Topic: Cato Publications

Bureaucracy and Lost Privacy

In my book Identity Crisis: How Identification is Overused and Misunderstood, I argue that identification is required of us too often by both corporations and government as we go about our business. I also do my best to articulate the reasons why this is bad, and how we can escape it.

With my senses tuned to the overuse of identification, I’m keenly aware of the osmotic process by which institutions soak up information about us, pass it around, and use it in ways we may not prefer.

Here’s an example from real life: I have recently spoken at several conferences dealing with identification, identity, financial risk management, and the like. When the time came to get reimbursement for my travel, one of the conference organizers asked me to give my Social Security Number if I was going to rely on faxed receipts for reimbursement.

The e-mail thread below shows how complex IRS regulations require financial administrators in the corporate world to over-comply, collecting (and possibly filing with the government) information that neither entity needs.

This is bureaucracy in action (both public and private), and it’s the constant drip, drip, drip of privacy going away.

[Names have been changed to protect the guilty.]

*********************

—–Original Message—–

From: katie [at] conference [dot] org

Sent: Fri 9/29/2006 10:19 AM

To: Jim Harper

Subject: W-9 Forms Needed

Hello Jim,

Thank you so much for sending over your receipts.

Since you did not send me actual receipts, I need you to fill out this W-9 form and fax it back ASAP.

Thanks again,

-Katie

Katie Folsom

Conference Specialist

*****************************

Are you sure? This is reimbursement for travel, not income. And even if it were income, I believe the amount in question here would not even require a W-9. (Also, I’m traveling through Sunday without access to a printer or fax. ;-)

Having suffered through my talk, you probably understand that I don’t needlessly share information with the government or with organizations who are going to needlessly share with the government.

If you could politely ask your accounting folks to show where the law or IRS instructions require them to have my SSN to reimburse me for travel, I would appreciate it. (I’m not a tax law expert, just knowledgeable enough to be dangerous/annoying.) If they can’t show that they need this information, they don’t need it.

Thanks! Sorry for being prickly, but it’s my job.

Jim

Jim Harper

Director of Information Policy Studies

The Cato Institute

***************************

—–Original Message—–

From: elizabeth [at] conference [dot] org

Sent: Friday, September 29, 2006 11:32 AM

To: Jim Harper

Cc: Katie [at] conference [dot] org

Subject: Re: Fw: W-9 Forms Needed

Hi Jim,

While I understand your concern regarding needlessly sharing information, IRS regulations specify that a W-9 must be filled out whenever receiving income from a company. Please see the “Purpose of Form” section on the front of the W-9. Your travel reimbursement is technically considered income.

One way around this (to avoid having to fill a W-9 out), however, is to send us all of you Original receipts and get reimbursed on those. Basically, in layman’s terms, the IRS is trying to avoid “double-dipping”. If we reimburse someone for receipt copies, that person can then claim/deduct the originals on their own personal/business taxes. The W-9 form is the IRS’ tracking solution to this.

Please let Katie what you intend to do, so she can be on the lookout for either your W-9 form or your original receipts in the mail (sent with tracking information for your protection). I hope this cleared things up a bit.

Thank you.

Elizabeth

Elizabeth LaFontaine

Senior Accountant

*********************

“Jim Harper”

10/03/2006 06:04 PM

To elizabeth [at] conference [dot] org

cc Katie [at] conference [dot] org

Subject RE: Fw: W-9 Forms Needed

Hi Elizabeth –

Sorry for the delay. I’ve been traveling. Again.

As I understand it (and I have double-checked), W-9s are needed when you are going to file a 1099. If you believe that there is a requirement to file a 1099 on reimbursement of my travel expenses, could you please tell me where that is? Which 1099 would you file? If you think that it’s the 1099-MISC, please note that the threshold amount for filing the 1099-MISC is $600 in income.

And I have strong doubts that this is income. If you were to file a 1099 dealing with reimbursement for travel expenses, the IRS would be looking for it on my 1040, and I have never included travel expenses on a 1040.

Let me apologize for being a stickler about this, but many administrators believe they have to collect SSNs when they do not. It may be that you are over-collecting SSNs and possibly even filing forms you don’t need to.

If you can point me to documents showing that I’m mistaken, I welcome being corrected. But unless you do, I’m pretty sure that you don’t need a W-9 and can issue a check to me.

Thanks!

Jim

Jim Harper

Director of Information Policy Studies

The Cato Institute

************************

Hi Jim,

As I stated in my previous email, you do not need to fill out a W-9 if you do not wish to. Simply send all of your original receipts to Katie so she can process your check. Unfortunately, that is the only way you will be reimbursed. Sorry for any inconvenience, but those are the policies we strictly abide by and they in no way infringe upon any reservations you may have about providing information you don’t want to provide.

Please let Katie know when she can be expecting your receipts in the mail. We will reimburse you $4.55 for Priority mail with Delivery Confirmation if you’d like.

Regards,

Elizabeth

Elizabeth LaFontaine

Senior Accountant

Evidence from Thee, but Not from Me

Via the Healthcare Economist and Health Care Renewal, I was led to a recent editorial in the BMJ (formerly the British Medical Journal):

[In the National Health Service,] something important is quietly dying. I don’t think it is too fanciful to call it the spirit of medical professionalism. And we, the medical profession, are watching it die….

[F]ar from being privatised, medicine in England has become ever more a creature of the state….

[A]lthough medicine has embraced the need for evidence-based medicine, policy making remains largely an evidence-free zone.

Politicians consolidating and centralizing power…government sucking the soul out of a profession…ho-hum. It was the last line that really caught my attention. 

I’ve noticed the same tendency on this side of the pond. For example, policymakers such as Sen. Chuck Grassley, Rep. Nancy Johnson, and the Institute of Medicine want Medicare to cook up “pay-for-performance” financial incentives that reward providers who deliver what the evidence suggests is “quality” care. You know, pay them to follow the evidence. As Forrest Gump might say, that’s a fine idea. The only problem is, private insurers have been trying that idea for 10 years, and there’s scant evidence to show that it actually works. 

Personally, I think “P4P” has the potential to do a lot of good. But in a recent paper on the topic, I had to note the irony:

The P4P movement proceeds from two premises: first, that clinicians tend to underuse evidence from randomized clinical trials and, second, that financial incentives can increase such use and improve the quality of care. Yet whatever enthusiasm exists for P4P is not derived from the type of evidence of effectiveness that P4P enthusiasts believe should guide clinical practice. Third-party financial incentives remain an unproven tool for improving health care quality at all, let alone in a cost-effective manner.

New at Cato Unbound: Markos “Kos” Moulitsas on Libertarian Democrats

The October edition of Cato Unbound is now underway with a new essay making “The Case for the Libertarian Democrat” by Markos Moulitsas, proprietor of the web’s most popular political blog, Daily Kos. Bruce Reed, president of the Democratic Leadership Council, Harold Meyerson, editor of the American Prospect, and Nick Gillespie, editor-in-chief of Reason will reply.

Looking to next month’s midterm elections, this month’s topic is “Should Libertarians Vote Democrat?” Here’s the lowdown about this issue:

In over a half-decade of Republican political dominance, Americans have witnessed a huge expansion in the scope and cost of government, a questionably justified and so-far unsuccessful war in Iraq, serious erosions of civil liberty, and a troubling tendency toward an imperial executive. Is it time for the traditional alliance between libertarians and conservatives to finally end? If Republicans in power have failed so utterly to promote libertarian ideals, would libertarians better advance their cause by supporting Democrats at the polls? Of course, the fact that libertarians have been so badly abused by conservatives doesn’t necessarily imply they will find a more welcoming home among liberals. Is the Democratic tent big enough to include small-government free-marketeers? Perhaps libertarians have something to gain by supporting to Democrats, but does the Democratic party have anything to gain by courting libertarians?

Costs vs. Spending

In yesterday’s New York Times, David Leonhardt writes:

Mr. Wagoner’s argument has become the accepted wisdom about the [health care] crisis: the solution lies in restraining costs. Yet it’s wrong.

In fact, the solution does lie in restraining costs.  Leonhardt is wrong because he conflates costs and spending

Spending is the amount of money we devote to medical care.  Costs are different.  The money devoted to medical care represents a cost, because we give up the next-highest value use of that money (e.g., a skiing trip).  But we also bear costs due to illness, including pain, limited mobility, and shortened lifespans.  We spend money on medical care to reduce the total costs that we bear.  Spending a lot of money on medical care is therefore desirable – so long as the benefits (reduced pain, enhanced mobility, longer lifespan) exceed the costs for each increment of spending.  The solution to every economic problem undeniably lies in restraining costs. 

Leonhardt probably meant to shoot down the idea that the solution to America’s health care crisis is in restraining spending.  Indeed the thesis of his article seems to be that even though there are many wasteful medical expenditures, a lot of what America spends on health care is very worthwhile.  But he repeatedly confuses the two concepts:

But the No. 1 cause of the cost increases is still the one you can see at the hospital and in your medicine cabinet — defibrillators, chemotherapy, cholesterol drugs, neonatal care and other treatments that are both expensive and effective.  

But if those treatments are expensive and cost-effective, then they would reduce costs. 

The confusion keeps Leonhardt from reaching the $64,000 question: How can we eliminate waste while preserving what works?  Or to put it another way, How can we reduce spending without increasing costs?

Feariness about Data Loss

In the spirit of Stephen Colbert’s “truthiness,” here’s another useful term for the pop lexicon:

fear i ness (fir’ e-nes) n. The quality of being feared, even though logic and/or evidence indicates there is little to fear.

A prime example of feariness right now is data loss — the loss of control over confidential information that could lead to violation of a person’s privacy, identity theft, and fraud. This feariness has been fanned by the recent thefts of government and corporate computer hardware containing important data files.

Though privacy violations and fraud are worrisome, an article in today’s New York Times explains that much of the alarm over data loss is just feariness:

The veterans’ laptop episode underscores the crucial distinction between data loss and malicious data theft — a distinction that has often been glossed over or ignored in the recent wave of alarming disclosures of data breaches at government agencies, universities, companies and hospitals. In most cases, the consequences — financial and otherwise — of the data losses have been slight.

But while high-profile data breaches are common, there is no evidence of a surge in identity theft or financial fraud as a result. In fact, there is scant evidence that identity theft and financial fraud have increased at all. Even when computer networks are cracked into, and troves of personal information intentionally stolen, fraudsters can typically exploit only a tiny fraction of it.

Readers of Cato’s Regulation Magazine already know this story. In last spring’s issue, Tom Lenard and Paul Rubin describe how the incidence of data theft–inducing fraud is fairly stable, how most of that fraud is the product of the theft of old-fashioned paper statements instead of electronic information, and how the response to data loss (including government-mandated response) is far more costly in aggregate than any resulting fraud.