Tag: new america foundation

New America’s New Entitlement

The Bill and Melinda Gates Foundation has delivered a lot of money for ideas to make higher education more affordable. One of the many papers it funded came out of the New America Foundation last week, and the report contains lots of proposals for Gates to work with. Unfortunately, its backbone – making the Pell Grant an entitlement program – is a complete nonstarter. Not only does Washington need a new entitlement like the Super Bowl needed a sudden spike in hair dryer use, the Pell Grant is utterly unjust, taking from Peter and giving to Paul so that Paul can make a million extra bucks.

The first point should be self-evident. Entitlements such as Medicare and Social Security are already gigantic fiscal asteroids hurtling directly at us. Indeed, at their present rate of growth, by 2050 entitlements will likely eat up every single cent the federal government brings in, leaving not a dime for defense and other discretionary spending.

A Pell entitlement would certainly be small compared to, say, Medicare. If I’m reading NAF’s report right, the total Pell cost in 2022, after all their recommended reforms, would be about $53.3 billion. (NAF says its plan would cost $94.4 billion over the next ten years “compared to current policy.” For simplicity, dividing $94.4 by ten and adding the resulting $9.4 billion to the CBO-projected 2022 Pell cost of $43.9 billion yields $53.3 billion.) In contrast to that $53.3 billion, Medicare is expected to cost about $1 trillion in 2022. But while the cost would be relatively tiny, the root pathology would be the same: a program with funding put on autopilot.

And don’t think Pell won’t sneak up to include increasingly higher-income people. No one likes seeing others get free taxpayer money, and no politician will let the “middle-class” – whoever that is – get “squeezed.” Indeed, NAF tries to soften the blow for those who would lose tax deductions and credits under their plan (very good proposals, by the way) by noting that “some of the aid that these benefits provide to families with middle incomes will be replaced with the significant increases to the maximum Pell Grant that are proposed in this paper.”

All that said, the root objection to Pell applies, whether it is an entitlement or not: There is no just reason for taking money from Paul and giving it to Peter so that Peter can get much wealthier. But that is precisely what Pell is intended to do: Take money from taxpayers and give it to other people so that they can get degrees and earn “$1 million more over their lifetimes.” If any entity other than government were to do that, we’d call it “stealing.”

The Pell Grant program absolutely should not be an entitlement – we have way too many of those as it is. Even more important, though, Pell shouldn’t exist at all. It is, essentially, legalized theft.

Cross-posted at seethruedu.com

ObamaCare: a Downward Spiral of Rising Costs and Deteriorating Quality

Here’s my contribution to a “one-minute debate” on ObamaCare in the Christian Science Monitor:

The new health-care law’s mandates are already causing health insurance premiums to rise 3 to 9 percent more than they otherwise would. Its price controls are pushing insurers to abandon the market for child-only coverage and will soon begin rationing care to Medicare patients, partly by driving nearly 1 in 6 hospitals and other providers out of the program.

Starting in 2014, when the full law takes effect, things will get really ugly. ObamaCare’s “individual mandate” will drive premiums even higher – assuming the courts have not declared it unconstitutional, as they should. Because the penalty for violating the mandate is a fraction of those premiums, healthy people will wait until they are sick to buy coverage, driving premiums higher still. This is already happening in Massachusetts, which enacted a nearly identical law in 2006. ObamaCare’s price controls will force insurers to cover sick patients at artificially low premiums, guaranteeing that insurers will avoid, mistreat, and dump the sick, because that’s what the price controls reward. ObamaCare’s private health-insurance subsidies will expose low-wage workers to implicit tax rates higher than 100 percent, potentially trapping millions in poverty.

With real reforms like Medicare vouchers and large health savings accounts, and letting consumers purchase health insurance across state lines, a free market would reduce costs and improve quality through innovations such as integrated health systems, nurse-practitioner-staffed primary care clinics, telemedicine, and insurance that offers even sick patients a total satisfaction guarantee.

But until Congress or the courts discard ObamaCare’s mandates, price controls, and new entitlement spending, there is literally nothing that can arrest this downward spiral of rising costs and deteriorating quality.

The above link will also take you to a counter-point by Kavita Patel of the New America Foundation.

Consumer Protection for Intellectuals

Nate Anderson at Ars Technica has a good write-up of the New America Foundation’s interesting proposal for labeling of broadband services, something akin to the nutrition labels we have for food.

Labeling and disclosure are better than direct regulation of the terms on which goods and services can be sold, of course. Labeling does not presume to decide unalterably what factors are or will be the most salient to consumers. But it does seek to channel those interests, and it does presume that consumers discover information that is important to them via labels. (I dealt with some of these concepts in my recent post about privacy notices.)

What labeling is really about, I believe, is pushing consumers to focus on the terms that intellectuals believe are most interesting. Smart people’s interests often match up with everyone else’s, but not always. Anderson’s write-up wonders aloud “whether requiring disclosure of the ‘maximum round-trip latency to border router’ will do more than induce eye glaze among most broadband users.”

I want my ISP to give me a live tech-support person that can solve the problem with my wifi router, but that didn’t make it into New America’s labeling plan. Any labeling plan will likely be either overinclusive or underinclusive or both, obscuring and omitting the most relevant information.

Yes, labeling is “market-friendlier” than regulation dictating what broadband providers can and can’t offer. But if we believe that markets discover the dimensions of goods and services that are salient to consumers, we can also believe that markets discover what information consumers want, and how they best learn it.

Many years ago, I spoke to a panel of regulators about a financial privacy “short notice” project that — heck — may still be going on. I passed around a small package from which I had eaten baby carrots the previous day. Along with a nutrition label, it had a picture of a cornucopia spilling forth vegetables and fruits, with the legend “Five a Day!” This, I suggested, communicates more salient information to consumers than nutrition labels: eat more fruits and vegetables. “But I use nutrition labels,” countered a well-meaning regulator, extrapolating from her own experience to that of all Americans.

Commerce is alive with trade names, trademarks, symbols, messages, notices, and signals about the content, quality, and desirability of goods and services. Consumers get much more relevant, actionable information this way, I think, than through mandated labels.

They do not intellectualize about these things, but that’s fine. Time is scarce, and it’s not worth it for people to intellectualize about the details of most purchases. Those who do, and those who talk about it, press the market toward what is good for all. The average consumer can gather just enough information to be relatively confident of being satisfied overall with any purchase. On the whole, consumers and markets will gravitate toward products and services that make all better off.

There may be consumer demand for organized, industry-wide labeling in some areas, of course. It’s a fine thing if there is. 

Anderson takes NAF’s plan to be a call for a government mandate, but the write-up itself is vague, saying that broadband providers “should” do various things and observing the absence of a legal requirement for notice. It takes pains to use the passive voice when ordinary speech would identify what actor should establish a labeling regime. 

If only there were a label about that salient feature of the proposal!

You’re for Fair Competition, You Say?

Len Nichols is the top health-policy guy at the New America Foundation.  He’s spent the past few months trying to negotiate a compromise between the Left and the far Left over the creation of a new government health insurance program that would compete with private insurers.  With John Bertko, Nichols wrote a paper on how to create a level playing field between a government program and private insurance.

Yesterday’s CongressDailyAM, however, had an interesting article that sheds light on Nichols’ sense of fair play.  According to the article:

Nichols has floated the idea of writing into law a requirement that certain changes to the system would require a two-thirds vote to pass rather than a simple majority.

Never mind that such a requirement would guarantee that the new program would breed even more stagnation and death than Medicare and Medicaid do.

What Nichols proposes is that a Democratic Congress should be able to create a new Fannie Med by a simple majority vote in each chamber, but if a subsequent (Republican?) Congress wanted to repeal it, they should face a higher bar.

Keep that in mind when you hear talk about a level playing field.

Shuffle, Shuffle, Shuffle…

This morning I attended a federal student aid event at the New America Foundation. The big topic? Not the effect of aid on out-of-control college prices, by far the most important concern from the contexts of economic growth, affordability, fairness to taxpayers, etc. No, it was the Obama Administration’s “bold” (NAF’s word) proposal to kill the federal guaranteed student loan program and do all lending directly from Washington. It was just the kind of debate folks in DC love, one that sounds really important but leaves the government-created problem almost totally untouched.

Here’s the critical reality that was completely ignored: taxpayer-furnished financial aid – whether coming directly from DC or delivered by “private” institutions completely backed by DC – appears to be a very big enabler of rampant tuition inflation. Quite simply, as I lay out in the most recent Cato Handbook for Policy, when government ensures that customers can pay more, students demand more and colleges raise prices.

Of course, the argument that aid drives prices is not without its critics, but they’ve got a tough case to make both in terms of economic theory and college cost reality. In Washington, however, this isn’t even being discussed. In DC, it’s all about the deck chairs and nothing about the sinking ship. But then, as we’ve learned oh-so-clearly over the last several months, politicians gain little from averting disasters they’ve helped cause, and lots from handing out life jackets.

Fortunately, Cato is here to remind politicians about the important stuff, not just to bicker over which special interest gets the biggest tax-dollar windfall. On April 7 we will address the fundamental problems with student aid, hosting a Capitol Hill Briefing on the effects not just of switching from guaranteed lending to direct lending, but of all federal student aid. It’ll be just the kind of discussion Washington so desperately needs but so rarely has.

Register here to attend, or watch online the day of the event.

This Is Why Universal Coverage Is a Religion — and Not about Compassion or Saving Lives

I was invited to participate in an email/online/sorta exchange for the Washington Post yesterday.  Unfortunately, the effort was spiked after just a few rounds of emails.  But rather than let my participation go to waste, I thought I’d post one exchange that I think highlights why I’m not just being colorful when I describe supporters of universal health insurance coverage as the Church of Universal Coverage.  I could summarize the exchange, but I’m lazy.  So I’ll just copy and paste.

I wrote:

All the interest groups are meeting with all the right politicians and making all the right noises, thus the Church of Universal Coverage says the stars have aligned for fundamental reform… Everyone is at the table right now because no one wants to be on the menu.  But when the Democratic leadership makes its intentions clear, today’s love-fest will turn into a bloodbath.

Andres Martinez of the New America Foundation (who owes me a taco al pastor) responded:

I am a proud member of the church, Michael.  As New America’s own recent study on the urgency of reform – which reads like a strong courtroom closing argument – noted, how can the world’s most prosperous nation afford to have tens of thousands of its citizens die each year because they lacked access to health care?  Health care reform is a moral imperative, so your reference to a church (um, even if sarcastic) is appropriate…

I replied:

The Institute of Medicine estimates that every year, about 20,000 Americans die because they lacked health insurance, but as many as 100,000 die from preventable medical errors.  What moral code compels the Church of Universal Coverage to solve the first problem before addressing the second?

Elise Gould of the Economic Policy Institute (whose working paper, “Who is Adversely Affected by Limiting the Tax Exclusion of Employment-Based Premiums?”, I am keen to read) chimed in:

In an answer to Michael’s post about the deaths caused by lacking health insurance as compared to those from preventable medical errors, I’d argue that it’s much easier to solve the second when you have people in a common system (i.e., solving the first).

Me again:

To say that universal coverage will make it easier to reduce medical errors is pure fantasy.

The principal reason we have too many medical errors is that fee-for-service payment dominates America’s health care sector, and fee-for-service rewards medical errors and punishes efforts at error reduction.  The reason fee-for-service dominates is government.  Medicare – the single-largest purchaser in the world – pays largely on that basis.  Ditto Medicaid.  And the federal tax code encourages fee-for-service by insulating consumers from the cost of their health coverage.  If you think it’s hard for government to change payment systems now, just wait until universal coverage gives government even more control over payment systems and makes even more providers dependent on those decisions for even more of their income.  (As an aside, when consumers control their health care dollars and choose their health plans, they can change payment systems in a heartbeat.)

This is why universal coverage is a religion: supporters believe that universal coverage has magical, supernatural powers to suspend political reality and the laws of economics.  I do not exaggerate.  See here and here.

Health care reform is a moral imperative.  But universal coverage is not a moral imperative, nor is it about compassion or saving lives.

For those who are interested, the Anti-Universal Coverage Club is still accepting new members.