Topic: Trade and Immigration

How States Use Medicaid to Bilk Taxpayers in Other States

Today, the Government Accountability Office (GAO) testified before Congress on the many ways that states use the Medicaid program to defraud (my word) taxpayers in other states.  The following is an excerpt from GAO’s prepared testimony:

GAO has reported for more than a decade on varied financing arrangements that inappropriately increase federal Medicaid matching payments. In reports issued from 1994 through 2005, GAO found that some states had received federal matching funds by paying certain government providers, such as county-operated nursing homes, amounts that greatly exceeded established Medicaid rates. States would then bill CMS for the federal share of the payment. However, these large payments were often temporary, since some states required the providers to return most or all of the amount. States used the federal matching funds obtained in making these payments as they wished…[Such] financing arrangements effectively increase the federal Medicaid share above what is established by law…

Supplemental payments involving government providers have resulted in billions of excess federal dollars for states, yet accountability for these payments—assurances that they are retained by providers of Medicaid services to Medicaid beneficiaries—has been lacking. CMS has taken important steps in recent years to improve its financial management of Medicaid, yet more can be done.

Yes, more should be done.  Congress should reform Medicaid and the State Children’s Health Insurance Program the same way it reformed welfare: eliminate the federal entitlement to benefits, and replace those programs’ matching grants with lump-sum block grants.  That would eliminate many perverse incentives created by those programs, including the incentive to cheat taxpayers in other states.

Those reforms would also be a nice stepping stone toward giving the states full responsibility for maintaining those programs, and getting the federal government out of the business of providing medical care to the poor entirely.

Passport Snooping Is Just the Beginning

Following up on the story earlier this week that the passport files of all three major presidential candidates had been snooped on, Brian Bennett writes in the April 7 issue of Time about plans to distribute passport information very widely indeed, such as to the Department of Homeland Security, IRS, employers, and foreign governments.

Meanwhile, the State Department has a video interview up on its website about passport privacy. Addressing the issue in a long format on a widely accessible medium is a good thing, so congratulations are due State for addressing the issue.

However, the lead question asked of Under Secretary for Management Patrick Kennedy is a big waste of time: “Does every State Department employee have access to personal data that’s given us for passports or other reasons?” That pitch is so slow it doesn’t even reach the plate. But there is some interesting information about the State Department’s data security practices later in the video.

Unaddressed is Brian Bennett’s reporting on the proposal for wholesale sharing of passport information.

Tuesday Trade Links

A couple of interesting tidbits on trade:

  • Here’s a great video of our friend, Rep. Jeff Flake (R, AZ), speaking about the decades-long embargo on Cuba and restrictions on the freedom of Americans to travel there. Congressman Flake spoke at a Cato event (scroll to about half way down the page) on Capitol Hill last year along with Congressman Charlie Rangel (D, NY). Cato’s Center for Trade Policy Studies has long argued for an end to the failed embargo on Cuba.
  • The U.S. Department of Commerce yesterday released the 2007 trade deficit figure: $738.6 billion or 5.3 percent of GDP. It will no doubt come as a relief to the current account deficit (CAD) hawks to know that the CAD is down 9 percent on 2006, primarily due to higher export earnings (thanks, cheaper dollar) and an economic slowdown. More on the link between economic growth and the deficit here.

Goliath vs. Goliath?

A further development in the cross-border supply of gambling and betting services broke today when the European Union announced they would launch a formal investigation into the selective (and retroactive) prosecution of European gaming interests by US authorities.

This is yet another twist in the saga first brought to light by Antigua’s case against the United States in the WTO. That case (summarized here and updated here, here, here, and here) sparked a slew of indirectly related skirmishes, a plethora of “David vs. Goliath” headlines, and an unprecedented reaction from the United States to pick up their ball and go home. The various twists and turns of the dispute have provided ample fodder for trade junkies in the form of commercial and systemic issues: Does the WTO dispute settlement mechanism provide effective recourse for big as well as small members? How should WTO members respond when one of their cohorts wants to change the nature of the contracts between the parties? How do members balance their rights and obligations in the context of issues of public morals?

The questions look far from answered because if the EUs investigation proceeds, a new WTO case could be on the horizon. Although the EU and the United States came to a settlement in December over the United States’ wish to withdraw its commitment to open its market to the cross-border supply of gambling and betting services, the details of that settlement are sketchy. And the December deal pertains to compensation for the withdrawal of market access going forward: unless and until that deal is ratified by all WTO members (including those who are asking for compensation of their own), the U.S. obligations stand and so does the ruling that found the United States was in breach of those obligations.

In other words, while the United States might eventually be able to get away with changing its obligations to provide WTO members access to the lucrative U.S. gambling market, in the meantime their (discriminatory?) prosecution of offshore interests leaves them vulnerable.

New Paper on Electronic Employment Eligibility Verification

For all its wonders, technology is not something policymakers can sprinkle on deep-seated economic and social problems to make them go away. Electronic employment eligibility verification - the idea of automated immigration-background checks on all newly hired workers - illustrates this well.

A national EEV program would immerse America’s workers and businesses in Kafkaesque bureaucracy and erode the freedoms of American citizens, even as it failed to stem illegal immigration.

Ultimately, there is no alternative but for Congress to repair the broken immigration system by aligning legal immigration with our nation’s economic demand for labor.

Read about it in my new paper, “Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration.”

Conservatives and Free Trade

Robert Lighthizer tries to make the case in this morning’s New York Times that conservative Republicans should all be pragmatic protectionists.

It’s telling that the op-ed column does not present one bit of evidence that trade barriers have actually made America a more free and prosperous country. His argument, rather, is one of name dropping: Many liberals, including Ted Kennedy, have “supported the advance of free trade” while many conservatives, including Ronald Reagan, have prudently deviated from “free-trade dogma.”

Lighthizer paints a misleading caricature of Ronald Reagan’s trade legacy. It’s true that Reagan bowed to protectionist pressure more often than he should have, but in his words and most of his deeds, he came down squarely in favor of free trade. As I noted in an op-ed published shortly after Reagan’s death in June 2004:

Reagan’s heart and head were clearly on the side of free trade. While president, he declared in 1986: “Our trade policy rests firmly on the foundation of free and open markets. I recognize … the inescapable conclusion that all of history has taught: The freer the flow of world trade, the stronger the tides of human progress and peace among nations.’

It was the Reagan administration that launched the Uruguay Round of multilateral trade negotiations in 1986 that lowered global tariffs and created the World Trade Organization. It was his administration that won approval of the U.S.-Canada Free Trade Agreement in 1988. That agreement soon expanded to include Mexico in what became the North American Free Trade Agreement, realizing a vision that Reagan first articulated in the 1980 campaign. It was Reagan who vetoed protectionist textile quota bills in 1985 and 1988.

And Ted Kennedy as a free trader? His trade record is mixed, but on most votes in recent years, he has come down against trade liberalization. According to our new trade vote web feature, “Free Trade, Free Markets,” Kennedy voted against the Central American Free Trade Agreement, the Chile and Singapore FTAs, presidential trade promotion authority, and the 2000 African trade bill. He voted in favor of China currency sanctions, exempting anti-dumping laws from WTO negotiations and the trade-distorting farm bill now making its way through Congress. If that’s the record of a free-trader, then the term has lost any meaning.

Whether a conservative should support free trade ultimately turns on what THAT label means. If conservative means one who opposes change and wants to preserve the status quo, then free trade is probably not the right policy. But if conservative means one who favors individual liberty, free markets, limited government, and a more peaceful world, free trade is a grand slam.

Senators Suddenly Pro-Trade

Four influential senators have written [$] to the French Ambassador to express their displeasure at France’s ongoing restrictions on genetically modified (GM) corn, warning that the issue could spark litigation.

America and the European Union have been at loggerheads over GM foods for years now, culminating in a dragged-out WTO dispute (summary available here) that was resolved with a partial-loss for the EU because they took too long to make a decision on allowing certain products into the european market, and because the EU didn’t base some of their restrictions on scientific evidence, as required under WTO rules. Now the victorious parties, including the United States, Canada and Argentina, are waiting for practical resolution and for trade to start flowing.

The French, however, are continuing to resist approving products made from agricultural biotechnology, ostensibly in the face of public opposition to the foods. French President Nicolas Sarkozy has spoken publicly in support of a ban on growing GM crops in France, and the French yesterday proposed scrapping the current EU approval process for genetically modified organisms in favour of tougher standards.

Enter the senators, who see what tougher restrictions would mean for GM-happy American farmers and are incensed at what they see as a flouting of trade rules. Ironically, among them is Saxby Chambliss (R-GA) who favors the continuing support of American cotton growers, even in the face of WTO rebukes for the manner in which that support is delivered. Similarly, Senate Finance Committee Chair Max Baucus (D-MT) has refused to countenance passing any trade deals unless and until he gets his way on trade adjustment assistance (you can see what I think of his ideas for TAA here).

Senator Obama isn’t the only member of that august chamber with two faces on trade.