Archives: 06/2010

Health Care Rights and Wrongs

Michael Cannon’s post about this ridiculous New York Times article nearly made me fall off my chair. The article, entitled “A Poor Nation, With a Health Plan,” favorably compares the health care system in Rwanda with that in the United States. That’s right: because we don’t have state-provided universal health care coverage, Americans are worse off than residents of one of the poorest countries in the world.  (This is a new article, by the way, not Frank Rich’s column in the Sunday paper.)

Here’s how it begins:

The maternity ward in the Mayange district health center is nothing fancy.

It has no running water, and the delivery room is little more than a pair of padded benches with stirrups. But the blue paint on the walls is fairly fresh, and the labor room beds have mosquito nets.

Inside, three generations of the Yankulije family are relaxing on one bed: Rachel, 53, her daughter Chantal Mujawimana, 22, and Chantal’s baby boy, too recently arrived in this world to have a name yet.

The little prince is the first in his line to be delivered in a clinic rather than on the floor of a mud hut. But he is not the first with health insurance. Both his mother and grandmother have it, which is why he was born here.

In other words, it’s not that the cost of modern medicine has declined in relative terms (thanks to American technological development) and the economy has grown (ours and theirs) such that more people can be medically trained and the tax base can support more public hospitals, but the insurance genie has come and sprinkled fairy dust on misbegotten villagers. (Read the whole thing for some more eye-popping lines – Rwanda has less obesity than the United States, for example.)

Now, I’m just a lawyer – about the only thing I know about health policy is that Obamacare is unconstitutional – but it seems to me that there are at least two basic definitional problems with the inferences the article invites the reader to make even beyond the detailed technical analysis Michael provides.

First, there’s a difference between health care and health insurance.  Nobody in the United States is denied health care.  Between Medicaid and federal law requiring emergency rooms to treat all comers, we simply do not have children dying in the street (like in, say, Rwanda, where, according to the Times, the most common causes of death are “diarrhea, pneumonia, malaria, malnutrition, infected cuts”).  As Michael says, “Yes, the poorer nation has a higher levels of health insurance coverage.  But the wealthier nation does a better job of providing medical care to everyone, insured and uninsured alike.”  That is, you can (and often do) have universal health insurance that provides universally bad care – except for the political elites, who pay extra for proper Western care.  Is there any American who would have better health living in Rwanda or any number of countries where the government provides universal health insurance?

Second, and relatedly, health care is not and cannot be a “right” – because rights are things that inhere in human beings by virtue of their being human.  As the Declaration of Independence says, we are “endowed by [our] Creator with certain unalienable Rights.”  These “natural” rights are things we enjoy without burdening the rights of others: freedom of speech and belief, the right to earn an honest living, freedom of movement, the right to acquire and possess private property, the right to decide what we do every day … all the way down to the right to get out of bed on the left or right side (or to stay in bed all day) – and the right to defend ourselves against those who would take away these rights.  Once you start making “rights” out of things that somebody has to provide you – food, shelter, health care, employment – then you’ve violated everyone’s natural rights and reduced their inherent liberty.

And that’s no less true in countries where the constitutions guarantee all sorts of things (e.g., article 24 of the UN Declaration of Human Rights guarantees the right to a paid vacation.  Those countries have the added misfortune of having a devalued constitution, whose promises are wholly aspirational at best.   Indeed, I’m often amused in foreign travels to be asked why the U.S. Bill of Rights doesn’t include health care (among other things).  I mean, if the best constitutions were the grandest ones, I could draw one up that guaranteed the right to immortality, the mandate that all streets be paved in gold, and the provision that everyone have above-average intelligence.  Also, two chickens in every pot and a flying car in every garage.

There is no magic genie to public health or national development:  it takes the rule of law – including restraining political elites from meddling in the economy – and years of entrepreneurship and hard work.  Indeed, there are plenty of ways in which the United States can improve its health care system but universal health insurance is beside the point. A cautionary note, though: It wasn’t that long ago, in relative human terms, that America was at Rwanda’s level of development – and it won’t take long to destroy, in the name of “fairness” or “human rights,” all we’ve created.

Our Enemies or Our Allies?

The New York Times reports that congressional investigators have found mounting evidence that “American taxpayers have inadvertently created a network of warlords across Afghanistan who are making millions of dollars escorting NATO convoys and operating outside the control of either the Afghan government or the American and NATO militaries.”

The Financial Times broke this story back in March. But their most startling discovery was that after nearly a decade at war in Afghanistan, Washington still has no clue as to who its true enemies (and allies) are.

Many Americans would be surprised to learn that some prominent Afghan officials are in fact saboteurs of America’s presumptuous and dangerously quixotic nation-building endeavor, instituting policies that feed the insurgency’s momentum in order to get more economic assistance from the coalition. America’s Ambassador to Kabul, Karl W. Eikenberry, said as much last November. Eikenberry warned (of course, to no avail), that Afghan President Hamid Karzai, “continues to shun responsibility for any sovereign burden…He and much of his circle do not want the U.S. to leave and are only too happy to see us invest further.” [Emphasis added]

Karzai knows very well that once the conflict ends, his open aid spigot will dry up. Indeed, Karzai has become notorious for replacing and undercutting people in his government who become too well-liked and “clean,” fearing these officials will become more popular than himself. Such double-gaming leads us to Karzai’s younger half brother, Ahmed Wali Karzai.

He consolidates his power base by acting as the powerful chairman of Kandahar’s provincial council, as well as relying on a mafia-like network of militias, many of whom demand bribes from security companies that benefit from U.S. contracts. The rise of these militia fiefdoms have profited handsomely with foreign taxpayer dollars. “You have about 30 oligarchs who have built little empires with ISAF money,” Carl Forsberg, a researcher at the Institute for the Study of War, told the Financial Times. “We are ultimately creating a shadow government.”

Lamenting America’s strategic paradox, Congressman John F. Tierney (D-MA), chair of the U.S. House National Security and Foreign Affairs Subcommittee said recently: “In this case, the U.S. appears to be inadvertently fueling the very warlordism and corruption that we are pressing President Karzai to curtail.”

U.S. officials say perceptions that power in Kandahar is concentrated in the hands of the Karzai family’s ethnic Pashtun Popalzai tribe fuel support for the insurgency. According to a Pentagon assessment released April 28, Afghan public perceptions of Karzai’s anti-corruption efforts are “decidedly negative” and extend to international forces and the international community. U.S. defense officials also find that the “exploitative behavior” of some Afghan officials contributes to the insurgency’s success.

For far too long, U.S. officials and analysts have concentrated their focus on Pakistan. As regional expert Steve Coll notes, “If you think about it, the United States is essentially waging a proxy war against its own ally. The Taliban are a proxy of the government of Pakistan. We are an ally of the government of Pakistan. We are fighting the Taliban.”

But government officials in Kabul also fit into this equation; unfortunately, this is a government that Washington still endeavors to support.

Top House Democrat Calls for Middle-Class Tax Hikes (and the real reason why)

Smart statists understand that there are very strong Laffer Curve effects at the top of the income scale since investors and entrepreneurs have considerable ability to control the timing, level, and composition of their income. So if higher tax rates on upper-income taxpayers don’t collect much revenue, why is the left so insistent on class-warfare taxation? The answer, I think, is that soak-the-rich taxes are a “loss-leader” that politicians impose in order to pave the way for higher taxes on the middle class. Indeed, I made this point in my video on class warfare taxation, and noted that are not enough rich people to finance big government. As such, politicians that want to tax the middle class hope to soften opposition among ordinary people by first punishing society’s most productive people. We already know that tax rates on the so-called rich will jump next January thanks to higher income tax rates, higher capital gains tax rates, more double taxation of dividends, and higher death taxes. Now the politicians are preparing to drop the other shoe. Excerpted below is a blurb from the Washington Post about a member of the House Democratic leadership urging middle-class tax hikes, and let’s not forgot all the politicians salivating for a value-added tax.

Tax cuts that benefit the middle class should not be “totally sacrosanct” as policymakers try to plug the nation’s yawning budget gap, House Majority Leader Steny Hoyer (D-Md.) said Monday, acknowledging that it would be difficult to reduce long-term deficits without breaking President Obama’s pledge to protect families earning less than $250,000 a year. Hoyer, the second-ranking House Democrat, said in an interview that he expects Congress to extend middle-class tax cuts enacted during the Bush administration that are set to expire at the end of this year. But he said the extension should not be permanent. Hoyer said he plans to call for a “serious discussion” about the affordability of the tax breaks. …The overarching point in Hoyer’s remarks is the need for a bipartisan plan that includes spending cuts and tax increases, in the tradition of deficit-reduction deals cut under former presidents George H.W. Bush and Bill Clinton. Drafting such a plan would require a reexamination of tax cuts enacted in 2001 and 2003, Hoyer says – cuts that benefited most taxpayers.

Facts That Lack Currency

In Washington, everybody seems to have an opinion about the Chinese currency these days.  But too often those opinions show contempt for the facts.

The prevailing wisdom—undergirded by theories and equations that may need updating in this age of global production sharing and transnational supply chains—is that an appreciating yuan will reduce the bilateral trade deficit, as U.S. imports from China become relatively more expensive for Americans using dollars, and U.S. exports to China become relatively less expensive for Chinese using yuan.

The lead article in Sunday’s Washington Post presents this point of view unquestioningly, and in the process foregoes an opportunity to explain to its readers that the relationship between currency values and trade balances, and between trade balances and jobs, is not as straightforward as many proponents of Chinese revaluation argue.

In the fourth paragraph, the authors write:

“Whether Saturday’s announcement [from the Chinese government that it will allow its currency to appreciate gradually] will help the U.S. economy depends on how much Beijing lets its currency rise.  A jump of 20 percent, for example, could cut as much as $150 billion off the U.S. trade deficit with China and create as many as 1 million U.S. jobs by making American exports more competitive, according to estimates by C. Fred Bergsten of the Peterson Institute of International Economics.  From 2005 to 2008, China let the yuan appreciate 20 percent against the dollar before it stopped the process while it confronted the global financial crisis.”  (My emphasis, primarily for what is absent from this sentence).

No doubt Fred Bergsten and his colleagues at the Peterson Institute know something about economics, but Bergsten’s projection should raise some red flags for anyone who’s been following this subject.   The authors cite Bergsten’s estimation that a 20 percent appreciation of the yuan could lead to a $150 billion decline in the U.S. trade deficit with China, and they even indicate that China has allowed that kind of appreciation before—from 2005 to 2008.  But then, inexplicably, the authors abandon what should be the next logical question in reporting this story: what happened to the bilateral trade deficit during that recent period of 20 percent yuan appreciation?  After all, if the authors are going to acknowledge that period of appreciation, then surely it should serve as support for Bergsten’s current projections of trade deficit reduction and job creation—unless, of course, it doesn’t.  And it doesn’t.

That recent period of Yuan appreciation (21 percent between July 2005 and July 2008) is associated with a U.S. bilateral trade deficit that increased by $66 billion from $202 to $268 billion between 2005 and 2008, and incidentally, the number of jobs in the U.S. economy increased by 3.5 million between July 2005 and July 2008 (the precise period of appreciation), from 142.0 million to 145.5 million.  It is confounding to me that reporters are still adhering, seemingly unquestioningly, to the pre-financial crisis, pre-recession fallacy that a trade deficit hurts the economy?  Didn’t our huge economic hiccup put that myth the bed for good?

Between the end of 2007 and the end of 2009, deficit hawks got their wish.  The U.S. trade deficit declined, and substantially, by $327 billion, from $702 billion to $375 billion.  But the huge payoff they promised never materialized.  Instead, U.S. employment fell from 146 million workers in 2007 to 138 million workers in 2009.  The unemployment rate increased from an average of 4.7 percent in 2007 to 10.1 percent in 2009.  What was that about currency values and trade balances?  And between trade balances and employment?

A review of Federal Reserve exchange rate data and Commerce Department trade data reveals that the textbook characterizations of an inverse relationship between currency value and the trade account does not hold for many of America’s largest trading partners.  Between 2002 and 2008 (before trade flows dropped dramatically across the globe on account of the recession), the dollar declined considerably against the Chinese yuan, the Canadian dollar, the euro, the Japanese yen the Korean won, the Indian rupee, and the Malaysian ringgit, yet the U.S. bilateral trade deficit with all of those countries (and the Eurozone collectively) increased, in some cases substantially.

As I suggested in this paper and in this op-ed a couple months ago, many factors, including income, the availability of substitutes, and perhaps most significantly, globalized production and supply chains influence trade flows.  Since somewhere between one-half to two-thirds of the value of Chinese exports to the United States comprise of value that was first imported into China (as components, raw materials, and the labor and overhead embedded therein), an appreciating yuan produces mitigating effects.  The appreciating yuan makes the price tag higher to Americans than before the appreciation, if all else were equal.  But all else isn’t equal.  The rising yuan also reduces the cost of production in China — the cost of imported inputs, which accounts for up to two-thirds of the U.S. price tag, on average (but far more for devices like the Apple iPod)–thereby enabling Chinese exporters to lower their price tags to American consumers.

The evidence, as presented in this paper, suggests that this dynamic played a big role in preventing the trade deficit from declining.  I wonder how these transnational production processes factor into Fred Bergsten’s economic models or whether the 2005 to 2008 period can be explained away as some anomaly.  Nevertheless, at the very least those data, that recent evidence, should be acknowledged and understood by economists, who in turn can help reporters provide a more complete picture to the public.

Study: RomneyCare Increased Health Premiums by 6 Percent

One of the main arguments for both RomneyCare (the health care law Massachusetts enacted in 2006) and ObamaCare (the federal law enacted in March of this year) is that once the government mandates that everyone purchase health insurance, premiums will fall due to broader pooling. A new study published by the Forum for Health Economics & Policy suggests the opposite.

Supporters of those laws, like MIT health economist Jonathan Gruber, point to data showing that premiums for individually purchased health insurance policies in Massachusetts fell after 2006.  Yet that was expected, and is not evidence that RomneyCare reduced health insurance costs.  RomneyCare merged Massachusetts’ “individual” health insurance market with the market for small employers.  The individual market accounts for just 4 percent of the private market, and premiums in that market were higher than for employment-based coverage.  When the two markets merged, the price controls that Massachusetts imposes on health insurance led to an averaging of premiums: premiums for individual purchasers fell, and premiums for small-business employees increased to pick up the slack.  That is, RomneyCare shifted costs from people who purchase their own coverage to workers who obtain coverage on the job.

Economists John Cogan, Glenn Hubbard, and Daniel Kessler compared premiums for job-based coverage in Massachusetts, before and after RomneyCare, to job-based premiums nationwide. They found evidence that RomneyCare increased employer-sponsored insurance premiums, particularly at small firms:

We find that health reform in Massachusetts increased single-coverage employer-sponsored insurance premiums by about 6 percent in aggregate, and by about 7 percent for firms with fewer than 50 employees. The effect of reform on family premiums is less uniform. If Massachusetts is compared to the nation as a whole, reform had a modest 1.5 percent effect on family premiums. However, in the Boston MSA, and among employees of small firms, the effect of reform on family premiums was much greater. Family premiums grew by about 8 percent more in Boston than in the 19 largest other MSAs from 2006-08, as compared to 2004-06. For small employers, the differential Massachusetts/US growth in small-group premiums from 2006-08, over and above the growth from 2004-06, was 14.4 percent.

Their study is subject to important limitations.  But it is getting harder and harder to claim that RomneyCare – and ObamaCare, which is just RomneyCare 2.0 – are going to reduce costs.

DADT Debate

Last week military analyst Stuart Koehl had a piece at the Weekly Standard opposing the end of Don’t Ask Don’t Tell (DADT). I wrote a response, and he posted a rebuttal. I recommend reading those pages before continuing here.

Koehl first makes the point that he was writing about “combat effectiveness” and I only addressed “readiness.” His point being that readiness is a black and white evaluation on paper – is the unit up on personnel and equipment, and have they completed necessary training prior to entering the fight? Combat effectiveness is only measured when the bullets start flying, and then in subjective terms. In response to this, I would simply reiterate everything I said in my initial response and replace “readiness” with “combat effectiveness.” We are both discussing personnel issues that impact morale and unit cohesion, and these are the intangibles that make readiness translate into combat effectiveness. My responses on the specifics below bear that out.

British and Israeli Experiences

Koehl continues to claim that the success of the British and Israeli militaries with gays serving openly does not translate into a combat effective American force where DADT has ended. I will address this on several fronts.

First, Koehl says that the British and Israeli armies have not experienced a sustained High Intensity Conflict (HIC) in recent decades, and that the Low Intensity Conflict (LIC) experience they have is not indicative of what their combat effectiveness would be in a HIC environment. For the uninitiated, HIC would be a conflict between two nation-states with uniformed armies, and LIC is all of the stuff going on now – counterinsurgency, peacekeeping, and the like.

Before I get to the HIC/LIC differentiation Koehl makes, it is worth noting that we know exactly what the United States would do with regard to gays serving in the military in HIC, since we saw it in World War II. Gays served honorably throughout the war (which wasn’t all HIC, plenty of partisans fighting around the world) while their comrades suspected or knew of their sexual orientation, and were then discharged at high rates afterward.

With regard to success in LIC not translating to success in HIC, I think Koehl gets it exactly backwards. From a personnel standpoint, HIC is a lot less stressful on the force than LIC. Taking on a uniformed force in a stand-up fight that is resolved relatively quickly is less of a test of combat effectiveness than a long counterinsurgency campaign against an enemy that melts back into the population. Compare the British experience in the Falklands with their involvement in Afghanistan. Compare the Israeli incursion into Gaza in Operation Cast Lead (a high-intensity phase of an otherwise low-intensity conflict) with their occupation of Lebanon. Compare the initial invasion of Iraq to the subsequent counterinsurgency.

When you are restructuring your force to provide more “dwell time” between deployments, that is a sign that you are coming close to, as Koehl puts it, “stress[ing] combat units to the breaking point.” To say that gays may serve openly without ill effect in LIC, but that we should hold off changing our policy because we may someday have World War III against China and her allies, is ignoring the fact that combat effectiveness is tested in both low- and high-intensity conflicts and more in the wars we are fighting than in the ones we could hypothetically fight.

Koehl also dismisses the British and Israeli experience due to their smaller militaries. In terms of raw numbers, they are smaller than ours, but the per-capita rates defeat this argument. Yes, the British armed forces are smaller in absolute terms, but proportionally are only about a quarter smaller than the American military (overall population of 61 million versus 307 million). With Israel, it flips the other way. A nation of 7.3 million with over 175,000 active service members (and twice that in the reserves) has a much higher per-capita ratio of service members to the total population. Dismissing them as a “commuter” force is unpersuasive as well. When you are deployed, other soldiers’ significant others may just be a photo on the wall. When your military is fighting on home field, you will see more of your comrades’ personal lives.

Women in Combat

Koehl devotes part of his original article making a parallel between keeping DADT and excluding women from combat arms positions. He says that there will always be a small percentage of women who can equal men in the physical demands of combat, and the only reason to exclude them from combat units is the undesirable influence eros will have on combat effectiveness.

Once again, I think this is completely backwards.

First, we may be excluding women from combat arms branches, but we are certainly not excluding them from combat. The lack of a front line means that all units deployed to Iraq and Afghanistan can come under sudden attack. Women are rising to the occasion. Take this combat medic who received the Silver Star for braving enemy fire to save members of her unit. Or this military policewoman who responded to an ambush by clearing two trenches and killing three insurgents in close combat. Women are serving with distinction and the units they serve in do not show reduced combat effectiveness by virtue of their presence.

Second, I think that the exclusion of women from the most physically demanding branches is appropriate and constitutional. While some women can max their physical fitness test and generally keep up with the boys, adding women to light infantry units does not make sense unless they can keep pace in the one area where women are particularly disadvantaged – moving under a heavy load. Paratrooper planning weights for combat remain around 145 lbs. Integrating women means that your battlefield calculus for foot movement is seriously impacted – can you maintain your desired rate of movement given combat load, terrain, weather, and visibility? If the answer to this is no, then integrating women in those units is a mistake. There is a serious argument that we put too much gear on the average soldier, but it’s not a problem that’s going away any time soon.

Women coming to the infantry would have to take the physical fitness test under male standards and road march without slowing down the unit. Would the military hold true to that standard if women were allowed in the combat arms? No. Is it discriminatory not to allow them in those branches? Yes. But I strongly believe that it would pass constitutional muster under the intermediate-level scrutiny used for gender-based discrimination claims.

Conclusion

Koehl admits that gays “have served in every army in every war since we began recording the history of warfare.” If that is the case, and if we can change policy without impacting American readiness – and yes, combat effectiveness – as the British and Israeli experiences show, then resistance to ending DADT seems less a matter of national security and more a political football.

There’s More to Market Education than School Choice

Nick Gillespie drew attention yesterday to an op-ed Charles Murray wrote on school choice. Murray’s thesis was that the dominance of family environment and genetics in determining student achievement is such as to allow little room for schools to affect academic outcomes. That said, Murray goes on to argue for school choice anyway, on the grounds that families differ in their educational preferences, and the best way to match families to schools is to allow the former to choose the latter. This, he says, “should be the beginning and the end of the argument for school choice.”

Certainly Murray’s point about the value of choice is true, so far as it goes. But it doesn’t go nearly far enough. First, there are other compelling non-academic arguments for school choice (e.g., they minimize social conflict by allowing families to get the sort of education they want for their own kids without imposing it on everybody elses, as happens of necessity when there is a single official government organ of education.) Second, there is very good reason to believe that true market education would lead to higher student achievement.

Murray cites the pathbreaking work of James Coleman, who revealed that home-related factors explain more of the observed variation in student achievement than does choice of school, to argue that schools can’t have much effect on achievement. This is a non sequitur. While Murray’s inference is consistent with Coleman’s evidence, it does not necessarily follow from it. It is possible that since 90 percent of U.S. students are enrolled in government monopoly schools, and since those schools operate on similar lines not just within states but between states, variation in schools’ contributions to student learning have been artificially curtailed.

Furthermore, even in a highly competitive and free education marketplace, variation in student achievement between schools wouldn’t necessarily be very large, since the very best schools would be emulated by many of their competitors, and the very worst schools would go out of business.

But, and this is the point that Murray did not address, the mean level of student achievement in the competitive marketplace could well be much higher than the mean level in our current monopoly system despite the fact that, within each of these systems, school-to-school variation might be low.

From our previous exchanges on this topic, it seems Murray is skeptical of that possibility–skeptical that markets could lead to a substantial increase in mean academic achievement above the mean we observe the existing school monopoly. I offered some counter-evidence in those earlier exchanges, but here’s another reason to expect a higher market mean: the abandonment of rigid age-based grading.

Age-based grading is arbitrary and pedagogically counterproductive. Market education systems, such as the Asian after-school tutoring industry, often group students based on their performance in each subject, promoting them to the next level of the curriculum as soon as they have mastered the current one. This allows students to progress at their own pace. Empirical studies have shown that performance based grouping helps students at all levels of performance to learn more quickly, and it would almost certainly contribute to a boost in the overall average even if nothing else changed.

But the existing research on performance based grouping fails, I think, to capture the full extent of the difference that it can make when allowed to operate unfettered. It is not at all uncommon to see kids who take an avid interest in some pursuit leap well ahead of the typical adult expectations of what they can achieve. Music is a good example, as are strategy games like chess and go (a.k.a. weiqi or baduk). There are 11 and 12 year olds who play these games well above the level that most adult players ever reach.

Furthermore, it does not seem that we can fully attribute the stellar achievement of these youngsters to stratospheric IQs. The research on chess and IQ is surprisingly sparse, but what there is does not point to a strong linear relationship between the two. My (admittedly incomplete) reading of it suggests that there might be an IQ floor below which high-level strategy game performance is unlikely, but that above this floor assiduous practice and access to high level players (and/or books on the game) seem more important. The latter are the kinds of things that performance based grouping allows across academic subjects. There’s no reason that kids with an affinity for math couldn’t be learning calculus in middle school or early high-school, for example.

So there is much more value in market education reform than simply letting families choose the flavor of curriculum they prefer.