Romania Joins the 31-Nation Private Retirement Account Revolution

An English-language story from the European press discusses the privatization of the retirement system in Romania. The system eventually will permit workers to put six percent of their income in personal accounts. This is good news, but there is a dark lining to this silver cloud. I challenged my colleague Jose Pinera earlier this year that the number of flat-tax nations would soon exceed the number of private-account nations. Unfortunately, Jose works too hard, and he keeps adding new nations to his list. Since there are now 21 jurisdictions with flat tax systems, this means I still have a long way to go:

Under a new system launched last month, more than 3 million Romanian workers under 35-years-old must opt for one of 14 competing private pension funds before January 17th, 2008. Those ages 35 to 45 can also decide to join one of the private funds. Starting in 2008, 2% of every worker’s general income will be redirected from the state budget to the chosen private fund. This contribution will gradually increase to 6% by 2015, and the current 9.5% social security contribution to the state system will diminish accordingly. “Several million Romanians will become investors, and the private pension system will educate them in the spirit of a free market economy,” says Romanian President Traian Basescu. …Romania cautiously now joins a club formed by 31 countries – Bulgaria, Macedonia and Croatia among them that have decided to address the demographic pressure on state budgets through privatisation.

Mitt: Educational Marxist?

According to MSNBC, yesterday GOP presidential candidate Mitt Romney called Hillary Clinton a Marxist, remarking that “she said we’ve always been an on-your-own society…we should be a we’re-all-in-it-together society, a shared responsibility society. So it’s out with Adam Smith and in with Karl Marx.”

Romney might be right about Hillary Clinton, but based on several things he’s said recently about education, one can’t help but wonder if there’s not a fair bit of Big Brother in him, too.

At the same event where Romney attacked collectivist Hillary, for instance, he lauded the intrusive, federal No Child Left Behind Act. He likes the testing, he said, apparently not caring that it’s mandated by the central government. Even scarier, he endorsed a national program requiring that “before a parent can send a child to school for the first time, they’ve got to go to a weekend where they learn about being prepared to support their child in school.”

To top all this off, yesterday the Associated Press reported that Romney has floated the idea of rewarding college aid based on what careers recipients choose. “I like the idea of linking the level of support that we’re able to provide to young people going to college to the contributions they’re going to make to our society.” So not only is Romney going to keep NCLB and force moms and dads into government parenting academies, he’s going to engineer who gets what based, apparently, on how much government decides different jobs contribute to society?

Maybe Hillary isn’t the only closet Marxist in the 2008 race.

Is Portland Light Rail a Success?

My recent Cato policy analysis, Debunking Portland, said Portland’s light rail is a failure. Paul Weyrich, the noted conservative and president of the Free Congress Foundation, responds that it is successful.

The question becomes, “How do you define success?” Weyrich claims that Portland’s light rail led to billions of dollars in economic development. But my paper shows that that development received billions of dollars in subsidies – and before the city started offering subsidies, not a single transit-oriented development was built along the light-rail line.

“Many (Portlanders) use their public transportation system,” says Weyrich. In fact, 9.8 percent of Portland-area commuters took transit to work before the region build light rail. Today it is just 7.6 percent. In a story repeated in numerous cities that have built rail lines, rail cost overruns forced the city to raise bus fares and reduce bus service. That’s a success?

To Weyrich, rail is successful if anyone at all rides it. My standard is somewhat higher. For a point-by-point response to Weyrich’s article, see my Antiplanner blog.

I Challenge Paul Krugman to a Debate on SCHIP

Democracy NOW! quotes New York Times columnist Paul Krugman on the State Children’s Health Insurance Program:

the reason that Bush and much of the Republican leadership is so hostile to S-CHIP is not because they think it’s a bad program, but because they think it’s a good program, and that terrifies them. What bothers them so much is the fact that it works.

Why does Krugman think that SCHIP “works”? There is no evidence that the program is a cost-effective way of improving child health. It makes health care more expensive for those outside the program. It does not address the systemic problems that lead to low-quality pediatric care. It reduces the benefits of education and work effort, trapping families in low-wage jobs. It covers four uninsured children for the price of ten

Krugman is an economist. Has he thought about these issues? Has he read any of this literature? What about this program “works”?

It’s easy to dismiss right-wing hacks. These issues … not so easy to dismiss.

How to Argue against SCHIP

I like to open with this: “If your goal is to improve the health of low-income children, the State Children’s Health Insurance Program is a bad tool for achieving that goal.”

Then I make as many of the following points as possible.

  1. SCHIP does a bad job of targeting assistance. About 60 percent of children currently eligible for SCHIP already have private health insurance, while 77 percent of those targeted by this expansion (i.e., children between 200-300 percent of the federal poverty level) already have private health insurance.
  2. SCHIP covers four uninsured children for the price of ten. Economists Jonathan Gruber and Kosali Simon estimate that, in effect, 60 percent of children covered by SCHIP expansions already had private coverage.
  3. There is no evidence that SCHIP is the best way to improve the health of targeted children. Economists have found no evidence that SCHIP is a cost-effective way of improving health. Discrete health programs or policies that improve incomes or education could deliver as much or more health for the money.
  4. SCHIP discourages families from climbing the economic ladder. If a single mother of two earning minimum wage in New Mexico increases her annual earnings by $30,000, she pays an additional $4,000 in taxes and loses $26,000 in SCHIP and other government benefits. In other words, her net income would not change, therefore she has no financial incentive to climb the economic ladder. Expanding SCHIP would put downward pressure on even more families’ incomes, which could harm child health.
  5. Like Medicaid, SCHIP makes private coverage less affordable for people outside the program. Under Medicaid (and therefore SCHIP) rules, the government agrees to pay a percentage of what drug makers charge private payers. Economists have found that manufacturers respond by raising prices for private purchasers an estimated 15 percent.
  6. SCHIP would do nothing to address systemic quality problems. According to a recent study in the New England Journal of Medicine, “Expansion of access to care through insurance coverage, which is the focus of national health care policy related to children, will not, by itself, eliminate the deficits in the quality of care.”
  7. SCHIP’s self-interested advocates. Why do you suppose the physician, pharmaceutical, and health insurance lobbies are agitating for health care subsidies that lack any evidence of cost-effectiveness?
  8. This SCHIP expansion taxes the poor to benefit the middle class. Isn’t that just cruel?
  9. Eliminating SCHIP and letting people purchase coverage from out-of-state is a better alternative. The latter would enable families to avoid unnecessary regulatory costs, which the Congressional Budget Office puts at about 15 percent of health premiums. That would benefit SCHIP-targeted families most of all. And it would do so without raising anyone’s taxes, showering subsidies on non-needy families, pulling families into a low-wage trap, or increasing the cost of private insurance. As for eliminating SCHIP, when Congress cut non-citizen immigrants from the Medicaid rolls, contrary to all predictions the number of uninsured non-citizen immigrants actually fell. Why wouldn’t SCHIP families, who are more affluent, fare even better?

Then I like to close with this: “If you’re not interested in the best way to promote child health, not interested in targeting government assistance to the needy, and not concerned about trapping families in low-wage jobs…exactly what is it you are hoping to accomplish?”

Here [audio file] is what happened after I made just a few of these points to left-wing talk show hostess (and frequent Alan Colmes stand-in) Leslie Marshall.

Friendly Advice for Conservatives on Health Care

National Review Online’s Health Care Week is in full swing. The site features a week’s worth of essays on how conservatives should approach health care.

My contribution offers friendly advice about how conservatives can avoid abetting the Left as well as the special interests who profit from the creeping socialization of American health care:

Health care is a tough issue for conservatives only because they have strayed from their free-market principles. When conservatives return to those principles, health care will again become a tough issue for the Left.

It was the most fun I’ve had with an oped in a while. Read the whole thing here.