Tag: government program

Romney Can Run, but He Can’t Hide from Romneycare

Massachusetts Governor Mitt Romney announces today that he will be a candidate for president.   His announcement is expected to tout his business experience and to portray him as the candidate best able to deal with the country’s economic problems.  But one thing you are not likely to hear him talk about is his Massachusetts health plan, Romneycare.

Of course, Romney has already tried to put this issue away with a speech in Detroit last month, and he would probably be happy to never talk about it again.   But if Romney really believes he can hide from the Romneycare fallout, he is badly mistaken. 

Cato scholars have issued several reports detailing the many failings of Romneycare.  Those studies can be found here , here , here and here for instance.  

In his Detroit speech, Romney trotted out three defenses.  First, he says that his plan, unlike Obamacare, did not increase taxes. That is technically true — if you consider only the legislation as Romney signed it. However, it is also true that the legislation relied heavily on federal subsidies — more than $300 million — and was still underfunded. Romney’s successor was forced both to cut back on some benefits that the plan originally offered and to raise the state’s cigarette tax by $1 per pack ($154 million annually) to help pay for the program. The state also imposed approximately $89 million in fees and assessments on health-care providers and insurers. 

Similarly, Romney claims that his plan only costs about one percent of the Massachusetts budget and is, therefore, not a budget-busting, big government program.  In making this claim, however, Romney fails to note that that accounting does not take into account more than $300 million annually in federal funds.  Nor does it count the costs that were pushed off onto Massachusetts businesses and taxpayers through the individual and employer mandates, or the costs of increased insurance premiums.

And, finally, Romney criticizes Obamacare as a “one size fits all” federal plan, whereas his plan was implemented in only one state. That’s true. Governor Romney only messed up the health-care system in Massachusetts, while President Obama has messed up health care for the entire country. Of course, as governor, Romney didn’t have the power to impose his model outside of his state. He now says that he opposes any national plan, calling for states to experiment with different approaches as the “laboratories of democracy.” That would certainly be an improvement over Obamacare. On the other hand, he has repeatedly said that he sees the Massachusetts plan as a model for the nation and has urged other states to copy his approach.

Governor Romney faces many challenges in convincing voters that he really does want to reduce the size, cost, and intrusiveness of government.  For example, Romney has recently been pandering to Iowa voters by renewing his support for ethanol subsidies.  On other issues, he has been a big supporter of federal involvement in education. He backed No Child Left Behind and once called for the federal government to buy a laptop computer for every child born in America. His record as Massachusetts governor was decidedly mixed. In the Cato Institute’s biannual ranking of governors on fiscal issues, Romney received a grade of only “C.” His philosophy of governing can be seen from his comment, “I’d be embarrassed if I didn’t always ask for federal money whenever I got the chance.”

But the biggest single obstacle to his candidacy remains Romneycare.  Unless and until he finds a way to deal with this albatross, he will be a weak and wounded frontrunner.

Government’s Unwelcome Economic Distortions

A couple of weeks ago, David Boaz discussed the Old Testament story in which the people of Israel ask Samuel for a king to rule over them. God’s instructions to Samuel can be summed up as “tell them to be careful of what you wish for.” David brought up the passage in the context of civil liberties, but the story’s lesson also applies to economic liberties.

Over the past eighty years, the public has become conditioned in times of crisis to turn to their rulers and demand that they “do something.” That the rulers had a hand in the crisis is all too often either unrecognized or it’s a secondary concern. As Robert Higgs demonstrated in his seminal book, Crisis and Leviathan, the rulers will willingly oblige the public and, in the process, come away with more power and control than they had prior to the crisis. Unfortunately, the rulers’ enhanced authority begets more crises in the future.

The latest chapter in this story is the economic downturn. Many of the “seeds” for the recession were planted by government. Regardless, the average citizen reflexively looked toward Washington to quickly fix the economy. The public’s limited patience meshes well with policymakers who are naturally inclined to operate on a short-term horizon (i.e., the next election). Therefore, policymakers responded with quick-fix measures with almost no regard to the long-term consequences.

The long-term economic problems caused by massive deficit spending and mounting debt are the most obvious. But as two stories in the news show, short-term measures implemented by policymakers to “fix” the economy have also introduced unwelcome economic distortions.

First, following the expiration of the federal homebuyer tax credit, home sales have fallen off the cliff. The Christian Science Monitor asks: was the homebuyer tax credit the “scam of the century?” The program was riddled with fraud, some folks who were induced to purchase a house are already underwater or are headed in that direction, and the billions of dollars spent on the program did zilch for the long-term health of the housing market.

When one looks at ultimate beneficiaries of the tax credit, it’s easy to see why the CSM calls it a “scam:”

[I]n trying to fully understand why the government undertook such a useless and poorly calculated program, it’s important to recognize those who truly walk away from this policy in better standing.

Realtors, home builders and mortgage bankers… some of the most notable culprits of the housing bubble years… all walk away cleanly skimming the proceeds coming from the transactions of an estimated 2 million temporarily stimulated home purchases.

It should come as no surprise that these were the very same industry groups that worked tirelessly lobbying to enact this failed policy… it was a simple exchange… your tax dollars to their wallets.

Second, we go from “scam of the century” to the “the dumbest program ever.” The latter refers to the “Cash for Clunkers” program, which Chris Edwards submitted for nomination in August 2009. Chris cited numerous problems with the program, including that “Low-income families, who tend to buy used cars, were harmed because the clunkers program will push up used car prices.”

A senior editor at Edmunds.com tells a reporter from WIOD news radio in Miami that used-car prices are way up (h/t Radley Balko):

If buying a used car is among your cost-cutting measures… be prepared to pay up to 30-percent more than you did last year.

It is a simple case of supply and demand.

Trouble is … there are fewer used cars.

The cash-for-clunkers program took a bunch off the market.

Plus, Edmunds Senior Editor Bill Visnick says 5-million fewer new cars were sold last year…which pares down the used car supply even more.

As Radley sarcastically notes, you can’t blame those supposedly selfish limited government types for this one:

[W]e have a government program whose stated aim was to shore up huge, failed corporations by giving public money to mostly upper-income people that in the end will penalize low and middle-income people. But remember folks, it’s the libertarians—who opposed C4C—who are greedy corporatists who hate the poor.

There could be a silver lining in the cloud if more Americans start to realize that asking policymakers to quickly fix problems that government policies helped foster isn’t much different than asking the arsonist to put out the fire.

A Post-Health Care Realignment?

From Franklin Delano Roosevelt’s New Deal to Joe Biden’s Big F-ing Deal, progressives have led a consistent and largely successful campaign to expand the size and scope of the federal government. Now, Matt Yglesias suggests, it’s time to take a victory lap and call it a day:

For the past 65-70 years—and especially for the past 30 years since the end of the civil rights argument—American politics has been dominated by controversy over the size and scope of the welfare state. Today, that argument is largely over with liberals having largely won. […] The crux of the matter is that progressive efforts to expand the size of the welfare state are basically done. There are big items still on the progressive agenda. But they don’t really involve substantial new expenditures. Instead, you’re looking at carbon pricing, financial regulatory reform, and immigration reform as the medium-term agenda. Most broadly, questions about how to boost growth, how to deliver public services effectively, and about the appropriate balance of social investment between children and the elderly will take center stage. This will probably lead to some realigning of political coalitions. Liberal proponents of reduced trade barriers and increased immigration flows will likely feel emboldened about pushing that agenda, since the policy environment is getting substantially more redistributive and does much more to mitigate risk. Advocates of things like more and better preschooling are going to find themselves competing for funds primarily with the claims made by seniors.

I’d like to believe this is true, though I can’t say I’m persuaded. It seems at least as likely that, consistent with the historical pattern, the new status quo will simply be redefined as the “center,” and proposals to further augment the welfare state will move from the fringe to the mainstream of opinion on the left.

That said, it’s hardly unheard of for a political victory to yield the kind of medium-term realignment Yglesias is talking about. The end of the Cold War destabilized the Reagan-era conservative coalition by essentially taking off the table a central—and in some cases the only—point of agreement among diverse interest groups. Less dramatically, the passage of welfare reform in the 90s substantially reduced the political salience of welfare policy. The experience of countries like Canada and the United Kingdom, moreover, suggests that if Obamacare isn’t substantially rolled back fairly soon, it’s likely to become a political “given” that both parties take for granted. Libertarians, of course, have long lamented this political dynamic: Government programs create constituencies, and become extraordinarily difficult to cut or eliminate, even if they were highly controversial at their inceptions.

We don’t have to be happy about this pattern, but it is worth thinking about how it might alter the political landscape a few years down the line.  One possibility, as I suggest above, is that it will just shift the mainstream of political discourse to the left. But as libertarians have also long been at pains to point out, the left-right model of politics, with its roots in the seating protocols of the 18th century French assembly, conceals the multidimensional complexity of politics. There’s no intrinsic commonality between, say, “left” positions on taxation, foreign policy, and reproductive rights—the label here doesn’t reflect an underlying ideological coherence so much as the contingent requirements of assembling a viable political coalition at a particular time and place.  If an issue that many members of one coalition considered especially morally urgent is, practically speaking, taken off the table, the shape of the coalitions going forward depends largely on the issues that rise to salience. Libertarians are perhaps especially conscious of this precisely because we tend to take turns being more disgusted with one or another party—usually whichever holds power at a given moment.

The $64,000 question, of course, is what comes next. As 9/11 and the War on Terror reminded us, the central political issues of an era are often dictated by fundamentally unpredictable events. But some of the obvious current candidates are notable for the way they cut across the current partisan divide. In my own wheelhouse—privacy and surveillance issues—Republicans have lately been univocal in their support of expanded powers for the intelligence community, with plenty of help from hawkish Democrats. Given their fondness for invoking the specter of soviet totalitarian states, I’ve hoped that the folks mobilizing under the banner of the Tea Party might begin pushing back on the burgeoning surveillance state. Thus far I’ve hoped in vain, but if that coalition outlasts our current disputes, one can imagine it becoming an issue for them in 2011 as parts of the Patriot Act once again come up for reauthorization, or in 2012 when the FISA Amendments Act is due to sunset. In the past, the same issues have made strange bedfellows of the ACLU and the ACU, of Ron Paul Republicans and FireDogLake Democrats.  Obama has pledged to take up comprehensive immigration reform during his term, and there too significant constituencies within each party fall on opposite sides of the issue.

Further out than that it’s hard to predict. But more generally, the possibility that I find interesting is that—against a background of technologies that have radically reduced the barriers to rapid, fluid, and distributed group formation and mobilization—the protracted health care fight, the economic crisis, and the explosion of federal spending have created an array of potent political communities outside the party-centered coalitions. They’ve already shown they’re capable of surprising alliances—think Jane Hamsher and Grover Norquist.  Suppose Yglesias is at least this far correct: The next set of political battles are likely to be fought along a different value dimension than was health care reform. Precisely because these groups formed outside the party-centered coalitions, and assuming they outlast the controversies that catalyzed their creation, it’s hard to predict which way they’ll move on tomorrow’s controversies. It’s entirely possible that there are latent and dispersed constituencies for policy change outside the bipartisan mainstream who have now, crucially, been connected: Any overlap on orthogonal value dimensions within or between the new groups won’t necessarily be evident until the relevant values are triggered by a high-visibility policy debate.  Still, it’s reason to expect that the next decade of American politics may be even more turbulent and surprising than the last one.

Government Program Competes with First-Time Home Buyers

If there should ever be a great time to be a first-time home buyer – it should be now.  Mortgage rates are at historic lows.  Prices have fallen almost 30% across the country since the peak.  Builders continue to add supply into already saturated markets.  Yet, as the Wall Street Journal reports, potential first time home buyers are facing stiff competition from investors…and from the government.

Congress has appropriated about $6 billion to local and state governments to buy foreclosed properties.  President Obama is proposing to add another $1.5 billion that could be used for similar purposes.   The argument is supposed to be that these funds would eliminate the negative impact of foreclosures on communities, while also providing shelter to needy families.  Part of the program’s rationale is that local governments’ will select a better group of tenants and purchasers that would private investors (the history of public housing should rebut that assumption).

With the exception of cities like Detroit, Cleveland and Buffalo, many of the country’s boom areas still have significant population and other amenities (like sunny weather).  Many people would continue to choose to live in these areas, if only they were more affordable.  After all these years of massive subsidies for home-ownership, there seems a great irony in having the government now be one of the largest barriers to families achieving home-ownership – by using tax dollars to bid up and compete away existing homes.

Trouble in Massachusetts

Yesterday, Cato released a new study, “The Massachusetts Health Plan: Much Pain, Little Gain,” which showed that official estimates overstate the gains in health insurance coverage resulting from a 2006 Massachusetts law by at least 45 percent.  The study also finds: supporters understate the law’s cost by nearly 60 percent; government programs are crowding out private insurance; self-reported health improved for some but fell for others; and young adults are responding to the law by avoiding Massachusetts.

Given that the Massachusetts health plan bears a “remarkable resemblance” to the Obama plan, the study should serve as a warning sign to members of Congress, says Michael Cannon, director of health policy studies.

The study has received coverage in Investor’s Business Daily, The Wall Street Journal, The Washington Post, Detroit News, The Washington Times, the Reason Foundation and the Pioneer Institute.

Spending Our Way Into More Debt

Huge deficit spending, a supposed stimulus bill, and financial bailouts by the Bush administration failed to stave off a deep recession. President Obama continued his predecessor’s policies with an even bigger stimulus, which helped push the deficit over the unimaginable trillion dollar mark. Prosperity hasn’t returned, but the president is persistent in his interventionist beliefs. In his speech yesterday, he told the country that we must “spend our way out of this recession.”

While a dedicated segment of the intelligentsia continues to believe in simplistic Kindergarten Keynesianism, average Americans are increasingly leery. Businesses and entrepreneurs are hesitant to invest and hire because of the uncertainty surrounding the President’s agenda for higher taxes, higher energy costs, health care mandates, and greater regulation. The economy will eventually recover despite the government’s intervention, but as the debt mounts, today’s profligacy will more likely do long-term damage to the nation’s prosperity.

Some leaders in Congress want a new round of stimulus spending of $150 billion or more. The following are some of the ways that money might be spent from the president’s speech:

  • Extend unemployment insurance. When you subsidize something you get more it, so increasing unemployment benefits will push up the unemployment rate, as Alan Reynolds notes.”
  • “Cash for Caulkers.” This would be like Cash for Clunkers except people would get tax credits to make their homes more energy efficient. Any program modeled off “the dumbest government program ever” should be put back on the shelf. 

  • More Small Business Administration lending. A little noticed SBA program created by the stimulus bill offered banks an “unprecedented” 100 percent guarantee on loans to small businesses. The program has an anticipated default rate of 60 percent. Small businesses need lower taxes and fewer regulations, not a government program that perpetuates more moral hazard.

  • More aid to state and local governments. State and local government should be using the recession to implement reforms that will prevent them from going on another unsustainable spending spree when the economy recovers. Also, we need fewer state and local government employees – not more – as they’re becoming an increasing burden on taxpayers.

The president said his administration was “forced to take those steps largely without the help of an opposition party which, unfortunately, after having presided over the decision-making that led to the crisis, decided to hand it to others to solve.” Mr. President, nobody has forced you to do anything. You’ve chosen to embrace – and expand upon – the big spending policies that were a hallmark of your predecessor’s administration.

Medicare for Everyone?

According to The Hill, House Democrats are considering re-branding their new government-run health insurance program.  A “public option” evidently isn’t catchy enough.  Now they’re thinking, “Medicare Part E” as in, Medicare for Everyone.

By all means, model a new government program after Medicare, which:

Pleeeeease don’t throw me into that briar patch.