Archives: 11/2009

They Never Learn

The town of Truckee, CA is an upscale community nestled in the Sierra Nevadas near Donner Summit off I-80. Housing is expensive.  Truckee’s origins were as a railroad town, so there is older housing.  In Truckee, however, downscale is funky and comes with upscale prices.  The Truckee Town Council has decided to provide “downpayment assistance” with loans at interest rates as low as 2 percent.

Those who work in Truckee often cannot afford to live there and the Truckee Town Council hopes to make housing affordable for them.  The program is thus paved with good intentions, but we know where that road leads.  Cato’s Randall O’Toole and Hoover’s Thomas Sowell have shown that land-use restrictions and zoning are principal causes of high-priced housing.  The recent housing boom and bust demonstrated how efforts to make housing “more affordable” largely made it more expensive.  And they ended up putting many into homes that they could not ultimately afford.

There are no reports that the Truckee Town Council is planning to ease land-use restrictions.  So they have done nothing to address the problem of pricey homes.  It’s supply and demand, and the Council is working the wrong side of the equation.

Government Health Care Awash in Waste

Official estimates put the amount of improper payments in federal subsidy programs at about $100 billion a year, with Medicare and Medicaid accounting for more than half. The actual loss to taxpayers is probably much higher.

The Government Accountability Office has issued a new report illustrating why improper payments are so high. It focuses on poor contract management at the Centers for Medicare and Medicaid Services (CMS), which administers Medicare and Medicaid:

Pervasive deficiencies in CMS contract management internal control increase the risk of improper payments or waste. Specifically, based on our statistical random sample of 2008 CMS contract actions, GAO estimates that at least 84.3 percent of fiscal year 2008 contract actions contained at least one instance where a key control was not adequately implemented. GAO also estimates that at least 37.2 percent of fiscal year 2008 contract actions had three or more instances in which a key control was not adequately implemented.

The GAO underscores the chronic nature of the waste at CMS in noting that the agency has taken “insufficient” or “no” action on prior recommendations. The GAO is blunt: “The continuing weaknesses in contracting activities and limited progress in addressing known deficiencies will continue to put billions of taxpayer dollars at risk of improper payments or waste.”

Unfortunately, this is business as usual at the Department of Health and Human Services, which houses CMS. David Hyman recounts in his book, Medicare Meets Mephistopheles, that in 2001 HHS’s Health Care Financing Administration became CMS in an attempt to rebrand the universally disliked HCFA. CMS Administrator Tom Scully told Congress in 2003:

The fact is, the health care market…is extremely muted and extremely screwed up and it’s largely because of my agency. For those of you who don’t follow CMS, which used to be called HCFA, we changed the name because it was so well loved. I always say it’s kind of like when Enron comes out of bankruptcy, they’ll probably change their name. So, HCFA—Secretary Thompson and I decided to confuse everybody. We changed the name to CMS for a couple of years so people wouldn’t realize we’re actually HCFA. So far, it’s worked reasonably well.

Regardless of what the government’s health care bureaucracy is called, massively complex regulations combined with subsidies flowing like a river will always result in vast amounts of taxpayer dollars being washed down the drain.

Alas, the Obama administration plans to open another major tributary with its new health care plan. But the administration insists that taxpayers and the economy won’t get swept away by the rising torrent as its plan with actually save money. If this claim sounds ridiculous, it’s because it is ridiculous.

“Climategate” and Government

It was “Open Mic” this past weekend at Politico Arena:

My post:
Brad Smith is to be commended for encouraging Politico Arena contributors to comment on the emerging “Climategate” scandal.  And it is noteworthy that both he and Walter Russell Mead, the first to respond to Brad’s invitation, have taken a “let’s-see-the-evidence” posture toward the matter, discounting neither the global warming thesis nor the evidence that there may be less to the thesis than its promoters have been saying.

Yet to listen to how the promoters have discounted their critics over the years, one would imagine that the science on the matter were settled.  In fact, one hears often enough that the science is settled to believe that many of them believe it – until a story like this breaks.  Then we see the scramble to shore up their belief system.  It’s an old story, documented years ago by Thomas Kuhn in his provocative volume, The Structure of Scientific Revolutions.

Fortunately, we haven’t yet reached the stage of the Lysenko scandal, which set Soviet genetics back several decades.  But we delude ourselves if we believe that the politicization of science is not inherent in government entanglement as such.  Since that entanglement of government and science is not likely to end soon, the antidote is transparency.  Climategate may be just the spur we need to open the books on global warming, especially given the draconian remedies its promoters are prescribing.

Slavery and the Tariff: Exceptions to the American Spirit

We have much to be thankful for as Americans. We live in a country founded on the principles of liberty and limited government, and the freedom and prosperity we still enjoy today flow from those foundational principles.

I was reminded of our great heritage recently as I was re-reading Frederic Bastiat’s classic pamphlet, “The Law.” He wrote his impassioned defense of individual freedom and limited government in 1850, at a time when socialist ideas were on the march in his native France. Bastiat observed that, as government grew more powerful on the Continent, the struggle for political power became more bitter, stoking hatred, discord and social disorder.

In contrast, Bastiat beckoned his readers to

Look at the United States. There is no country in the world where the law confines itself more rigorously to its proper role, which is to guarantee everyone’s liberty and property. Accordingly, there is no country in which the social order seems to rest on a more stable foundation.

Being a lover of liberty, Bastiat also saw two great exceptions to “the general spirit” of our republic:

Nevertheless, even in the United States there are two questions, and only two, which, since it was founded, have several times put the political order in danger. And what are these two questions? The question of slavery and that of tariffs, that is, precisely the only two questions concerning which, contrary to the general spirit of this republic, the law has assumed a spoliative [despoiling or plundering] character. Slavery is a violation, sanctioned by law, of the rights of the person. Protective tariffs are a violation, perpetuated by the law, of the right to property …

Bastiat went on to warn, prophetically, that these two “scourges” posed a grave threat to the social order:

certainly it is remarkable that in the midst of so many other disputes this twofold legal scourge, a sad heritage of the Old World, should be the only one that can and perhaps will lead to the dissolution of the Union.

And then he wondered how much greater the coming conflict would be in Europe, where the law had become far more perverted. (He truly could not have imagined what was to come a few decades later.):

It is in fact impossible to imagine a graver situation in a society than one in which the law becomes on instrument of injustice. And if this fact gives rise to such dreadful consequences in the United Sates, where it is only exceptional, what must be its consequences in Europe, where it is a principle and a system?

Among today’s advocates of higher trade barriers, Pat Buchanan is especially fond of hearkening back to our “heritage” of high tariffs throughout the 19th century. Implied in his argument is that true patriots who celebrate the founding principles of our country should embrace higher duties on Chinese tires and Mexican tomatoes. But Frederic Bastiat, the Frenchman, understood far more accurately the real spirit of our Republic.

Hungry for Taxes

The Washington Post reports:

Would you gladly pay more for a cheeseburger today if it keeps your local librarian working tomorrow?

Several members of the Fairfax County Board of Supervisors think so. So do supervisors in neighboring Loudoun County, who hope the General Assembly will allow them to impose a meals tax, too.

If the supervisors are so sure that a tax increase would be popular, why don’t they put it to a referendum?

Or better yet, why not make it voluntary? The waitress could bring you a bill that shows the cost of the food and drink, the state tax, the county tax (as Virginia receipts already do), and then “additional voluntary local tax to keep Fairfax government big.” If the supervisors are right, people will gladly pay it.

Right, supervisors?

Defending Obama…Again

I caught a lot of flack from my Republican friends for my post blaming the FY2009 deficit on Bush instead of Obama. Well, I must be a glutton for punishment because I can’t resist jumping (albeit reluctantly) to Obama’s defense again. I’m venting my spleen for two reason. First, FoxNews.com posted a story headlined “Obama Shatters Spending Record for First-Year Presidents” and noted that:

President Obama has shattered the budget record for first-year presidents – spending nearly double what his predecessor did when he came into office and far exceeding the first-year tabs for any other U.S. president in history. In fiscal 2009 the federal government spent $3.52 trillion …That fiscal year covered the last three-and-a-half months of George W. Bush’s term and the first eight-and-a-half months of Obama’s.

This story was featured on the Drudge Report, so it has received a lot of attention. Second, Bush’s former Senior Adviser wrote a column for the Wall Street Journal eviscerating Obama for big budget deficits. Given Bush’s track record, this took considerable chutzpah, but what really nauseated me was this passage:

When Mr. Obama was sworn into office the federal deficit for this year stood at $422 billion. At the end of October, it stood at $1.42 trillion.

I’m a big fan of criticizing Obama’s profligacy, but it is inaccurate and/or dishonest to blame him for Bush’s mistakes. At the risk of repeating my earlier post, the 2009 fiscal year began on October 1, 2008, and the vast majority of the spending for that year was the result of Bush Administration policies. Yes, Obama did add to the waste with the so-called stimulus, the omnibus appropriation, the CHIP bill, and the cash-for-clunkers nonsense, but as the chart illustrates, these boondoggles only amounted to just a tiny percentage of the FY2009 total – about $140 billion out of a $3.5 trillion budget.

There are some subjective aspects to this estimate, to be sure. Supplemental defense spending could boost Obama’s share by another $25 billion, but Bush surely would have asked for at least that much extra spending, so I didn’t count that money but individual readers can adjust the number if they wish. Also, Obama used some bailout money for the car companies, but I did not count that as a net increase in spending since the bailout funds were approved under Bush and I strongly suspect the previous Administration also would have funneled money to GM and Chrysler. In any event, I did not give Obama credit for the substantial amount of TARP funds that were repaid after January 20, so the net effect of all the judgment calls certainly is not to Bush’s disadvantage.

Let’s use an analogy. Obama’s FY2009 performance is like a relief pitcher who enters a game in the fourth inning trailing 19-0 and allows another run to score. The extra run is nothing to cheer about, of course, but fans should be far more angry with the starting pitcher. That having been said, Obama since that point has been serving up meatballs to the special interests in Washington, so his earned run average may actually wind up being worse than his predecessor’s. He promised change, but it appears that Obama wants to be Bush on steroids.

ObamaCare’s Cost Could Top $6 Trillion

Congressional Democrats are using several budget gimmicks to disguise the cost of their health care overhaul, claiming the House and Senate bills would cost only (!) about $1 trillion over 10 years.  Now that critics have begun to correct for those budget gimmicks, supporters of ObamaCare are firing back.

One gimmick makes the new entitlement spending appear smaller by not opening the spigot until late in the official 10-year budget window (2010–2019).  Correcting for that gimmick in the Senate version, Sen. Judd Gregg (R-NH) estimates, “When all this new spending occurs” — i.e., from 2014 through 2023 — “this bill will cost $2.5 trillion over that ten-year period.”

Another gimmick pushes much of the legislation’s costs off the federal budget and onto the private sector by requiring individuals and employers to purchase health insurance.  When the bills force somebody to pay $10,000 to the government, the Congressional Budget Office treats that as a tax.  When the government then hands that $10,000 to private insurers, the CBO counts that as government spending.  But when the bills achieve the exact same outcome by forcing somebody to pay $10,000 directly to a private insurance company, it appears nowhere in the official CBO cost estimates — neither as federal revenues nor federal spending.  That’s a sharp departure from how the CBO treated similar mandates in the Clinton health plan.  And it hides maybe 60 percent of the legislation’s total costs.  When I correct for that gimmick, it brings total costs to roughly $2.5 trillion (i.e., $1 trillion/0.4).

Here’s where things get really ugly.  TPMDC’s Brian Beutler calls “the” $2.5-trillion cost estimate a “doozy” of a “hysterical Republican whopper.”  Not only is he incorrect, he doesn’t seem to realize that Gregg and I are correcting for different budget gimmicks; it’s just a coincidence that we happened to reach the same number.

When we correct for both gimmicks, counting both on- and off-budget costs over the first 10 years of implementation, the total cost of ObamaCare reaches — I’m so sorry about this — $6.25 trillion.  That’s not a precise estimate.  It’s just far closer to the truth than President Obama and congressional Democrats want the debate to be.

Beutler and other supporters of ObamaCare can react to this news in two ways.  They can continue to deny the enormous cost of the legislation they support.  Or they can question how President Obama’s health plan came to be so blessedly expensive, and how (and by whom) they were duped into thinking it wasn’t.