Archives: 07/2009

Why (Some) Docs Support the House Bill (So Far)

The news was unwelcome.  But the timing couldn’t have been better.

Physician lobbies like the American Medical Association and the American College of Surgeons (ACS) announced their support for the House Democrats’ health care reform plan at the very moment that Congressional Budget Office director Doug Elmendorf explained why they are supporting it.

Yesterday, Elmendorf had the following exchange with Senate Budget Committee chairman Kent Conrad (D-ND):

Elmendorf: …In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount.  And on the contrary, the legislation significantly expands the federal responsibility for health care costs.

Conrad:  So the cost curve in your judgement is being bent, but it is being bent the wrong way.  Is that correct?

Elmendorf:  The way I would put it is that the curve is being raised…

That’s right.  The docs are supporting the Democrats’ health care plans because the Democrats are buying them off.

The American College of Surgeons boasts that its executive committee voted unanimously to support the House Democrats’ bill because it would increase Medicare’s price controls so that over the next 10 years, Medicare would pay physicians $284 billion more than under current law.   Reminds me of something New Democrat David Kendall wrote in 1994:

Not surprisingly, some specialists welcome price controls — which would lock in their high income — and fear competition, which might depress it. For example, the American College of Surgeons has endorsed the single-payer approach, which would control prices at the current level and preserve surgeons’ relative value among physicians.

Of course, to pay off the docs, the Democrats will have to rob even more people than they otherwise would.

Is an Independent Fed Better?

Rep. Ron Paul now has a majority of the House of Representatives supporting his bill for an independent audit of the Federal Reserve System. He presented his case at a Cato Policy Forum recently, with vigorous responses from Bert Ely and Gilbert Schwartz.

Now more than 200 economists have signed a petition calling on Congress to “defend the independence of the Federal Reserve System as a foundation of U.S. economic stability.” The petition seems implicitly a rebuttal to Paul’s bill.

Allan Meltzer, a leading monetary scholar and frequent participant in Cato’s annual monetary conferences, declined to sign the petition and explained why: “I wrote them back and said, ‘the Fed has rarely been independent and it strikes me that being independent is very unlikely’” in the current environment.

Cato senior fellow Gerald O’Driscoll adds:

it is not the critics of the Fed who threaten its independence, but the Fed’s own actions.  Its intervention in the economy is unprecedented in size and scope. It is inevitable that those actions would lead to calls for further Congressional oversight and control. 

One of the lessons here is that once you create powerful government agencies, from tax-funded schools to central banks, there are no perfect libertarian rules for how they should be run. The way to protect freedom is to let people make their own decisions in civil society.  Schools have to decide what to teach, offending the values of some parents and taxpayers. The Fed can be independent and unaccountable and undemocratic, or it can be subject to the political whims of elected officials; neither is a very attractive prospect.

Spend Less by Spending More

From CongressDailyPM:

Reacting to a statement by former GAO comptroller general David Walker that “you can’t reduce costs by expanding coverage,” [White House National Economic Council Director Lawrence] Summers said President Obama rejects that view. “We won’t make progress in costs without addressing access,” Summers said.

In other news, up is down, slavery is freedom, and if she says it’s night convince her that it’s day.

How’d That Get in Here?

Understandably, the public is a little preoccupied right now with efforts in Washington to “reform” health care by making it much, much worse. Fortunately, people are starting to notice that a congressional bum rush is heading right toward them — maybe they’ll be able stop it in time. Unfortunately, that is giving Washington a chance to sneak some other stuff by us.

In particular, I’m thinking of the just-introduced Student Aid and Fiscal Responsibility Act. It’s been largely ignored so far, save a little chatter about the community college stuff it incorporates. In a simpler time, it would have generated a lot more copy. After all, it will:

  • end federally backed student loans that come through private companies, and instead make Uncle Sam the universal lender;
  • greatly increase Pell Grants and peg their growth to the rate of inflation plus 1 point;
  • balloon the federal Perkins loan program;
  • authorize $5 billion over two years for elementary and secondary school facility projects, with a focus on “green” efforts;
  • authorize $10 billion over ten years for Early Learning Challenge Grants; and
  • furnish $12 billion for community colleges.

Not all of this, I should say, is terrible. Getting rid of the Federal Family Education Loan Program — which backs loans coming from ostensibly private companies and guarantees lenders a profit — is a good thing. But replacing it all with loans directly from D.C.? That’s a bad thing.

To be fair, transitioning from guaranteed to direct lending could save some money, especially in the short run, eliminating various fees and guarantees Washington pays to lenders under FFEL. But those savings almost certainly won’t be the $87 billion over ten years supporters claim, a number that is no doubt overstated as a result of budget chicanery and how quickly government grows. And don’t expect taxpayers to benefit from whatever savings are ultimately generated. According to the proud declaration of SAFRA sponsor George Miller (D-CA), only $10 billion of the projected $87 billion savings is slated for deficit reduction. The rest — breathtaking deficit be damned! — is going to standard, feel-good government spending, including school “modernization” projects and “early learning” grants

Which brings me to the community college components, which have, unlike the rest of the bill, been getting some media play. I wrote about them earlier this week, noting especially that they make little sense in light of Bureau of Labor Statistics numbers showing that positions requiring on-the-job training will grow in much greater numbers than jobs requiring at least an associate’s degree. What I didn’t mention was the dismal performance of community college students, who take remedial courses in droves and complete their programs at very low rates.

Ah, but we’re told that this new legislation, backed wholeheartedly by the Obama administration, is going to reform community colleges. As David Brooks celebrates in his column today:

The Obama initiative is designed to go right at these deeper problems. It sets up a significant innovation fund, which, if administered properly, could set in motion a spiral of change. It has specific provisions for remedial education, outcome tracking and online education. It links public sector training with specific private sector employers.

Now, I thought Brooks was supposed to be a seasoned political observer, but he seems to have swallowed the reform-y rhetoric hook, line, and sinker. He’s seasoned enough, though, to give himself an out with the qualifier, “if administered properly.”

He’s gonna’ need that out, though the reform failure probably won’t be primarily administrative; the legislation itself offers gaping holes through which schools can escape real reform. To get “innovation” grants, schools would simply have to agree to do such nebulous, input-centric things as provide “student support services” and implement “other innovative programs.” In other words, they’d need do nothing meaningful at all.

Unfortunately, this bill will probably become law. Few politicians or interest groups are standing firmly against it, and with health care storming the public’s front door, few people will notice SAFRA tiptoeing through the back. Combine that with the few people who are writing about the bill giving it little critical thought, and its passage seems assured.

“Employee Free Choice Act” Still Bad News

One piece of good news out of Washington yesterday was the decision among supporters of the Orwellian-named Employee Free Choice Act to dump a provision that would have virtually eliminated the secret ballot in union-organizing elections.

The bill is the number-one legislative priority of major U.S. labor unions. It is packed with provisions aimed at making it easier for unions to organize workplaces and halt the relentless 40-year slide in private-sector union membership.

The jettisoned provision would have allowed unions to organize a workplace simply by “persuading” a majority of workers to sign cards saying they want a union. Of course, such a system would leave individual workers wide open to intimidation, as I explained in a recent op-ed. Business-funded ads against the measure struck a cord with voters who are understandably fond of the secret ballot, and the provision became a step too far for moderate Democrats.

What remains of the bill is still bad news. It would reduce the typical union-organizing election from two months to as short as five days. This is a provision that could only be favored by the side that wants workers to be deprived of the information and the time they need to make an informed decision.  And it would force employers to accept the decision of a government arbitration panel even if the resulting union contract would threaten the company’s survival.

University of Chicago law professor Richard Epstein explained cogently in a recent cover story for Cato’s Regulation magazine why the  the bill is fundamentally at odds with our basic constitutional rights.

Gates Lays Down the Gauntlet on the F-22

Defense Secretary Robert Gates isn’t known for his stirring oratory, and his speech to the Economic Club of Chicago is representative of his understated style. But when it comes to the F-22, the SecDef’s ire shows through.

The overarching theme of the speech was the future of the U.S. military, a rather obvious topic. I don’t agree with all that Gates has done, and is preparing to do. I question his fixation on population-centric counterinsurgency and post-conflict reconstruction. I think he could have done more to cut unnecessary weapons systems, although he deserves credit for tackling the low-hanging fruit.

By the same token, much of the criticism leveled against Gates is unfair, and some of it is absurd. Gates demolishes the charge that he has slashed defense spending, by pointing out that the FY2010 budget is $534 billion, $19 billion more than in FY09. “Only in the parallel universe that is Washington, D.C.,” Gates noted, “would that be considered ‘gutting’ defense.”

But he hasn’t shied from making some cuts, and he has taken on some politically popular programs. And the F-22 is at the top of this list. Gates devoted nearly a third of the speech to the F-22, and the bottom line is this:

[I]f we can’t bring ourselves to make this tough but straightforward decision [to terminate the program at 187 aircraft] — reflecting the judgment of two very different presidents, two different secretaries of defense, two chairmen of the joint chiefs of staff, and the current Air Force Secretary and Chief of Staff, where do we draw the line? And if not now, when? If we can’t get this right — what on earth can we get right? It is time to draw the line on doing Defense business as usual. The President has drawn that line. And that red line is a veto.  And it is real.

No one reading this speech should have any doubts that Gates and President Obama are serious. We’ll know perhaps as soon as Monday — the Senate is supposed to vote on the McCain-Levin amendment to strip funding for the F-22 from the Defense Authorization bill — whether Congress is paying attention.