Topic: Government and Politics

A Health Fed?

Lots of people, on both the Left and the Right, want government to plan economic activity.  Honest central planners recognize that highly concentrated and well-organized groups of producers and consumers typically hijack the plan’s new taxes, subsidies, and regulations.  The central planners are typically horrified to see what their carefully laid plans look like after being put through the political grinder.

Clever central planners look for ways to protect their plans from the influence of their fellow citizens.  For example, some planners seek to restrict their fellow citizens’ right to petition the government for a redress of grievances.  (I have often remarked that if you can’t implement your plans without taking away someone else’s First Amendment rights, maybe you should rethink your plans.)

Other central planners seek to create special government bodies to execute their plans.  These bodies would have the power to tax, spend, and regulate, but their decisions could only be overturned by the people’s representatives with great difficulty.  Indeed, the very purpose of these bodies is to allow the planners to govern their fellow citizens without having to worry so much about the consent of the governed. 

Certain health care reformers have set about this path.  Across the political spectrum, observers acknowledge that government wields enormous power over America’s health care sector, and that those powers are often co-opted to serve private ends.  For example, former Senate Majority Leader Tom Daschle (D-SD) recently remarked:

Congress is just not capable of being the manager of a health care system and yet it’s largely Congress today that has that responsibility. It hasn’t worked for the last 50 years. It’ll work even less in the next 50.

As a result, Daschle and others propose that Congress create a “federal health board” to manage the health care sector.  The Federal Health Board would do things like require you to purchase health insurance, dictate what kind of health insurance you will purchase, set the prices for health insurance and medical goods and services, etc..  In other words, the Federal Health Board would have the power to bankrupt corporations, to force doctors to change the way they do business, to deny medical care to patients, and to shift massive amounts of resources from one part of the country to another.  The problem is, some corporations, doctors, patients, and regional interests would try to block parts of The Plan, either on their own or through their representatives in Congress.

Since it would be so hard for the Federal Health Board to do its job with all that meddling by the governed, Daschle et alia want to insulate the Board from the political process.  Specifically, they want Congress to model a new Federal Health Board on the existing Federal Reserve Board.  That would enable the “health Fed” to focus on the public good, much like the Federal Reserve Board manages the money supply and guides interest rates without any of the unseemly pandering to special interests that goes on in Congress and other government bodies.  Because that’s how the Fed operates, right?

Maybe not.  Economist Allan H. Meltzer of Carnegie-Mellon University has read the transcripts of every meeting of the Fed’s Open Market Committee going back to 1913, and has written a two-volume history of the Federal Reserve.  Interviewed recently for one of Russ Roberts’ excellent EconTalk podcasts, Meltzer dismissed the idea that the Federal Reserve is immune from political pressures:

We talk about an independent Federal Reserve, but in reading and writing the history of the Federal Reserve, there are very few occasions since the 1930s when the Fed actually practiced independence.  There was the [Paul] Volcker era; he was certainly an independent central bank governor.  But [current Fed chairman Ben] Bernanke is anything but an independent central bank governor.  He is being leaned on by the Congress, and he accedes to them.  So even though he may worry about inflation … he’s … trying to respond to the short-term pressures instead of thinking ahead and thinking longer-term …

That brings him to the interest rate, because that’s the thing that people in the market see.  The Wall Street people …  put him under great pressure because they own a lot of bonds and mortgages.  And they believe that if he lowers the federal funds rate, it will lower the price of their mortgages and bonds, and they will have smaller losses.  And so they are on his back all the time to do more, to cut the interest rate that he controls, hoping that the rates that they see and own will go down, and their … losses will become smaller …

In reading the minutes of the Fed and watching what they do, the Fed has always been very much afraid of Congress.  And it took someone with the stamina and arrogance, in a way, of Volcker to be able to get around that … By the summer of 1982, [Congress was] facing an election and they were on his back to ease up … He wouldn’t admit that he was [easing up], but he did …

The idea of having a really independent agency in Washington, that’s just not going to happen … The Federal Reserve derives its power from Congress … The Fed’s power is delegated, and they are very much aware that Congress could always change that … [The Fed] manages to hang on to some measure or vestige of independence, but it is very much concerned – always – about what the Congress is doing, and doesn’t want to deviate very far from that.

What can’t come through in a transcription is that Meltzer chuckled at “the idea of having a really independent agency in Washington.”

So if the central planners seek to insulate their health care reforms from the political process, modeling a new health planning board on the Fed won’t achieve that goal.  That’s probably a good thing.  Power with accountability is dangerous enough.  Power without accountability is truly frightening. 

An important advantage of free-market health care reforms is that they provide accountability without allowing anyone to consolidate much power at all.  That seems a much happier state of affairs.

Fannie Mae’s Rent-Seeking Empire Expands

Jeffrey Birnbaum, who covers lobbyists for the Washington Post, reports:

Lorraine A. Voles, until recently communications director for the congressional office of Sen. Hillary Rodham Clinton (D-N.Y.), has joined Fannie Mae as a senior vice president.The move is a reunion of sorts. Voles, who was communications director to Al Gore when he was vice president, worked previously at the public relations firm Porter Novelli. There, her boss was Charles V. Greener, who is now Voles’s boss at Fannie Mae.Greener had been the mortgage finance giant’s senior vice president in charge of communications and is now chief of staff to Fannie Mae chief executive Daniel H. Mudd. Voles is taking his old job. Before he joined Porter Novelli, Greener was a spokesman for the Republican National Committee.

That’s right: A former mouthpiece for Clinton and Gore is working quite happily for a former GOP spokesman – for a second time. Only in Washington.

One big happy family here in the Imperial City. Those who are paid to fight the red-blue wars, fight. Those who are paid to lobby both sides against the taxpayers, lobby. And as the McCain campaign is demonstrating, the most effective players can switch roles on a moment’s notice.

It’s relevant to note that Ms. Voles and Mr. Greener are now working for Fannie Mae, one of the most skilled rent-seekers in Washington and a pioneer in hiring top players from both parties. As a Cato study noted a few years ago, “The special governmental links that apply to Fannie Mae and Freddie Mac yield little that is socially beneficial, while creating significant potential social costs.” And as an earlier Cato study (by financial analyst Vern McKinley, now a candidate for Congress) noted, “Fannie Mae and Freddie Mac preserve their privileged status through a multi-million-dollar lobbying effort that includes massive ‘soft money’ campaign contributions and the payment of exorbitant salaries to politically connected executives and lobbyists.” Ten years later, that’s still the bottom line.

No Majority Yet

The banner headline across the top of this morning’s Washington Post is

Obama Takes Delegate Majority

But that isn’t true. As the story itself (and the online headline) correctly said, Sen. Barack Obama is now “claiming a majority of the pledged delegates at stake.” His campaign is doing a great job of getting the media to declare that a “milestone” and a “major victory.” But in fact it tells us nothing we didn’t know already: Obama is ahead of Sen. Hillary Clinton in the race, and it seems impossible for Clinton to catch up. But “a majority of the pledged delegates” is virtually meaningless. There are several kinds of delegates that make up the convention, and you have to get a majority of all the delegates. “A majority of the pledged delegates” is no more relevant than Obama claiming “a majority of the delegates from coastal states” or Clinton claiming “a majority of the white delegates.” (I don’t actually know if either candidate has those majorities.) When Obama produces a list of 2025 delegates pledged to vote for him, it will be time for the Post to drag today’s headline out again.

Nothing to see here, folks. Move along. Just a little campaign bombast.

A David Brooks Two-fer!

David BrooksCouple of notes on recent David Brooks-related program activities. First, he calls the small-government wing of the conservative movement un-American. No, honestly, he does:

At the end of [1995], when the radical conservatives in the Gingrich Congress shut down the federal government, they learned that the American public was genuinely attached to the modern state. “An anti-government philosophy turned out to be politically unpopular and fundamentally un-American,” Brooks said. “People want something melioristic, they want government to do things.”

Then, in today’s column for the Times, Brooks points out how screwed up the legislative process is, a function of myriad rent-seekers, lobbyists and special interests. His foil? The farm bill:

Interest groups turn every judicial fight into an ideological war. They lobby for more spending on the elderly, even though the country is trillions of dollars short of being able to live up to its promises. They’ve turned environmental concern into subsidies for corn growers and energy concerns into subsidies for oil companies.

The $307 billion farm bill that rolled through Congress is a perfect example of the pattern. Farm net income is up 56 percent over the past two years, yet the farm bill plows subsidies into agribusinesses, thoroughbred breeders and the rest.

The growers of nearly every crop will get more money. Farmers in the top 1 percent of earners qualify for federal payments. Under the legislation, the government will buy sugar for roughly twice the world price and then resell it at an 80 percent loss. Parts of the bill that would have protected wetlands and wildlife habitat were deleted or shrunk.

My colleagues on The Times’s editorial page called the bill “disgraceful.” My former colleagues at The Wall Street Journal’s editorial page ripped it as a “scam.” Yet such is the logic of collective action; the bill is certain to become law. It passed with 81 votes in the Senate and 318 in the House — enough to override President Bush’s coming veto. Nearly everyone in Congress got something.

Funny thing, though: I bet I can think of a much, much better example of what Brooks is driving at here. After all, at least there was broad elite consensus that the farm bill was depraved. But where could we find an example of a legislative product where literally all interests are tied up in rent-seeking and resource extraction? Ah, right:

In current national security politics, there is debate, but all the interests are on one side. Both parties see political reward in preaching danger. The massive U.S. national security establishment relies on a sense of threat to stay in business. On the other side, as former defense secretary Les Aspin once wrote, there is no other side. No one alarms us about alarmism. Hitler and Stalin destroyed America’s isolationist tradition. Everyone likes lower taxes, but not enough to organize interest groups against defense spending. A scattering of libertarians and anti-war liberals confronts a bipartisan juggernaut. The information about national security threats comes to Americans principally from people driven by organizational or electoral incentives toward threat inflation.

Physician, heal thyself. Yet more evidence the that contemporary Right offers nothing of value to libertarians.

Medicare Advantage for All

The Church of Universal Coverage is whipping itself into a fervor over the Healthy Americans Act (S.334), a piece of legislation originally introduced by Sen. Ron Wyden (D-OR) that promises “affordable, guaranteed private health coverage that will make Americans healthier and can never be taken away.”  Wyden has enlisted seven Republican senators as cosponsors, including such conservatives as Lamar Alexander (TN), Bob Bennett (UT), Mike Crapo (ID), and Judd Gregg (NH). 

That guarantee and that bipartisan support have generated opeds in major newspapers, a web site, journal articles, a preliminary scoring by the Congressional Budget Office, and much twittering among the left-wing blogocracy that this could be the vehicle for achieving universal coverage.  There’s even a clever video that, come to think of it, supporters of market-based health care reforms could emulate in selling their own ideas.

What’s most interesting about all this is that so many conservative Republicans are acquiescing to a sweeping government takeover of the health care sector.  The Healthy Americans Act wouldn’t go quite so far as to enact the Left’s long-sought dream of “Medicare for All,” where government would dictate the terms of coverage for all Americans, set the prices, and cut checks to the doctors.  Rather, it would throw us all into a Medicare Advantage-like program, where government would dictate the terms of coverage, set the prices, and cut checks to … insurance companies.  Call it “Medicare Advantage for All.”  I have more to say about how the Healthy Americans Act would operate in this podcast

The conservative group Americans for Tax Reform claims the Act would constitute “the largest tax increase in history.”  Former Republican House Majority Leader Dick Armey accuses the bill’s GOP supporters – in particular Sen. Chuck Grassley (R-IA), the ranking Republican on the Senate’s committee of jurisdiction – of “signing on with the government-run health-care Democrats.” 

So why would conservative Republicans sign on to such a bill?  In particular, why Bennett, who has done an admirable job as a member of the Joint Economic Committee of trying to explain free-market concepts to his fellow senators? 

Given the general lack of health-policy literacy on the Right, it seems plausible that these conservatives just didn’t know what they were doing – or that their understanding of the legislation was sufficiently dim that any resistance could be overcome just by dangling the words “health savings accounts” in front of them.

A more troubling prospect is that these conservative senators and their staffs knew exactly what they were supporting, but made the calculation that their immediate political needs are more important than their fellow citizen’s health and freedom.

Rep. Tom Davis, Republican Brand Mangler - Er, Manager

In the opening segment of this week’s Washington Week on PBS, Representative Tom Davis (R-VA) commented on the viability of the Republican party in the upcoming elections: “The Republican brand name - if you were to put this on a dog food - the owners would just take it off the shelf because nobody’s buying it.”

Davis has more than a little responsibility for these circumstances. He’s been a consistent cheerleader of the REAL ID Act, for example, the moribund national ID law. He has consistently pressed and promoted REAL ID. He claimed that imposing $17 billion in costs on state governments is not an unfunded mandate, and pretended like shaking $50 million in federal money loose made any difference. Davis saluted the final regulations when they were issued earlier this year.

In a REAL ID story including Davis, Federal Computer Week saw fit to note that he “represents a Northern Virginia district heavily populated by federal employees and government contractors.”

P.J. O’Rourke comments in the most recent Cato’s Letter: “It took a Democratic majority in the House of Representatives 40 years—from 1954 to 1994—to get … corrupt and arrogant, and the Republicans did it in just 12.” Being wrong on liberty, even in service to your district’s government contractors, is not good for your party’s brand, Mr. Davis.

When Would McCain Intervene?

Matt Bai has a writeup in this Sunday’s NYTimes Magazine of McCain’s vision on foreign policy. Buckle up:

McCain considers national values, and not strategic interests, to be the guiding force in foreign policy. America exists, in McCain’s view, not simply to safeguard the prosperity and safety of those who live in it but also to spread democratic values and human rights to other parts of the planet….

[…]

[A]s we talked, I tried to draw out of him some template for knowing when military intervention made sense — an answer, essentially, to the question that has plagued policy makers confronting international crises for the last 20 years. McCain has said that the invasion of Iraq was justified, even absent the weapons of mass destruction he believed were there, because of Hussein’s affront to basic human values. Why then, I asked McCain, shouldn’t we go into Zimbabwe, where, according to that morning’s paper, allies of the despotic president, Robert Mugabe, were rounding up his political opponents and preparing to subvert the results of the country’s recent national election? How about sending soldiers into Myanmar, formerly Burma, where Aung San Suu Kyi remained under house arrest by a military junta?

“I think in the case of Zimbabwe, it’s because of our history in Africa,” McCain said thoughtfully. “Not so much the United States but the Europeans, the colonialist history in Africa. The government of South Africa has obviously not been effective, to say the least, in trying to affect the situation in Zimbabwe, and one reason is that they don’t want to be tarred with the brush of modern colonialism. So that’s a problem I think we will continue to have on the continent of Africa. If you send in Western military forces, then you risk the backlash from the people, from the legacy that was left in Africa because of the era of colonialism.”

The United States faced a similar obstacle in Myanmar, McCain went on, shaking his head sadly. “First of all, you’d have to gauge the opinion of the people over time, whether you’d be greeted as liberators or as occupiers,” McCain said. “I would be concerned about the possibility that if it were mishandled, we might see an insurgent movement.” He talked a bit about Aung San Suu Kyi, whom he called “one of the great figures of the 20th century,” but then wondered aloud if the American public would support a military intervention.

“It goes back to the Vietnam thing,” McCain told me. “I’m just not sure the American people would support a military engagement in Burma, no matter how justified the cause. And I can’t tell you exactly when it would be over. And I can’t tell you exactly what the reaction of the people there would be.”

Most American politicians, of course, would immediately dismiss the idea of sending the military into Zimbabwe or Myanmar as tangential to American interests and therefore impossible to justify. McCain didn’t make this argument. He seemed to start from a default position that moral reasons alone could justify the use of American force, and from there he considered the reasons it might not be feasible to do so. In other words, to paraphrase Robert Kennedy, while most politicians looked at injustice in a foreign land and asked, “Why intervene?” McCain seemed to look at that same injustice and ask himself, “Why not?”

Thankfully, though, the Washington Post is reporting that McCain apparently has a secret plan to win the war in Iraq by 2013.