Topic: Tax and Budget Policy

Hurray for a Bigger Welfare State!

The Bush administration is deeply infused with a pro-spending, welfare state mentality. It may contain a few conservative officials scattered here and there, but the vast machinery of the Republican executive branch churns out spending proposals, regulations, and big government propaganda just as prior Democratic ones did.

Consider this June 5 press release from the USDA , wherein higher spending and more recipients of government welfare is always a good thing.

Agriculture Secretary Mike Johanns says proudly: “We have increased our nutrition assistance budget by 70 percent since 2001 and we proposed that the 2007 Farm Bill do even more to increase access and participation in USDA programs to help those in need.”

Here’s one particularly silly statement: ”Today’s report highlights the recent growth in the Food Stamp Program — the largest Federal nutrition assistance program, and the nation’s first line of defense against hunger.”

Of course, free markets are the real “first line of defense against hunger.” Has no one in the administration read Adam Smith? It is the self-interest of the butcher, brewer, and baker that we can thank for providing our dinner.

Europeans Continue to Flee

Immigration is not just about Latin Americans moving to the United States for higher wages. It is also about Europeans moving to just about anywhere that has lower taxes.

A column in the Washington Times explains that, as a result, most of Europe’s major economies are suffering a significant brain drain:

Last year more than 155,000 Germans emigrated from their native country. Since 2004 the number of ethnic Germans who leave each year is greater than the number of immigrants moving in. …In a survey conducted in 2005 among German university students, 52 percent said they would rather leave their native country than remain there. …Some complain that the tax rates in Germany are so high that it is no longer worthwhile working for a living there.

…The situation is similar in other countries in Western Europe. Since 2003, emigration has exceeded immigration to the Netherlands. In 2006, the Dutch saw more than 130,000 compatriots leave. …In Belgium the number of emigrants surged by 15 percent in the past years. In Sweden, 50,000 people packed their bags last year — a rise of 18 percent compared to the previous year and the highest number of Swedes leaving since 1892. In the United Kingdom, almost 200,000 British citizens move out every year.

Americans who think that the European welfare state is the model to follow would do well to ponder the question why, if Europe is so wonderful, Europeans are fleeing from it. European welfare systems are redistribution mechanisms, taking money from skilled and educated Europeans….

[A] German sociologist at the University of Bremen, warns European governments that they are mistaken if they assume that qualified young ethnic Europeans will stay in Europe. “The really qualified are leaving,” Mr. Heinsohn says. “The only truly loyal towards France and Germany are those who are living off the welfare system, because there is no other place in the world that offers to pay for them…. It is no wonder that young, hardworking people in France and Germany choose to emigrate,” he explains.

A Gem from Pearlstein

In this morning’s Washington Post (man, I need to do my blogging earlier in the day), business columnist Steven Pearlstein dings Sen. Hillary Clinton (D-N.Y.) for “demonizing the drug companies and health insurers, and turning them into opponents” when she should be enlisting their support for health care reform.

Pearlstein’s column includes this gem:

[Y]ou have to have a pretty finely calibrated moral yardstick to see how drug companies and insurers are any worse than hospitals and doctors, who profit just as handsomely from the current system and have been just as dogged in opposing reasonable reform. And you could add to that list the medical-equipment makers, laboratories and nursing-home operators.

Yes, there are plenty of bootleggers behind government control of health care.  Here’s hoping they don’t start making nice-nice with the Baptists.

Armey Wades into Swampland

Former House majority leader Dick Armey is guest blogging at Time magazine’s Swampland blog about health care and other issues.

When Armey argued against government subsidies and price regulation, Time’s Jay Carney asked a couple of good questions. Here’s how I would have answered them.

“Would we really be better off if we could shop around for the best price on a quadruple bypass? Or chemotherapy?” 

I suggest Carney ask Howard Staab, a 56-year old uninsured contractor in North Carolina who needed a heart valve repaired in 2004. Durham Regional charged $200,000, which Staab couldn’t possibly afford. So he went to India, where a former associate professor of medicine from NYU performed the surgery in a quality hospital for just $10,000. (Mike Tanner and I wrote about Staab and patients with similar stories in our delightful book.)

We don’t need every quadruple bypass candidate to shop around, or to shop internationally, or to shop just on the basis of price.  If only a few of them do so — economists call them the “marginal consumers” — we will establish the kind of competition that reduces prices and improves quality even for patients who don’t have the luxury of time.

“Wouldn’t that lead to even greater disparities between the quality of care received by rich and poor?” 

Personally, I’m mostly concerned with developing better medical care, and making those innovations available to the poor as quickly as possible. Market competition is the best tool for doing so. Other approaches either stifle innovation or keep prices way too high for the poor to afford.

Fisking Romney

I watched the Republican presidential candidates’ debate last night, and darn it if that Mitt Romney isn’t an attractive speaker. If you didn’t know anything about health care or the reforms he enacted in Massachusetts, you’d think he had that problem licked. 

So here’s a reality check.  What Romney said about health care (according to the New York Times) appears in bold italics.

“[In Massachusetts,] we said: ‘You know what? We [have] got to find a way to get everybody insured….’”

Here, the candidate reveals his desire to do something that is 100 percent impossible. To be clear: It is impossible to give everyone health insurance

Some people with known, high-cost conditions are uninsurable. So even if you claim you are providing “insurance” to an uninsurable person, you are not, because it’s only insurance if there is uncertainty about whether a subsidy will be needed. If there’s no uncertainty, it’s just plain subsidy — not insurance. 

Markets don’t provide “insurance” to uninsurable people. Only government does that. So when people say they want to “get everybody insured,” rest assured, they are about to propose more government.

“And the last thing we want is to have the government take over health care, because anything they take over gets worse, not better….”

I agree with this sentence, because it completely contradicts the sentence that came immediately before it. 

“We’re not going to turn to Washington, because Washington makes a mess….”

Actually, a significant portion of the funding for RomneyCare came from Washington. Indeed, it was because Washington was about to yank $385 million in Medicaid funding that Massachusetts turned to Washington with a plan to keep that money flowing. Sure did make a mess, though — no argument there.

“We said: ‘We need to find a way to get everybody in our state insured with private insurance….’”

Funny, that’s exactly what Hillary Clinton tried to do in 1993.  

“The half a million who didn’t have insurance, all the people worried that if they lost their job, they’d lose insurance — we said we got to find a way to get them insured without raising taxes….”

RomneyCare imposed a slew of new taxes. Romney’s defenders like to claim that the plan did not include a broad-based tax increase. But it did increase government spending, which is essentially the same thing. 

“…without a government takeover…”

The government can take over your health care by taxing you and spending your money itself, or by forcing you to spend your money how it wants. The latter is what Romney did.  Either way, the government is taking over.

“…and that’s what we did.”

Really? And here I thought the Massachusetts “Connector” bureaucracy explicitly and unanimously decided not to cover 20 percent of the Bay State’s uninsured.

“It relies on personal responsibility….”

Personal responsibility means that you bear the cost of your decisions. But RomneyCare allows people to push the cost of their bad decisions (smoking, poor diabetes prevention and management, etc.) onto others. RomneyCare thus relies on collective responsibility. Romney consistently confuses the two.

“Every Democrat up there’s talking about a form of socialized medicine, government takeover, massive tax increase….”

True enough. But it’s not just the Democrats.

“We get people that were uninsured [covered] with private health insurance….”

Nominally private health insurance, yes. Just like Hillary proposed.

“We have to stand up and say the market works. Personal responsibility works….”

If they work, why abandon them?

“We’re going to have insurance for all of our citizens they can afford, that’s theirs, that’s portable. They never have to worry about losing it….”

Not quite. The only good thing about RomneyCare is that it may give workers more health insurance choices, and let them keep their insurance when they change jobs. The federal tax break associated with job-based coverage traditionally has made that impossible. 

But insurance would not be so portable for those who don’t get another job. In that case, RomneyCare will let you keep your insurance, but the cost could rise 80 percent because you’d lose that tax break. Losing your insurance would be really easy under those circumstances.

Romney’s defenders would say (1) that’s always been the case, and (2) you can’t change that problem at the state level — only Congress can change the federal tax code. But that’s exactly the point. 

The whole premise of RomneyCare and its “Connector” is that a state can undo the damage wrought by federal tax laws. An honest appraisal of RomneyCare belies the folly of that premise. For Massachusetts to mitigate the damage done by federal tax laws — even slightly — required (A) creating a new government bureaucracy, (B) increasing government spending, and (C) imposing new taxes. 

The fundamental flaw of RomneyCare is that conservatives tried to use state law to fix problems created by federal law. The Constitution just doesn’t work that way. RomneyCare is a net minus for freedom because it expanded government at the state level and distracted free-market advocates from pushing for real reform at the federal level. It continues to do so.

I was glad to see that the New York Times’ transcript picked up the comment of an unidentified candidate who responded to Romney’s claim of having covered all the uninsured with: “I’m told that’s not true.  Actually, Wolf, that’s not true.” Watching the debate, I thought it was Rudy Giuliani who said it. That would make sense: he had the soundest approach to health care of all the candidates.

Tony Blair’s Wise Warning against ‘Isolationism and Protectionism’

In an essay published this week by the Economist magazine, outgoing British Prime Minister Tony Blair shared “What I’ve Learned” during his decade in office. I’ll leave it to others to dissect what he said about the transatlantic alliance, the Iraq War and the National Health Service, but his words of wisdom on the importance of an open global economy are worth quoting.

Declaring that “‘Open v closed’ is as important today in politics as ‘left v right,’” Blair wrote:

Nations do best when they are prepared to be open to the world. This means open in their economies, eschewing protectionism, welcoming foreign investment, running flexible labour markets. It means also open to the benefit of controlled immigration. For all nations this is a hugely contentious area of policy. But I have no doubt London is stronger and more successful through the encouragement of targeted migration.

Isolationism and protectionism now cut across left and right boundaries. They are easy tunes to play but pointless in anything other than the very short-term.

I wish more members of the U.S. Congress would learn the same lessons.

What a County Government Does When It Has Too Much Money

The Fairfax County Taxpayers Alliance, here in the Washington suburbs, complains that property taxes have soared over the past seven years. The typical Fairfax homeowner is paying $4830 a year in property taxes. The FCTA points out that “if during the past seven years the Supervisors had held real estate tax increases to the rate of inflation, which averaged three percent per year, the typical homeowner would be paying $3,079.” Home values have been rising fast in the Washington area (at least until the past year), so taxes have also increased sharply.

Taxpayers urge the supervisors to cut taxes. The supervisors–in Fairfax County and everywhere else–respond, “Would you have us close fire stations or fire teachers or throw widows out in the snow?” Somehow they never discuss, as another item in the FCTA newsletter does, the fact that salaries and benefits have increased far more than population growth or any other measure over the past seven years. Just hold county employees’ salary increases to the rate of inflation, and you could save the taxpayers a lot of money.

Or maybe, just maybe, Fairfax County’s $3.3 billion annual budget contains some low-priority items, like this one that was the subject of a charming article in the Washington Post:

This group of 12 kids, ages 6 to 10, are in the otherwise empty cafeteria of Anthony T. Lane Elementary School in Alexandria for the last of their eight Saturday morning classes on manners, offered through the Fairfax County Park Authority.