Topic: General

IPAB Case Coons v. Geithner Dismissed, for Now

Jonathan Adler has a summary at the Volokh Conspiracy.

The Patient Protection and Affordable Care Act’s Independent Payment Advisory Board has been called a “death panel,” though I’ve argued one could just as legitimately call it a “life panel.” Either way, it is the most absurdly unconstitutional part of the PPACA.

Adler’s otherwise excellent summary neglects to mention IPAB’s most unconstitutional feature. Diane Cohen and I describe it here:

The Act requires the Secretary of Health and Human Services to implement [IPAB’s] legislative proposals without regard for congressional or presidential approval. Congress may only stop IPAB from issuing self-executing legislative proposals if three-fifths of all sworn members of Congress pass a joint resolution to dissolve IPAB during a short window in 2017. Even then, IPAB’s enabling statute dictates the terms of its own repeal, and it continues to grant IPAB the power to legislate for six months after Congress repeals it. If Congress fails to repeal IPAB through this process, then Congress can never again alter or reject IPAB’s proposals…

Congress may amend or reject IPAB proposals, subject to stringent limitations, but only from 2015 through 2019. If Congress fails to repeal IPAB in 2017, then after 2019, IPAB may legislate without any congressional interference.

Like I said, absurdly unconstitutional. But that’s ObamaCare for you.

Has Freedom Finally Arrived? No, We’ll Have to Bring It!

The New York Times wonders if the libertarian moment has arrived. Unfortunately, there’ve been false starts before. 

Ronald Reagan’s election seemed the harbinger of a new freedom wave. His rhetoric was great, but actual accomplishments lagged far behind. 

So, too, with the 1994 Republican takeover of Congress.  Alas, the GOP in office behaved little different than many Democrats. 

Since then there’s been even less to celebrate—in America, at least. George W. Bush was an avid proponent of “compassionate,” big-government conservatism. Federa outlays rose faster than under his Democratic predecessor. Barack Obama has continued Uncle Sam’s bailout tradition, promoting corporate welfare, pushing through a massive “stimulus” bill for the bank accounts of federal contractors, and seizing control of what remained private in the health care system.

Over the last half century, members of both parties took a welfare state that was of modest size despite the excesses of Franklin Delano Roosevelt’s New Deal and put it on a fiscally unsustainable basis as part of the misnamed “Great Society.” Economist Lawrence Kotlikoff figures government’s total unfunded liability at around $220 trillion. 

The national government has done no better with international issues. Trillions went for misnamed “foreign aid” that subsidized collectivism and autocracy. Trade liberalization faces determined resistance and often is blocked by countries that would gain great benefits from global commerce.

Even worse has been foreign policy. The joy people felt from the collapse of the Berlin Wall a quarter century ago has been forgotten. 

China and the U.S.: Similar Frustrations, Different Policies toward North Korea

SHENYANG, CHINA—China-Korean relations are in a state of flux.  The People’s Republic of China and South Korea have exchanged presidential visits.  Trade statistics suggest that the PRC did not ship any oil to the North during the first quarter of the year.  Chinese academics openly speak of Beijing’s irritation with its long-time ally.

The cold feelings are reciprocated.  Last year North Korea’s Kim Jong-un sent an envoy to the PRC to unsuccessfully request an invitation to visit.  In December Kim had his uncle, Jang Song-taek, the North’s most intimate interlocutor with China, executed.

These circumstances suggest the possibility of a significant foreign policy shift in Beijing away from the North and toward the Republic of Korea.  Washington hopes for greater Chinese willingness to apply economic pressure on Pyongyang.  However, the PRC remains unwilling to risk instability by undermining the Kim dynasty. 

I recently visited China and held scholarly meetings amid excursions to long-missed tourist sites (such as Mao’s Mausoleum!).  I also made it to Shenyang, where relations with the North are of great interest because the city is about a two hour drive from the Yalu River.

I met one senior scholar who indicated that there was no doubt that Beijing-Pyongyang relations had changed since Kim came to power.  The two nations “have a different relationship now and it is becoming colder than ever before.” 

However, Jang’s execution had been “weighed too heavily by Western researchers,” he indicated.  In fact, economic relations had continued.  Jang’s fate was a matter of internal North Korea politics, “the result of the natural struggle for power.” 

This doesn’t mean Beijing was happy about Jang’s fate.  However, Jang’s ouster “is not the reason for the DPRK’s and China’s bad relations.” 

Rather, the principal barrier is the North’s continued development of nuclear weapons.  Kim Jong-un wants to visit China.  But it is “unimaginable for Chinese officials to invite him when he’s doing nuclear tests.  Impossible.”

In return, the North is unhappy over Beijing’s refusal to accommodate Kim as well as the end of oil shipments.  “Also, the DPRK is quite angry over the quick development of Chinese relations with South Korea.” 

This has made Pyongyang “eager to make contact with the U.S.,” an effort which so far has gone nowhere.  This is why the Kim regime “took American citizens as hostages” and invited Dennis Rodman to visit, but these tactics “are not working.” 

The North eventually “shifted the focal point of its foreign relations to Japan.”  For the same reason, though “less importantly the DPRK made contact with Russia.”

The PRC is quite interested in U.S.-DPRK relations and Washington’s view of Japan’s move toward Pyongyang.  “One of the uniform convictions for both the U.S. and China is no nuclear weapons in the DPRK,” he emphasized. 

However, in Beijing’s view the solution is not more sanctions which “everyone has been putting on the DPRK,” but revival of the Six-Party Talks.  This is where agreement between the U.S. and China breaks down. 

The PRC wants more negotiations, preceded by an American willingness to reduce tensions and Pyongyang’s perceived need for a nuclear arsenal.  The U.S. wants the North to make concessions beforehand lest the latest round fail like the many previous efforts.

This clash reflects an even deeper disagreement over competing end states.  Both Washington and Beijing oppose a nuclear North Korea.  However, the U.S., in contrast to China, would welcome a DPRK collapse, even if messy, and favor reunification with the South.

As I write in China-U.S. Focus, It isn’t impossible for American and Chinese policymakers to work through their differences.  However, it will require understanding the other party’s perspective and offering meaningful concessions to make the deal a positive for both parties.

Inventions to Eagerly Await

Humans are progress seekers. Those with an entrepreneurial drive use their intellect to invent novel solutions to our problems. Sometimes, their solutions alleviate widespread suffering and let us live better than kings of centuries past. Thomson Reuters released just such a list of welfare-enhancing inventions to expect by 2025:

Dementia, Alzheimer’s, cancer drug-induced deaths, and Type I diabetes should afflict far fewer individuals by 2025. See below that cancer–one of the most common causes of death in several countries–is already on the decline (with a graph made on HumanProgress.org):

Latvia, the Country Prof. Krugman Loves to Hate, Wins 1st Prize

I constructed a misery index and ranked 89 countries from most to least miserable based on the available data from the Economist Intelligence Unit. My methodology is a simple sum of inflation, bank lending and unemployment rates, minus year-on-year per capita GDP growth. The table below is a sub-ranking of all former Soviet Union (FSU) states contained in my misery index.

For these FSU states, the main contributing factors to misery are high levels of unemployment and high interest rates.

The low misery index scores in Estonia and Lithuania don’t surprise me as I helped both countries establish sound money with the installation of currency boards in 1992 and 1994, respectively. Latvia, a country Paul Krugman loves to hate, takes the prize for the least miserable of the former Soviet Union countries in this sub-ranking.

In Memory of Carlos Ball

I’m sad to report that Venezuelan journalist and Cato adjunct scholar Carlos Ball passed away last week. He was 75. Carlos was a champion of liberty and a long-time friend to so many of us in the freedom movement in the Americas. His life was a testimony to the power of ideas, and he lived it true to his classical-liberal convictions.

Carlos was a co-founder of CEDICE, the market-liberal think tank in Caracas that celebrated its 30th anniversary this year and with whom Cato has worked closely for many years (and that has been severely harassed by the Chavista regime). In the 1980s, Carlos was the editor of El Diario de Caracas, an important daily that was critical of government policies. It was when Carlos represented Venezuelan journalists at an Inter-American Press Association conference in 1987 in San Antonio, Texas and denounced then-President Lusinchi’s attacks on freedom of the press, that Lusinchi demanded that Carlos be fired from the newspaper, conditioning the renewal of the license of the popular television station RCTV—part of the same media company—on that outcome. Carlos was let go from the paper, he was criminally charged by the government, and was told by the judge presiding his case that “I have orders from above.” It was at that time that Carlos left Venezuela, moving to Florida where he would live the rest of his life. RCTV received a 20-year license. It was the expiration of that license in 2007—that Hugo Chavez refused to renew, thus shutting down the television station—that triggered the massive student uprising against the government that year. (As a result, Chavez lost a constitutional referendum and temporarily slowed down his accumulation of power.)

The idea that Venezuela was doomed to repeat such experiences and that the country would only lose more freedoms if economic freedom was not also respected was a long-time theme in Carlos’s writings. In that regard, he was among a very small group of Venezuelan intellectuals who decades ago warned against the ideology of socialism predominant in the political system and much of Venezuelan society. Indeed, he very correctly viewed Hugo Chavez’s regime as a logical, though more extreme, extension of what had come before. “Chavez,” he wrote, “has intensified, accelerated and exacerbated corruption, the concentration of power, the violation of property rights” and the power of the bureaucracy in people’s lives. In a 1992 essay, Carlos wrote that the “fatal date” for his country was January 1976, when President Perez nationalized the petroleum industry. That “meant a radical change; for the first time since the death of General Gomez [1935], political and economic power was again concentrated in the same hands: in those of the head of state.”

He would later write: “Without that concentration of wealth in political hands, Chavez would never have been able to Cubanize Venezuela because it was the economic power of oil that allowed the government to crush the individual liberties of the Venezuelans.” How right he was.

Paul Light on Government Failure

Paul Light of Brookings and NYU is a top expert on the federal bureaucracy. He has a new study on federal government failures over the 2001 to 2014 period.

Light’s paper is useful. He identifies 41 major federal failures, examines the reports completed on each, and classifies the types of mistakes that took place. From the 9/11 terrorist attacks to the recent veterans health care scandal, Light points to failures in both “operations” and “oversight.”

Certainly, government operations and oversight fail frequently. But I look at many of Light’s 41 events and see more fundamental failures than he does. Federal policies, for example, often distort the economy in ways that are bound to cause problems. Federal interventions based on coercion are generally worse than solutions developed in the private, voluntary sphere of society.  

Light classifies the 2008 financial collapse as a failure of federal “oversight.” He says, “after years of risky investments and with little regulation, the banking system collapsed under the weight of toxic assets created by risky mortgage loans, poorly understood financial instruments, and a credit crisis that froze the economy.”

But it was government policies—such as Federal Reserve interest rate policies and federal housing subsidies—that incentivized the bad behavior on Wall Street. Federal oversight may have been poor, but the main problem was that government-created distortions cascaded and undermined markets.

On Hurricane Katrina, Light notes that the federal emergency response was a failure in operations, and it is true that FEMA officials were mired in confusion and indecision when the storm hit. However, it was decades of misguided policies that encouraged many people to live in low-lying and dangerous areas in New Orleans in the first place, which made the disaster much worse.

After an initial coding of failures between “operations” and “oversight,” Light does proceed to look more deeply into why the government failed in each of the events. He finds multiple causes behind all of the failures, with the most common factor being poorly designed policies.

Still, there are deeper reasons why the government fails than the potentially fixable problems that Light identifies. Superficially, the veterans health care scandal is just a failure of “operations,” but the fundamental problem is the federal attempt to centrally plan an industry rather than relying on markets.

Light’s study is a thoughtful piece that will hopefully generate a broader discussion about government failure. The 15 factors in this recent testimony are my initial stab at identifying some of the more fundamental reasons for government failure.