aye only because they want to keep the process moving – i.e., because this isn’t the vote that counts.
Win or lose, tonight’s vote will be the high water mark for the Pelosi bill.
(Cross-posted at Politico’s Health Care Arena.)
Filed under: General; Health, Welfare & Entitlements
Yes, Mr. President, a Free Market Can Fix Health Care
At his White House forum on health reform back in March, President Barack Obama offered:
If there is a way of getting this done where we’re driving down costs and people are getting health insurance at an affordable rate, and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I’d be happy to do it that way.
In a new Cato study titled, “Yes, Mr. President, a Free Market Can Fix Health Care,” I take up the president’s challenge and explain that markets are indeed the only way to achieve those goals. I also explain how Congress can remove the impediments that currently prevent markets from doing so:
- Give Medicare enrollees a voucher (adjusted for their means and health risk) and let them purchase any health plan on the market,
- Reform the tax treatment of health care with “large” health savings accounts, which would give workers a $9.7 trillion tax cut (without increasing the deficit) and free them to purchase secure coverage that meets their needs,
- Free consumers and employers to purchase health insurance across state lines (i.e., licensed by other states), which could cover up to one third of the uninsured,
- Make state-issued clinician licenses portable, which would increase access to care and competition among health plans, and
- Block-grant Medicaid and the State Children’s Health Insurance Program, just as Congress did with welfare.
Unlike the president’s health care proposals (which, as Victor Fuchs explains, would merely shift costs), these reforms would reduce costs, expand coverage, and improve health care quality – without new taxes, government subsidies, or deficit spending.
Would a free market be nirvana? Of course not. But fewer Americans would fall through the cracks than under the status quo or the government takeover advancing through Congress.
There is a better way.
(Cross-posted at Politico’s Health Care Arena.)
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Australian Trade Scholars Offer Perfect Cure for ‘Protectionitis’
Earlier this month, the Lowy Institute in Australia published a paper offering some very sound and, obviously, very timely advice about how to contain, and ultimately, eradicate protectionism. The paper is being circulated among the G20 delegations, who will undoubtedly discuss the topic of trade and protectionism in Pittsburgh next week. So for those of you interested in getting a sense of what will probably be the single best idea on (or at least near) the table at the G20 summit, I highly recommend this 20-pager.
The solution proposed by the authors boils down to a two-word phrase: “Domestic Transparency.” What is meant by that phrase is that “defeating protectionism begins at home.” And by that slogan, the authors mean that the key to reducing, and ultimately eliminating, protectionism is not external pressure from other countries, mercantilist trade negotiations, or filing trade complaints at the WTO, but rather greater awareness at home of the real costs of protectionism. I couldn’t agree more. (In fact better transparency is one of our recommendations in this paper).
When governments impose trade barriers at the behest of special interests, they usually justify that protectionism with diversionary rhetoric concerning some vague conception of the “national interest,” and the imperative of shielding domestic business from unfair competition and other vagaries of the globalized economy. That the protectionist measure itself—the product of special interests diverting productive resources from economic to political ends—forces involuntary and usually unknowing subsidization of those protection-seekers by the same citizens at large who are expected to buy into the national interest canard is a detail about which most people remain in the dark.
Filed under: International Economics and Development; Trade and Immigration
Don’t Leave Room for Desert
Duncan “Atrios” Black sums up and amplifies on a much longer post by Salon’s Glenn Greenwald as follows:
Just adding on to Glenn’s post, much opposition to the government actually doing anything decent for people comes from the idea that the government is going to take my tax money and give it to people who don’t deserve it. The problem is that for decades the Dems have tried to get around this by making sure policies and programs were relatively small and incremental, everything targeted and means tested. But doing that effectively confirmed the critics’ point. The big (giant) government programs which are most popular are the ones which are universal – Social Security and Medicare – and other less controversial government programs, like highway spending, are also perceived to benefit people across the board.
There’s a couple of interesting things going on here that seem worth unpacking. The first is actually a legitimate point about how valid arguments against various kinds of redistribution tend, with unsettling ease, to shade into unsavory demonization of the folks on the receiving end of the transfer. Suppose someone suggests that the government should, either by regulation or direct subsidy, ensure that the indigent are provided with health care or that insolvent homeowners are protected from foreclosure. Now, there are a few types of objections people might raise. There’s an argument from efficiency and incentives: To the extent that the risks associated with individual financial or lifestyle choices are borne by the public, there’s a familiar problem of “moral hazard” reducing incentives for prudence. And there’s an argument from property and autonomy, to the effect that even if people ought to help others in need, each person is entitled to decide whether and how to do so without compulsion. Neither of these implies any blanket judgment about the folks who find themselves in need of aid. The first argument does suggest that redistributive policy will make it rational for people to take more risks at the margin, but it does not follow from either that people who are having trouble meeting their mortgage payments, or people who get sick and cannot afford care, are bad or foolish or irresponsible or otherwise deserving of their fate. And it is a good thing for these arguments that no such conclusion follows, because it’s clearly not true.
Filed under: Government and Politics; Health, Welfare & Entitlements; Political Philosophy
Have Mexican Dishwashers Brought California to Its Knees?
An article published this week by National Review magazine blames the many problems of California on—take a guess—high taxes, over-regulation of business, runaway state spending, an expansive welfare state? Try none of the above. The article, by Alex Alexiev of the Hudson Institute, puts the blame on the backs of low-skilled, illegal immigrants from Mexico and the federal government for not keeping them out.
Titled “Catching Up to Mexico: Illegal immigration is depleting California’s human capital and ravaging its economy,” the article endorses high-skilled immigration to the state while rejecting the influx of “the poorly educated, the unskilled, and the illiterate” immigrants that enter illegally from Mexico and elsewhere in Latin America.
Before swallowing the article’s thesis, consider two thoughts:
One, if low-skilled, illegal immigration is the single greatest cause of California’s woes, how does the author explain the relative success of Texas? As a survey in the July 11 issue of The Economist magazine explained, smaller-government Texas has avoided many of the problems of California while outperforming most of the rest of the country in job creation and economic growth. And Texas has managed to do this with an illegal immigrant population that rivals California’s as a share of its population.
Two, low-skilled immigrants actually enhance the human capital of native-born Americans by allowing us to move up the occupational ladder to jobs that are more productive and better paying. In a new study from the Cato Institute, titled “Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” this phenomenon is called the “occupational mix effect” and it translates into tens of billions of dollars of benefits to U.S. households.
Our new study, authored by economists Peter Dixon and Maureen Rimmer, found that legalization of low-skilled immigration would boost the incomes of American households by $180 billion, while further restricting such immigration would reduce the incomes of U.S. families by $80 billion.
That is a quarter of a trillion dollar difference between following the policy advice of National Review and that of the Cato Institute. Last time I checked, that is still real money, even in Washington.
Canada and Jefferson’s Natural Progress
Thomas Jefferson famously opined that “the natural progress of things is for liberty to yield and government to gain ground,” but Canada has bucked that gloomy forecast in recent years. As my co-authored op-ed in the Washington Post yesterday showed, Canada has:
- Cut government spending
- Cut government debt
- Balanced its budget consistently
- Pre-funded its version of Social Security to make it solvent
- Decentralized power within its federation of provinces
- Cut taxes, particularly corporate taxes
Meanwhile, the United States has headed in the opposite direction in each of these policy areas. Consider further that Canada has other economic policy advantages over the increasingly uncompetitive welfare state to its south:
- Canada has more liberal immigration policies for highly skilled workers than does the United States, which has added greatly to the entrepreneurial vibrancy of Canada’s economy.
- Canada has long had a stable, efficient, and competitive financial sector, which avoided the government-assisted meltdown that occurred in the United States.
- Canada has a home ownership rate as high as the United States, yet it does not have a distortionary mortgage interest tax deduction.
- Canada recently implemented large Roth IRA style savings accounts, which are much more flexible than the U.S. version.
- The Canadian federal capital gains tax rate is 14.5 percent, which compares to the current 15 percent in the United States and 20 percent under Obama’s tax plan.
- Canada has no federal ministry or department of education. The K-12 schools are the sole responsibility of the provinces, yet Canadian kids generally do better than American kids on international tests.
- In recent years, Canada has probably been more supportive of NAFTA, and free trade in general, than its main trading partner, the United States.
Major pro-market reforms are possible in advanced welfare states — Jefferson can be proven wrong, as Canada illustrates. U.S policymakers can prove Jefferson wrong as well. They can start by cutting spending, decentralizing power out of Washington, and making pro-growth tax reforms in response to globalization, as Canada has, rather than imposing self-defeating “Buy America” provisions and making childish rants about “corporations moving jobs offshore.”
Filed under: International Economics and Development; Tax and Budget Policy
How the Welfare State Destroys Our Liberty
The welfare state has long been one of the most potent arguments for additional restrictions on our freedom. For instance, you must wear a motorcycle helmet because if you splatter yourself all over the highway the rest of us will be paying your medical expenses.
One of the factors considered by New Zealand in ruling on applications from would-be immigrants is health. If you are fat — and thus at risk for various health conditions — forget it!
The 51-year-old, who has not been named, argued that her 52 inch waistline was no obstacle to her work as a nurse, which involved 60-hour weeks.
She was offered a job in a home and hospital for the elderly in a provincial town in New Zealand, documents from the country’s Residence Review Board said, and applied for residence in March 2008. But officials rejected the argument that 10 years’ experience as a nurse meant she should be allowed to live there — even though there is a shortage of qualified nurses.
The woman decided to move to New Zealand after a holiday in 2007 and wanted to set up home there with her husband, a crane driver, and her daughter who planned to work in a shop.
But medical advisors calculated that with a weight of 21 stone and height of 5ft 1in, her body mass index (BMI) was 55.2, putting her at a high risk of developing health problems.
This isn’t the first time New Zealand has turned down an applicant for health reasons. Adds the Telegraph:
In 2007, a British man who moved to New Zealand was told his wife was too overweight to join him.
Taking care of the taxpayers makes sense. But the right way to do so is not to put them at risk in the first place. Socializing health care and then allowing government to micromanage everyone’s lifestyle creates a form of soft tyranny through the back-door. We already see that in America with motorcycle helmet laws, increasing restrictions on smoking, and proposals for special “fat taxes” on disfavored foods. Unfortunately, these likely are only the beginning.
Filed under: Government and Politics; Health, Welfare & Entitlements
Don’t Turn America into France
Veronique de Rugy of the Mercatus Center (and formerly with Cato) narrates a new video warning that it would be a mistake to turn America into a European-style welfare state, which is the fate of her native country.
The video is a joint production of the Center for Freedom and Prosperity and Reason TV. Enjoy.
Cato Unbound Update
This month’s issue of Cato Unbound has drawn an extraordinarily hostile response from a couple of mainstream online publications. Writing at Salon, Michael Lind inferred, mistakenly, that our interest in Seasteading and other radical libertarian projects was due to our disappointment that Republicans lost in the 2008 election. Because this issue was my idea, I feel I can speak effectively to the charge.
As I see things, it was basically impossible to cast either John McCain or Barack Obama as a libertarian. Neither of them shared the policy goals of the Cato Institute to any appreciable degree. Speaking as a private individual, I didn’t vote for either of them, and I don’t regret my choice. I found both Democrats and Republicans profoundly unappealing this election cycle.
This issue of Cato Unbound was motivated solely by my desire to see one particularly radical branch of libertarianism publicly confront its critics. I wanted to see how well it could hold up. Whether it stood or fell, the issue would have served its purpose. Electoral politics had nothing to do with it.
Who’s Blogging about Cato
Here’s a round-up of bloggers who are writing about Cato research and commentary:
- National Review’s Mark Hemingway quoted Ilya Shapiro about the 9th Circuit Court of Appeal’s recent decision on gun laws. He also posted David Boaz’s reaction to the New York Times blog that stated that Cato has been “remarkably silent on bailouts.”
- QandO’s Michael Wade offered his own thoughts on the New York Times blogger who said Cato’s voice against bailouts has not met her “expectations of adequate noise.”
- Blogging about high-speed rail, The Reason Foundation’s Samuel Staley cited Randal O’Toole’s study, High-Speed Rail: The Wrong Road for America.
- At The New Republic’s “The Plank” blog, James Kirchick discussed last week’s Cato event, “Left Turn? South Africa after the Election.”
- The Atlantic’s Clive Crook reviewed the new Cato book, The Beautiful Tree, which explains how private education efforts are empowering children in Third World nations.
- Blogging on Tax Day, Jacob Grier cited Charlotte Twight’s essay in Cato Journal on the history of income tax withholding in the United States.
Cato and the Bailouts: A Correction for the NY Times ‘Economix’ Blog
At the New York Times Economix blog, economist Nancy Folbre of the University of Massachusetts writes:
The libertarian Cato Institute often emphasizes the issue of corporate welfare, but it’s remained remarkably quiet so far on the topic of bailouts.
Excuse me?
Since she linked to one of our papers on corporate welfare, we assume she’s visited our site. How, then, could she get such an impression? Cato scholars have been deploring bailouts since last September. (Actually, since the Chrysler bailout of 1979, but we’ll skip forward to the recent avalanche of Bush-Obama bailouts.) Just recently, for instance, in — ahem — the New York Times, senior fellow William Poole implored, “Stop the Bailouts.” I wonder if our commentaries started with my blog post “Bailout Nation?” last September 8? Or maybe with Thomas Humphrey and Richard Timberlake’s “The Imperial Fed,” deploring the Federal Reserve’s help for Bear Stearns, on April 14 of last year?
Cato scholars appeared on more than 90 radio and television programs to criticize the bailouts during the last quarter of 2008. Here’s a video compilation of some of those appearances.
Folbre complains that some people seem more concerned about welfare — TANF, in the latest federal acronym — than about welfare for bankers — TARP. Google says that there are 138 references to TANF over the past 13 years or so on the Cato website, and 231 references to TARP in the past few months.
Now she has a legitimate point. Welfare for the rich is at least as bad as welfare for the poor. And as much as welfare for the poor has cost taxpayers, the new welfare for banks, insurance companies, mortgage companies, and automobile industries is costing us more. Samuel Brittan of the Financial Times has written that “reassignment,” an economic policy that changes individuals’ ranking in the hierarchy of incomes, is far more offensive than a policy of redistribution, which in his idealized vision would merely raise the incomes of the poorest members of society. By that standard, taxing some businesses and individuals to subsidize the high incomes of others is certainly offensive. Of course, Brittan underemphasized the harm done by welfare to people who become trapped in dependency. But there’s good reason to oppose both TANF and TARP, and Cato scholars have done both.
Lest the good work of Cato’s New Media Manager Chris Moody go under-utilized, here’s a probably incomplete guide to Cato scholars’ comments on the bailouts of the past few months. (Note that it doesn’t include blog posts, of which there have been many.) Quiet? I don’t think so:
Filed under: Finance, Banking & Monetary Policy; Health, Welfare & Entitlements; Tax and Budget Policy
Washington’s Government-Centric View of the World
Too many people in Washington look out upon the beauty and bounty of America and see a vast wasteland, enlivened only by government programs. If government isn’t doing it, they think, then it isn’t being done. When the Republicans threatened to nick the budget of the National Endowment for the Arts, First Lady Hillary Rodham Clinton wailed that the proposal “not only threatens irrevocable damage to our cultural institutions but also to our sense of ourselves and what we stand for as a people.” Seriously, she thought that if the then-$167 million of the NEA were eliminated, the $37 billion that Americans spent on the arts that year would somehow disappear in a puff of smoke?
Sen. Edward M. Kennedy was even more sweeping when he said in 1992, “The ballot box is the place where all change begins in America” — conveniently forgetting the market process that has brought us such changes as the train, the skyscraper, the automobile, the personal computer, and charitable or self-help endeavors from settlement houses to Alcoholics Anonymous to Comic Relief.
And today the Washington Post weighs in with the chart below. It’s titled “Percent of GDP spent on social/family expenditures,” and it shows the United States at a shockingly low 0.7 percent, while Obama-esque countries like Sweden and France are above 3 percent. But could it really be true that America spends less than 1 percent of its wealth on families and children? Of course not. The proper title for the chart would be “Percent of GDP spent by government on social/family expenditures.” (Indeed, given the federal nature of the United States, it’s possible that the proper title would be “Percent of GDP spent by the central government on social/family expenditures.”) Every American family spends a large portion of its income on children’s needs, and a larger portion on the needs of children and parents.
The point of the article, as the caption above the chart indicates, is to argue that the Japanese government needs to spend more on programs that would encourage women to join the paid workforce. (If the government hired all the mothers in Japan and paid them to care for their neighbors’ children, would that be a better world? It certainly would raise Japan’s position on the Post’s chart!) If that’s what Post reporters believe, they’re certainly free to advocate that position. But they shouldn’t assume or imply that the government is the entire society. Families in Japan and the United States spend most of their income — or at least most of their after-tax income — on child and family needs. The chart ignores that reality and seeks to make Japanese and Americans embarrassed that government taxes and spends less in their countries than in the European welfare states.
Filed under: Education and Child Policy; Tax and Budget Policy
Demand for Subsidies
My op-ed on National Review Online today provided new information about the increasing number of federal subsidy programs. The federal welfare state is expanding rapidly.
One friendly reader emailed me:
Ever cross your mind that there’s a reason government programs increase over time? I’ll clue you in: Programs increase because of public demand.
It’s not rocket science, people want more services. Period. Somebody’s got to pay for them. Hences taxes. Or perhaps borrowing. Or a combination of both. In any event, there’s no evidence people are willing to get along with fewer services.
The situation seems simple to me; so why can’t you ideologues on the far right understand what’s going on. Instead, you simply go on bemoaning the existence of programs and taxes you don’t like.
There are numerous problems with this reader’s views, including constitutional problems. But one thing that strikes me is the underlying assumption of the “public interest theory of government,” or the idea that democracies and bureaucracies operate to efficiently provide “services.”
In reality, there are structural problems in government that bias policymakers toward fiscal irresponsibility, as our current $1.8 trillion federal deficit indicates. The issue is not ideology, it is scientific: Does the government actually work as the optimists, like this reader, believe? I think the empirical evidence is in on that question.
Filed under: Government and Politics; Political Philosophy; Tax and Budget Policy
New Podcast: “Stimulus: The Welfare Un-Reform”
When President Obama signed his massive spending bill into law yesterday, many of the provisions of the 1990s welfare reform were chipped away, says Cato Senior Fellow Michael D. Tanner in today’s Cato Daily Podcast. Parts of the new law actually offer states incentives to add people to their welfare rolls, Tanner says.
They didn’t repealed the ’96 act, but what they have done is chip away at the foundations and the very idea that you’re supposed to hold down your rolls rather than increase them, particularly when you take this into the context of all the other welfare spending….There really is a surprising increase in the welfare state in this bill.
In a New York Post op-ed, Tanner expands on the welfare-friendly provisions of the stimulus plan:
This is radical change. States that succeed in getting people off welfare would lose the opportunity for increased federal funding. And states that make it easier to stay on welfare (by, say, raising the time limit from two years to five) would get rewarded with more taxpayer cash. The bill would even let states with rising welfare rolls still collect their “case-load reduction” bonuses.
In short, the measure will erode all the barriers to long-term welfare dependency that were at the heart of the 1996 reform.
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