Tag: mandate

Mandate for Taxes?

The New York Times reports that House Democrats want to raise money for health care with a $550 billion tax hike on people who produce the most wealth. The Times says,

the proposal is perhaps the clearest expression yet of the mandate that Democrats believe they won last November, when voters expanded Democratic majorities in Congress and sent Barack Obama to the White House.

If Democrats think they won a mandate for huge tax increases – without talking about them – then 2010 ought to be fun.

A Compelling Government Interest in… Fabulous Drapes!

Libertarians often disagree with their non-libby friends about the need for government-mandated occupational licensing in fields like medicine. The idea behind such licensing is that the government has a compelling interest in protecting citizens and that licensing actually achieves that end. The evidence is not as cut and dried on the latter point as many people assume, but at least there’s enough meat there to warrant a discussion.

Whatever you think about occupational licensing in the context of medicine, there’s one field where the government’s “compelling interest” – and ability to successfully execute on it – is particularly hard to defend: interior design.

In three U.S. states, government officials are, right now, “protecting” their citizens from bad Feng Shui, misguided uses of prints with plaids, gauche arrangements of bric-a-brac, and other crimes against fabulosity. No one in Florida, for instance, can call himself an interior designer lest he receives the official imprimatur of the state. The Institute for Justice has filed suit to overturn the licensing requirement. Imagine the harm to Floridians if they succeed….

No. I can’t imagine any either.

In this field, more than any other, the real reason for most occupational licensing becomes apparent: cartelization to protect incumbent businesses from competition.

UPDATE: Check out this video by ReasonTV about the interior design license laws around the country.

GOP Health Care Alternative: Drinking the Massachusetts Kool-Aid

Earlier this morning, my colleague, Michael Cannon, blogged a devastating critique of the Coburn-Burr-Ryan-Nunez alternative to the Obama health plan. As he shows, while the bill has some good features (changing the tax treatment of health insurance, expanding HSAs), the good is swamped by a bizarre collection of regulation, mandates, and hidden taxes.

In fact, the bill appears to be based, in large part, on what its sponsors call “the well-known, bi-partisan achievement of universal health care through a private system in Massachusetts.” But the Massachusetts model has failed to either achieve universal coverage or control health care costs. Rather, as I noted in this recent blog, it has led to more regulation, less consumer choice, and increased insurance premiums, while running huge budget deficits that have already led to one tax increase and are now causing the state to consider premium caps and global budgets. One wonders why congressional Republicans would want to head down that road.

Notably, Coburn-Burr-Ryan-Nunez abandons Rep. John Shadegg’s proposal to allow Americans to buy insurance across state lines in favor of a requirement that states establish Massachusetts-style connectors. But the Massachusetts Connector has been one of the worst aspects of that state’s reform, acting as a super-regulatory body, adding new mandated benefits, restricting consumer’s choice of plans, and adding both regulatory and administrative costs to insurance. (In fact, the Connector adds its own administrative costs, estimated at 4 percent of premium costs, for plans that are sold through it.) What the Connector has not done is live up to its promise of breaking the link between employment and insurance, giving workers personal, portable insurance that they could take with them from job to job, and which they would not lose when they lost their jobs. Unfortunately, the Connector has not lived up to its promise in the latter regard. In fact, as of May 2008, only 18,122 people had purchased insurance through the Connector. That’s very little gain for so much pain.

Since there is virtually no chance that the Coburn-Burr-Ryan-Nunez will actually be enacted, perhaps one shouldn’t get too excised about its failings. No doubt it is far superior to Obamacare. And, it is understandable that congressional Republicans want to appear as more than the “party of no.” Still, this looks like a sadly missed opportunity.

The Coburn-Burr-Ryan-Nunes Mandate-Price-Control Bill

Today, Senators Tom Coburn (R-OK) and Richard Burr (R-NC), along with Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA) announced that they will introduce a health care reform bill. If my reading of the bill summary is correct, their bill would:

  • Mandate that states create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
  • Mandate that all plans offered through those exchanges meet federal regulatory standards,
  • Mandate “guaranteed issue” in those exchanges,
  • Mandate “uniform and reliable measures by which to report quality and price information,”
  • Impose price controls on those plans by prohibiting risk-rating,
  • Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and
  • Fall just short of an individual mandate by setting up (mandating?) automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” – essentially, trying to achieve universal coverage by nagging Americans to death.

Needless to say, I am troubled.

The bill summary is self-contradictory. On the one hand, it lists “No Tax Increases” as a core concept. Do its authors not know that imposing price controls on health insurance premiums imposes a tax on healthier-than-average consumers? And where do they think the money for “risk-adjustment” payments will come from? Heaven?

The bill sponsors seem to want to cement in place the monopoly regulation that currently exists at the state level – when they’re not encouraging Congress to take over that function. Have they abandoned their colleague Rep. John Shadegg’s (R-AZ) proposal to allow for competitive regulation of health insurance?

And if Massachusetts created an “exchange” on its own, why do other states need federal legislation?

The bill includes some ideas for which I have more sympathy, like its tax-credit proposal and expanding health savings accounts.

But the above provisions would sow the seeds of a government takeover of health care – so much so that The Washington Post’s Ezra Klein is salivating:

The word of the day is “convergence.” That – and that alone – is the definitive message of the conservative health reform alternative developed by Sens. Tom Coburn (Okla.) and Richard Burr (N.C.), as well as Rep. Paul Ryan (Wisc.). For now, some of the key provisions are about as clear as mud. The plan’s changes to the tax code, in particular, are impossible to discern. So I’ll do another post when I can get some clarity on those issues. The politics, however, are perfectly straightforward.

A superficial read of the Patients’ Choice Act – which I’ve uploaded here – would make you think you’re digging into a liberal bill. A fair chunk of the rhetoric is lifted straight from Sen. Ted Kennedy’s office. “It is time to publicly admit that the health care system in America is broken,” begins the document. “Health care is not a commodity in the traditional sense,” it continues. “States should provide direct oversight of health insurers to make sure they are playing by fair rules,” it demands. The way we pay private insurers in Medicare “wastes taxpayer dollars and lines the pockets of insurance executives,” it says. Elsewhere, it praises solutions that have worked in several European countries.”

And though it’s still too early to say how the policy fits together, it’s clear that many traditionally Democratic concepts have been embraced. To put it simply, the plan wants to encourage a version of the Massachusetts reforms – which it calls a “well-known, bi-partisan achievement of universal health care” – in every state. There are some differences, of course. The plan doesn’t have an individual mandate. It doesn’t have an obvious tax on employers. But it strongly endorses State Health Insurance Exchanges. And that, for Republicans, is a radical change in policy.

This idea – present in every Democratic proposal but absent in Arizona Sen.John McCain’s plan – would empower states to create heavily regulated marketplaces of insurers. The plans offered would have to “meet the same statutory standard used for the health benefits given to Members of Congress.” Cherrypicking would be discouraged through risk adjustment, which the PCA calls “a model that works in several European countries.” The government would automatically enroll individuals in plans whenever they interacted with a government agency and states would be able to join into regional cooperatives to increase the size of their risk pool.

In essence, Coburn, Burr, and Ryan are abandoning the individual market entirely. Like Democrats, they’re arguing that individuals cannot successfully navigate the insurance market, and they need the protection of government regulation and the bargaining power that comes from a large risk pool. This is literally the opposite approach from McCain, who attempted to unwind the employer-based insurance and encourage families to purchase health coverage on the individual market. The core elements of this plan, in other words, make it the same type of plan Democrats are offering. A plan that enlarges consumer buying pools rather than shrinks them. It’s pretty much exactly what I’d expect a Blue Dog Democrat to propose. And it’s further evidence that the argument over health reform is narrowing, rather than widening. And it’s narrowing in a direction that favors the Democrats.

UPDATE: After discussions with Sen. Coburn’s staff, I happily issued a few corrections. Still, concerns remain.

Obama’s Fuel-Economy Standards

If you like driving a big car or SUV, the good news about Obama’s new fuel-economy standards is that they won’t dictate what kind of car you will be able to buy in the future. If you want to buy a 15-mpg SUV, Detroit (or Aichi or Wolfsburg) will be free to make and sell you one.

The bad news is that the standards may make your car more expensive. Corporate Average Fuel Economy (CAFE) standards are actually calculated as the mean of gallons per mile, not miles per gallon. So, as of 2016, for every 15-mpg model made by an auto maker, that company will have to make five models of cars that can go 50 mpg in order for its fleet to meet Obama’s new target. Since bringing each new model to market can cost billions of dollars, if there are not enough people who want to buy those fuel-efficient cars to cover their design costs, the company will have to add a share of those costs to your SUV.

If you want to save energy, the good news is that Obama’s standards are more stringent than those in the Energy Independence and Security Act of 2007 – but not by much. While the 2007 law required new car fleets to average 35 mpg by 2020, Obama’s standard requires fleets to average 35.5 mpg by 2016.

The bad news is that nothing in Obama’s standard guarantees that they will actually save energy. The rule only requires that the mean fuel economy of all models, not all cars, made by a manufacturer meet the 35.5 mpg standard. Not much energy will be saved if gas guzzlers sell well and hybrids don’t.

If gas prices go up, people will buy the fuel-efficient models that auto makers are forced to make – but that would have happened anyway. If gas stays cheap, people will continue to buy fuel-inefficient cars (tempered only by having to pay extra to cover the start-up costs of models no one wants). If you believe that saving energy or reducing dependence on foreign oil is important, then you should prefer a stronger form incentive over this mandate.

The worst-cast scenario is that the new standards increase the cost of buying new cars but don’t save any energy (except to the extent that a few people can’t afford to own a car at all). The best-case scenario is that Obama’s standards result in future auto fleets that are not much different from what a free market would have produced. Considering that Honda and Toyota are now in a price war over their Insight vs. the third-generation Prius, that may be closer to the actual outcome.

The good news is that auto makers readily acquiesced to this standard, partly because they feared something worse but partly because they didn’t think it would cost much. The Obama administration estimates that the added cost of the new standard will be $1,300 per car, but that (if gasoline remains $3 per gallon) it will save drivers $500 per year. That means it could pay for itself in the long run – but only if people actually do buy more fuel-efficient cars.

The debate over the standard reminds me of the debate after Congress gave the Environmental Protection Agency the authority to regulate air quality in 1970. One faction favored of technical solutions to pollution, such as catalytic converters. The other faction argued for behavioral tools aimed at getting people to drive less.

Today, we know the behavioral solutions were a complete failure. Although many cities imposed urban-growth boundaries, built light rail, and implemented various disincentives to driving, not one can say they have reduced per-capita driving by even 1 percent.

On the other hand, the technical solutions were highly successful. Though we drive nearly three times as many miles as in 1970, total automotive air pollution has declined more than 50 percent.

There was a third faction in 1970 whose voice was almost inaudible: economists who argued that incentives would clean the air better than mandates. The mandates that were put in place only acted on new cars, and it took more than a decade (and now takes almost two decades) to turn over the American auto fleet. Properly designed incentives could have acted on all cars and cleaned the air much faster (by, for example, giving people a choice between retrofitting their cars or paying a pollution fee that was dedicated to cleaning up pollution elsewhere).

The lesson libertarians take from this is that incentives are better than mandates. But the point I like to make is that, though incentives might work better than mandates, technical solutions work far better than behavioral ones.

Despite the past failure of behavioral tools, there is a strong movement in the administration and Congress today for more behavioral controls aimed at reducing driving to save energy and greenhouse gas emissions. These behavioral tools will be expensive, they will have costly unintended consequences, and in the end they will do little to protect the environment.

I remain unpersuaded that we need to reduce greenhouse gas emissions. But if there is a political need to do so, we should at least do it in ways that cost little and provide other benefits that will help cover those costs. McKinsey & Company estimates that the United States can meet the most stringent greenhouse gas targets by investing in programs that cost no more than $50 per ton of greenhouse gas abatements. More fuel-efficient cars meet this test, says McKinsey, and will also reduce the emissions of other pollutants such as nitrogen oxides.

Meanwhile, light rail, growth boundaries, and other behavioral tools, if they save energy and reduce greenhouse gases at all, will only do so at costs of tens of thousands of dollars per ton. Though I am far from thrilled about Obama’s new policy, at least it reminds us that, for a relatively low cost, we can significantly reduce energy consumption and various pollution emissions without trying to socially engineer American lifestyles.

Does the GOP Recognize Socialized Medicine When They See It?

Rumor has it that Republicans in the House and Senate will soon decide whether their alternative to the Democrats’ health care reforms will include an “individual mandate” – a legal requirement that all Americans obtain health insurance.

A recent Consensus Group statement shows that the entire free-market health policy community – including scholars from the Heritage Foundation – opposes such a move.

The Cato Institute has published one study arguing against an individual mandate in itself, and two studies critical of its use in Massachusetts. Cato will soon publish additional studies showing how an individual mandate has – as predicted – led to exploding costs and government rationing efforts in Massachusetts, and arguing against its use at the federal level.

Worse, as I explain in this study, an individual mandate is in fact a large leap toward socialized medicine – regardless of the fact that health insurance would remain nominally “private.” Republicans may oppose creating a new government health insurance program. Yet if they are willing to force Americans to purchase insurance, they will effectively nationalize the health insurance industry.

Finally, as I explain in this op-ed, an individual mandate is always accompanied by taxpayer subsidies to people who may (or may not) need aid to comply. The more people who rely on government aid for their health care, the harder life will become for the party of tax cuts. Bill Clinton showed that the best way to defeat tax cuts is to paint them as a threat to YOUR health care. Just in case doing the right thing isn’t reason enough to reject this horrid idea, Republicans should know that by supporting an individual mandate, they will be slitting their own throats.

All for an idea that doesn’t even command support from a majority of the public.

The REAL ID Revival Bill Should Not Get a PASS

A draft Senate bill to revive the REAL ID Act has been leaked to to the anti-immigrant Center for Immigration Studies, and they find it wanting.

The bill is an attempt to smooth down REAL ID and make the national ID law more palatable. CIS is unhappy because they want a national ID implemented right away.

REAL ID is, of course, failing. Just ten months ago, the Bush Administration’s Secretary of Homeland Security granted waivers to every state in the country - not a single one of them was in compliance by the May, 2008 deadline, and several have statutorily barred themselves from complying.

Legislation to repeal REAL ID in both the House and Senate was introduced in the last Congress, but with an administration and Department of Homeland Security eager to demagogue the issue against a Democratic Congress, that legislation did not move. Repealing REAL ID would not have the same problem in the current Congress.

But since then, Washington’s wheels have been turning. The National Governors Association has turned into an advocate of reviving REAL ID because it hopes that federal dollars will flow behind federal mandates. They won’t, but reviving REAL ID will cement NGA’s role as a beggar for federal dollars in Washington. (Maybe other state legislator groups, as well.)

Everbody in Washington, D.C. salivates over the chance to make “deals” even if that means switching positions on issues of principle like whether the U.S. should have a national ID. We’ll be watching to see which political leaders reverse themselves and support this attempt at a national ID for their love of political dealmaking.

The working name of the REAL ID revival bill is the “PASS ID Act.” It should not be given a pass by opponents of a U.S. national ID and the REAL ID Act.