Tag: welfare

The Pelosi Bill’s High Water Mark

Democrats are having difficulty corralling 218 votes for the Pelosi bill because Americans do not want government to be as big and as powerful as the House leadership does. Pro-life Democrats do not want a government so big that it can force taxpayers to fund abortions. Pro-choice Democrats do not want a government so big that it uses subsidies to restrict access to abortion coverage. Other Democrats don’t want a government so big that it turns the United States into a welfare magnet.

The American people don’t want the Democrats’ approach to health care generally. The more time the public has to digest ObamaCare, the more they dislike it:

And the Pelosi bill is the most expensive and extreme version of ObamaCare.  Opposition will climb higher when the public learns the bill costs some $1.5 trillion more than Democrats claim.

Even a majority vote would not necessarily indicate majority support for the Pelosi bill. Rep. Jim Cooper (TN) and other Democrats are voting aye only because they want to keep the process moving – i.e., because this isn’t the vote that counts.

Win or lose, tonight’s vote will be the high water mark for the Pelosi bill.

(Cross-posted at Politico’s Health Care Arena.)

Yes, Mr. President, a Free Market Can Fix Health Care

At his White House forum on health reform back in March, President Barack Obama offered:

If there is a way of getting this done where we’re driving down costs and people are getting health insurance at an affordable rate, and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I’d be happy to do it that way.

In a new Cato study titled, “Yes, Mr. President, a Free Market Can Fix Health Care,” I take up the president’s challenge and explain that markets are indeed the only way to achieve those goals.  I also explain how Congress can remove the impediments that currently prevent markets from doing so:

  1. Give Medicare enrollees a voucher (adjusted for their means and health risk) and let them purchase any health plan on the market,
  2. Reform the tax treatment of health care with “large” health savings accounts, which would give workers a $9.7 trillion tax cut (without increasing the deficit) and free them to purchase secure coverage that meets their needs,
  3. Free consumers and employers to purchase health insurance across state lines (i.e., licensed by other states), which could cover up to one third of the uninsured,
  4. Make state-issued clinician licenses portable, which would increase access to care and competition among health plans, and
  5. Block-grant Medicaid and the State Children’s Health Insurance Program, just as Congress did with welfare.

Unlike the president’s health care proposals (which, as Victor Fuchs explains, would merely shift costs), these reforms would reduce costs, expand coverage, and improve health care quality – without new taxes, government subsidies, or deficit spending.

Would a free market be nirvana?  Of course not.  But fewer Americans would fall through the cracks than under the status quo or the government takeover advancing through Congress.

There is a better way.

(Cross-posted at Politico’s Health Care Arena.)

Australian Trade Scholars Offer Perfect Cure for ‘Protectionitis’

Earlier this month, the Lowy Institute in Australia published a paper offering some very sound and, obviously, very timely advice about how to contain, and ultimately, eradicate protectionism. The paper is being circulated among the G20 delegations, who will undoubtedly discuss the topic of trade and protectionism in Pittsburgh next week. So for those of you interested in getting a sense of what will probably be the single best idea on (or at least near) the table at the G20 summit, I highly recommend this 20-pager.

The solution proposed by the authors boils down to a two-word phrase: “Domestic Transparency.” What is meant by that phrase is that “defeating protectionism begins at home.” And by that slogan, the authors mean that the key to reducing, and ultimately eliminating, protectionism is not external pressure from other countries, mercantilist trade negotiations, or filing trade complaints at the WTO, but rather greater awareness at home of the real costs of protectionism. I couldn’t agree more. (In fact better transparency is one of our recommendations in this paper).

When governments impose trade barriers at the behest of special interests, they usually justify that protectionism with diversionary rhetoric concerning some vague conception of the “national interest,” and the imperative of shielding domestic business from unfair competition and other vagaries of the globalized economy. That the protectionist measure itself—the product of special interests diverting productive resources from economic to political ends—forces involuntary and usually unknowing subsidization of those protection-seekers by the same citizens at large who are expected to buy into the national interest canard is a detail about which most people remain in the dark.

The central theme of the Lowy paper is that once people become informed about the costs of protectionism, not only to the broader economy, but in terms of what it means for their own personal budgets, politicians and lobbyists will find it much more difficult to concoct protectionist schemes.

That this paper is written by Australians is no accident. The Aussies have experience and credibility implementing a successful domestic transparency regime, which entailed the establishment of an independent authority (independent from the levers of government and business) to provide advice to governments that is “disinterested, open to public scrutiny, and formulated from the perspective of national welfare rather than the needs of particular producer groups.” The establishment of that agency (oddly named the “Industries Assistance Commission”—one of the authors, Bill Carmichael, is the former Chairman of the IAC) in 1974 and its successor agency (also oddly named the “Productivity Commission”) are widely credited with exposing the costs of protectionism to Australians, who subsequently supported dramatic waves of trade liberalization and have since been skeptical of efforts of industries to secure protection.

In this country, the U.S. International Trade Commission is an agency with a stable of economists that measures the welfare effects of trade liberalization and protectionism. While it may have the resources to conduct the analyses, it doesn’t have the independence. Regrettably, ITC studies are often subject to the whims of politics, particularly when the objectivity and facts in their reports don’t comport with politicians’ “expectations.” We need something similar to Australia’s domestic transparency institution in the United States, and in other countries, too.

G20 members should seriously consider the proposal in this excellent Lowy paper.

Don’t Leave Room for Desert

Duncan “Atrios” Black sums up and amplifies on a much longer post by Salon’s Glenn Greenwald as follows:

Just adding on to Glenn’s post, much opposition to the government actually doing anything decent for people comes from the idea that the government is going to take my tax money and give it to people who don’t deserve it. The problem is that for decades the Dems have tried to get around this by making sure policies and programs were relatively small and incremental, everything targeted and means tested. But doing that effectively confirmed the critics’ point. The big (giant) government programs which are most popular are the ones which are universal - Social Security and Medicare - and other less controversial government programs, like highway spending, are also perceived to benefit people across the board.

There’s a couple of interesting things going on here that seem worth unpacking.  The first is actually a legitimate point about how valid arguments against various kinds of redistribution tend, with unsettling ease, to shade into unsavory demonization of the folks on the receiving end of the transfer. Suppose someone suggests that the government should, either by regulation or direct subsidy, ensure that the indigent are provided with health care or that insolvent homeowners are protected from foreclosure. Now, there are a few types of objections people might raise. There’s an argument from efficiency and incentives: To the extent that the risks associated with individual financial or lifestyle choices are borne by the public, there’s a familiar problem of “moral hazard” reducing incentives for prudence. And there’s an argument from property and autonomy, to the effect that even if people ought to help others in need, each person is entitled to decide whether and how to do so without compulsion. Neither of these implies any blanket judgment about the folks who find themselves in need of aid. The first argument does suggest that redistributive policy will make it rational for people to take more risks at the margin, but it does not follow from either that people who are having trouble meeting their mortgage payments, or people who get sick and cannot afford care, are bad or foolish or irresponsible or otherwise deserving of their fate. And it is a good thing for these arguments that no such conclusion follows, because it’s clearly not true.

Yet in popular political rhetoric, it’s disturbingly easy to find just such a leap being made. Think of Rick Santelli’s jeremiad against “losers” under foreclosure getting bailed out by government. Is it just that people are inherently spiteful or unkind? In fact, the tendency to assume that people who are badly off must deserve it may be a result of what social psychologists call the Just World Hypothesis. In brief, faced with evidence that the world is often arbitrary and unfair, and that bad things often happen to good people, many of us prefer to preserve our faith in a basically fair and benevolent universe by assuming that the badly off must somehow deserve their fates—which is a stronger and (I think) rather morally uglier proposition than the more plausible notion that people are often significantly responsible for their fates.

There are at least three reasons to take some care to avoid this implication, given how easily human beings fall into it. The first is just that it’s an ugly and callous attitude to have toward people who will often deserve our compassion whether or not they ought to receive government aid. The second is that people will readily—and sometimes intentionally—misconstrue an argument about incentives as an argument about the moral worthiness or personal virtue of the proposed recipients, which does not make for a particularly fruitful conversation. Finally, there’s a paradoxically quite authoritarian implicit premise lurking behind this sort of argument—to wit, that it’s the job of the government  to determine who is or is not morally deserving of its largess, and that the central question is whether this or that particular class of prospective recipients qualifies. That’s a frame people across the spectrum ought to be uncomfortable with.

As Atrios points out, strategic response to this on the part of progressives has been to embed what are essentially welfare programs within an elaborate—and functionally, if not politically, superfluous—superstructure of universal social insurance. My colleague Will Wilkinson has pressed this point cogently in the context of Social Security. The rationale for the program is ultimately that we hope it will prevent people from being mired in poverty in old age. There is no sane reason, on this rationale, for cutting Bill Gates a check when he reaches the age of eligibility—but we do it this way because progressives believe, perhaps correctly, that a means-tested aid program for the indigent elderly would be more politically vulnerable to cuts. Which, I think, underscores the perverse effect of thinking in terms of the desert of the recipients, since there’s no actually-valid argument on which a universal need-blind benefit makes more sense than a narrow means-tested one. So one more reason to eschew desert-centered political discourse: It gives rise to policy that’s less intelligent whether your underlying commitments are progressive or libertarian.

Have Mexican Dishwashers Brought California to Its Knees?

workerAn article published this week by National Review magazine blames the many problems of California on—take a guess—high taxes, over-regulation of business, runaway state spending, an expansive welfare state? Try none of the above. The article, by Alex Alexiev of the Hudson Institute, puts the blame on the backs of low-skilled, illegal immigrants from Mexico and the federal government for not keeping them out.

Titled “Catching Up to Mexico: Illegal immigration is depleting California’s human capital and ravaging its economy,” the article endorses high-skilled immigration to the state while rejecting the influx of “the poorly educated, the unskilled, and the illiterate” immigrants that enter illegally from Mexico and elsewhere in Latin America.

Before swallowing the article’s thesis, consider two thoughts:

One, if low-skilled, illegal immigration is the single greatest cause of California’s woes, how does the author explain the relative success of Texas? As a survey in the July 11 issue of The Economist magazine explained, smaller-government Texas has avoided many of the problems of California while outperforming most of the rest of the country in job creation and economic growth. And Texas has managed to do this with an illegal immigrant population that rivals California’s as a share of its population.

Two, low-skilled immigrants actually enhance the human capital of native-born Americans by allowing us to move up the occupational ladder to jobs that are more productive and better paying. In a new study from the Cato Institute, titled “Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” this phenomenon is called the “occupational mix effect” and it translates into tens of billions of dollars of benefits to U.S. households.

Our new study, authored by economists Peter Dixon and Maureen Rimmer, found that legalization of low-skilled immigration would boost the incomes of American households by $180 billion, while further restricting such immigration would reduce the incomes of U.S. families by $80 billion.

That is a quarter of a trillion dollar difference between following the policy advice of National Review and that of the Cato Institute. Last time I checked, that is still real money, even in Washington.

Canada and Jefferson’s Natural Progress

Thomas Jefferson famously opined that “the natural progress of things is for liberty to yield and government to gain ground,” but Canada has bucked that gloomy forecast in recent years. As my co-authored op-ed in the Washington Post yesterday showed, Canada has:

  • Cut government spending
  • Cut government debt
  • Balanced its budget consistently
  • Pre-funded its version of Social Security to make it solvent
  • Decentralized power within its federation of provinces
  • Cut taxes, particularly corporate taxes 

Meanwhile, the United States has headed in the opposite direction in each of these policy areas. Consider further that Canada has other economic policy advantages over the increasingly uncompetitive welfare state to its south:

  • Canada has more liberal immigration policies for highly skilled workers than does the United States, which has added greatly to the entrepreneurial vibrancy of Canada’s economy.
  • Canada has long had a stable,  efficient, and competitive financial sector, which avoided the government-assisted meltdown that occurred in the United States.
  • Canada has a home ownership rate as high as the United States, yet it does not have a distortionary mortgage interest tax deduction.
  • Canada recently implemented large Roth IRA style savings accounts, which are much more flexible than the U.S. version.
  • The Canadian federal capital gains tax rate is 14.5 percent, which compares to the current 15 percent in the United States and 20 percent under Obama’s tax plan.
  • Canada has no federal ministry or department of education. The K-12 schools are the sole responsibility of the provinces, yet Canadian kids  generally do better than American kids on international tests.
  • In recent years, Canada has probably been more supportive of NAFTA, and free trade in general, than its main trading partner, the United States.

Major pro-market reforms are possible in advanced welfare states – Jefferson can be proven wrong, as Canada illustrates. U.S policymakers can prove Jefferson wrong as well. They can start by cutting spending, decentralizing power out of Washington, and making pro-growth tax reforms in response to globalization, as Canada has, rather than imposing self-defeating “Buy America” provisions and making childish rants about “corporations moving jobs offshore.”

How the Welfare State Destroys Our Liberty

The welfare state has long been one of the most potent arguments for additional restrictions on our freedom.  For instance, you must wear a motorcycle helmet because if you splatter yourself all over the highway the rest of us will be paying your medical expenses. 

One of the factors considered by New Zealand in ruling on applications from would-be immigrants is health.  If you are fat — and thus at risk for various health conditions — forget it!

Reports the Daily Telegraph:

The 51-year-old, who has not been named, argued that her 52 inch waistline was no obstacle to her work as a nurse, which involved 60-hour weeks.

She was offered a job in a home and hospital for the elderly in a provincial town in New Zealand, documents from the country’s Residence Review Board said, and applied for residence in March 2008. But officials rejected the argument that 10 years’ experience as a nurse meant she should be allowed to live there — even though there is a shortage of qualified nurses.

The woman decided to move to New Zealand after a holiday in 2007 and wanted to set up home there with her husband, a crane driver, and her daughter who planned to work in a shop.

But medical advisors calculated that with a weight of 21 stone and height of 5ft 1in, her body mass index (BMI) was 55.2, putting her at a high risk of developing health problems.

This isn’t the first time New Zealand has turned down an applicant for health reasons.  Adds the Telegraph:

In 2007, a British man who moved to New Zealand was told his wife was too overweight to join him.

Taking care of the taxpayers makes sense.  But the right way to do so is not to put them at risk in the first place.  Socializing health care and then allowing government to micromanage everyone’s lifestyle creates a form of soft tyranny through the back-door.  We already see that in America with motorcycle helmet laws, increasing restrictions on smoking, and proposals for special “fat taxes” on disfavored foods.  Unfortunately, these likely are only the beginning.