Topic: Cato Publications

Response to Holt

My back and forth with Matthew Holt on HSAs continues…

In my previous post, I wrote that Holt’s critique of my paper made it appear that he hadn’t read the paper very closely. As I understand his response, he is “not very interested” in doing so. He is already convinced that we need “compulsory social insurance” with “incentives for providers that induce them to provide cost-efficient care.” Fair enough.

Or maybe not. Holt continues to misrepresent my views and what that paper says. He variously accuses me of believing that his owning an HSA invalidates his criticisms of HSAs; believing that health insurance is unnecessary; and having no interest in (or proposals for) reducing the burden of expensive flat-of-the-curve medicine. These and other errors could have been avoided by carefully reading my paper.

Since this exchange seems to be bearing little fruit, I will not take it much beyond the following brief summary of my actual views on these issues.

There are some medical expenditures that should not be covered by insurance. Beyond a certain point, problems of moral hazard, fraud, low-quality care, medical errors, and loss of control over one’s medical decisions tend to overwhelm the benefits of additional coverage. (This occurs whether the excess coverage comes through the private sector or the public sector, and even if the state limits supply.) Consumers do a better job than government of establishing coverage up to that point and then stopping. That argues for letting consumers control all the dollars involved, which is at the heart of my large HSAs proposal.

In other words, if you want to subsidize uninsurable medical expenses, you don’t want to do it through insurance. You would do less damage by giving them cash.

Unnecessary Restrictions Are Holding HSAs Back

Federal law requires consumers to have a “qualified high-deductible health plan” before they can open a tax-free health savings account (HSA).  Today, Sarah Rubenstein of the Wall Street Journal reports that those rules make HSA-compatible coverage more expensive than necessary. 

In a recent paper, I argued that Congress actually requires HSA holders to have a “high-but-not-too-high-deductible health plan,” and that Congress should let consumers choose their own health insurance.

New at Cato Unbound: Richard Florida on the Future of Work

Today, in the hot-off-the-WordPress new edition of Cato Unbound, Richard Florida writes about “The Future of the American Workforce in the Global Creative Economy.”

Bestselling author of Rise of the Creative Class, Florida argues that the old industrial era has given way to a new creative era. Science and technology, art and design, and culture and entertainment have superceded natural resources and industrial infrastructure as the key to economic success. Talent is now the key factor of production and winners in global economic competition will be those who can best deploy and attract it. However, the creative economy is a source of increasing inequality both within and between nations. Florida argues that the key to bridging the gap between the creative and service sectors is to harness the creativity of service sector workers to make their jobs both higher-paying and more satisfying.

Florida’s essay is just the beginning of what promises to be an eye-opening conversation about “The Future of Work.” Big-thinkers Robin Hanson, Ed Leamer, and Frank Levy will reply in the days to come. As always, bloggers are encouraged to join the fray and respond to Cato Unbound essayists on their home turf; we’ll excerpt and reprint some of the best of the blogosphere.

Next Week at Cato Unbound: The Future of Work

Join us next week for the June issue of Cato Unbound devoted to glimpsing the future of work in America.

Richard Florida, author of the bestselling Rise of the Creative Class, will lead off with an essay this coming Monday. Replying to Florida over the following week and a half will be: George Mason economist and futurist Robin Hanson, an expert on robot economics [pdf]; UCLA economist Edward Leamer, author of a much-circulated review [pdf] of Thomas Friedman’s The World Is Flat; and MIT economist Frank Levy, co-author of The New Division of Labor: How Computers are Creating the New Job Market.

Here’s what they’ll be talking about:

The economists tell us that technology is a substitute for some forms of human capital and a complement to others. As the pace of technological advance continues to quicken, the “information age” evolves into something new, and the world economy becomes ever more integrated, the most economically valued set of human skills and capabilities continues to shift rapidly. Tens of millions of Americans used to make, and many still do make, a good living in low- and medium-skilled assembly line jobs. However, many of these jobs can now be done at less expense by machines, or by lower-paid workers in poorer countries like China and India. At the same time, the return on investment in education continues to rise, widening the gap in pay between workers with college degrees and workers without them. What do these trends mean for the future of work in America? Are there any jobs safe from mechanization and outsourcing? If part of rising inequality a function of the match between technology and human capital, what can be done to ensure that more people develop the right kind of capital? In a changing global economy, what is America’s comparative advantage? If you had a child tomorrow, and wanted her to get ahead, what would you want her to pick as her college major eighteen years from now?

Join us next week for a provocative look at the future of work in our high-tech, globalized world.

Enron Execs Go Down

The jury returned guilty verdicts against Ken Lay and Jeff Skilling today. I didn’t follow the case closely, but businesspeople who engage in fraud should obviously be punished. I do fear that the publicity surrounding this case will reinforce the misguided notion that federal prosecutors should be policing the business world. Cato’s new book, Trapped, shows that federal intervention will result in far more harm than good.

For those who would rather listen, than read, Prof. John Hasnas, author of Trapped, delivered an address here at Cato last month.

For still more background, go here.

The Greatest Deliberative Body?

Columnist Robyn Blumner has nice things to say about our new study, Power Surge, and she takes Congress to task for doing nothing: 

The Republican leadership in Congress is standing by while its house is being pillaged. The power to write federal laws is Congress’ alone. The president’s duty, as expressly stated in the Constitution, is to faithfully execute the laws he signs, not to add asterisks on parts he intends to ignore.

Senate Majority Leader Bill Frist and House Speaker Dennis Hastert are joining in their own emasculation when they utter not a peep during this bloodless coup. I don’t know why Republicans have a reputation for strength. When blindly supporting a president from your own party takes precedence over guarding Congress’ historic role, “Republican leadership” becomes an oxymoron.

It is not just liberals who have recognized the danger. I challenge anyone to read an important new report by the libertarian Cato Institute (www.cato.org) and not be chilled. “Power Surge: The Constitutional Record of George W. Bush” is an unblinking 28-page analysis of our slow devolution into autocracy. Its message can be summed up with this quote: “Under (the president’s) sweeping theory of executive power, the liberty of every American rests on nothing more than the grace of the White House.”

A meek and pliant Congress is allowing this new paradigm to take root.

One can almost hear Speaker Hastert trying to defend himself: ”Look, I said something about executive branch overreaching just this morning.  Ya know, I’ve signed off on some extraordinary police powers over the years, but there’s gotta be a limit to those powers.  The Constitution is clear: The right of members of Congress to be secure in their offices and homes shall not be violated!”