Time to Remember the Lessons of Katrina

The August 13 Time cover story on Katrina begins:

The most important thing to remember about the drowning of New Orleans is that it wasn’t a natural disaster. It was a man-made disaster, created by lousy engineering, misplaced priorities and pork-barrel politics.

The primary culprit was the Army Corps of Engineers, together with its congressional overlords. In the Time piece, reporter Michael Grunwald does an excellent job describing the misplaced priorities of the Corps, both pre-Katrina and post-Katrina.

As I’ve argued, the Corps ought to be privatized. Alas, the Bush administration bungled its Katrina response and has since missed a big opportunity to push for fundamental reforms of the Corps, FEMA, and other agencies.

Topics:

America’s “Public Squalor” Versus Europe’s “Social Justice”

A British member of the European Parliament urges approval of the new European Union constitution (now being called a reform treaty in an effort to preclude a referendum), arguing in the Guardian that it will promote European-style solidarity rather than the American-style squalor. Yet according to both the IMF and the World Bank, per capita GDP is $8,500 higher in the United States (nearly $13,000 higher according to the CIA and $9,800 higher according to the OECD) than it is in the United Kingdom. As for the less fortunate, a left-wing think tank published a report last year showing that poor people in America have more income than poor people in the U.K. (see Figure 8D). The international data suggests that the European social model does a good job preserving the self-interest of the political class and a crummy job helping people improve their lives:

The reform treaty will explicitly commit European governments to defend and strengthen the European social model. It will enshrine the values of social justice, full employment and solidarity in the EU’s “mission statement” and commit the EU to “a social market economy, aiming at full employment and social progress”. Similarly, the treaty emphasizes that the EU must work to “combat social exclusion and discrimination”, and will be legally required to promote social justice, gender equality and solidarity between generations. It is values such as these that clearly differentiate the EU from the American model of capitalism that allows private wealth and public squalor. …The overwhelming majority of our socialist colleagues across Europe support the reform treaty, despite some reservations, precisely because it will enshrine the European social model.

Hmm… You Should Have Someone Look at That

Americans usually criticize socialized health care systems for forcing patients to wait for care, so it’s a curious thing to find American patients waiting. It happens. I’ve weighed in on Americans waiting for care, as have Tyler Cowen, Matthew Yglesias, Ezra Klein, and others.

Today’s New York Times now informs us:

Patients seeking an appointment with a dermatologist to ask about a potentially cancerous mole have to wait substantially longer than those seeking Botox for wrinkles, says a study published online today by The Journal of the American Academy of Dermatology.

Researchers reported that dermatologists in 12 cities offered a typical wait of eight days for a cosmetic patient wanting Botox to smooth wrinkles, compared to a typical wait of 26 days for a patient requesting evaluation of a changing mole, a possible indicator of skin cancer.

The article also provides this interesting contrast:

Dr. Michael J. Franzblau, a dermatologist in San Francisco, said doctors typically charged $400 to $600 for a Botox antiwrinkle treatment, for which patients pay upfront because insurance does not cover it.

Meanwhile, doctors have to wait for health insurance to reimburse them for mole examinations, for which they receive an average of $50 to $75, Dr. Franzblau said.

This article reminds me of a 2005 study that called ambulatory clinics to see who is most likely to get an appointment for follow-up care after an ER visit. The study found, roughly:

  1. “Four hundred six (47.2%) of 860 total callers and 277 (64.4%) of 430 privately insured callers were offered appointments within a week.”
  2. People with private insurance and those who offer to pay cash up-front were more likely to get an appointment than Medicaid patients, who in turn were more likely to get an appointment than patients who offered to pay $20 up front and pay the balance later.
  3. Nevertheless, one-third of those with private insurance – and even those who offered to pay cash up-front – still couldn’t get an appointment.

When I discussed that study with my colleage Peter Van Doren, he described it (with precision) as “an out-of-equilibrium situation not resolved by the price mechanism.” With regard to Medicaid, it’s easy to see what’s interfering with the price mechanism: Medicaid prices are set by state governments, and so they don’t change to eliminate shortages (i.e., waits) the way market prices might. The same is largely true of private coverage: those prices are set by insurers, who mostly just track the prices that the federal government sets through the Medicare program [$].

But then why would there still be shortages for patients who come with cash in hand? The price mechanism seems to be working for cash-paying Botox patients, but not for cash-paying ambulatory clinic patients. One possibility is that there might be spillover effects that affect cash-payers in markets dominated by third-party payment and rigid prices. But then wouldn’t we see cash-only ambulatory clinics emerge to capture those customers? If not, that suggested supply constraints to Peter and me.

Tax Havens and Prosperity

The Central Intelligence Agency ranks 229 nations and territories based on per capita gross domestic product and a quick look at the list shows that tax havens dominate the top of the rankings. A majority of the top 20 jurisdictions are tax havens, based on the definition put forth in 2000 by the statists at the Organization for Economic Cooperation and Development. Luxembourg, Bermuda, and Jersey (the one in the Channel Islands) top the list, while places like the Cayman Islands, Andorra, Hong Kong, and Switzerland also rank among the world’s richest jurisdictions. In an ideal world, other nations would emulate the so-called tax havens. Instead, high-tax nations persecute these jurisdictions as part of an effort to create an OPEC for politicians.

SCHIP’s Bad Bargain

According to a cost estimate released by the Congressional Budget Office last Friday, the Senate-passed legislation expanding the State Children’s Health Insurance Program would enroll an additional 6.1 million children in SCHIP and Medicaid. However, 2.1 million would lose their private health insurance. So while the legislation would provide government-run health care to 6.1 million children, it would reduce the number of uninsured children by only 4 million.

That’s government efficiency for you: extending health insurance to two children for the price of three!

I’ll be discussing SCHIP at a Capitol Hill Briefing with Patrick Fleenor of the Tax Foundation on September 13 (register now) and in an upcoming Cato Briefing Paper to be released the same day.

Why Is the President Amplifying Enemy Propaganda?

The president’s speech yesterday was another surreal offering, but this time we got two shocking endorsements and amplifications of essential enemy propaganda points. According to George W. Bush, the reason we are in Iraq is ― in part ― to control its oil. Also, according to the president, there is a real danger that Osama bin Laden and his cohort could establish a caliphate over the swath of territory from Spain to the Phillipines. Here he is on oil, and what would happen to it if we left:

Extremists would control a key part of the world’s energy supply, could blackmail and sabotage the global economy. They could use billions of dollars of oil revenues to buy weapons and pursue their deadly ambitions.

Out of the 20-30,000 people we have in custody in Iraq, 130 of them are non-Iraqi. Can anyone imagine the gang of idiots currently slaughtering innocent Iraqis with car bombs trying to run the oil infrastructure of a country the size of Iraq? Monitoring extraction, handling the logistics of getting oil through southern Iraq out to port and then dealing with multinationals and the sophisticated financial instruments used to remunerate oil producers? Could anything be more ridiculous?

Then we went on to the other nightmare scenario: American defeat in Iraq will birth a caliphate!

These extremists hope to impose that same dark vision across the Middle East by raising up a violent and radical caliphate that spans from Spain to Indonesia… And that is why they plot to attack us again. And that is why we must stay in the fight until the fight is won.

Who is writing this stuff? Chris Preble and I have written why al Qaeda has no hope of taking over Iraq in the wake of a U.S. withdrawal, but their reestablishing the caliphate is an even more ridiculous notion. But don’t take it from me:

“I can see the whole Arab world falling into sectarian violence, so I can’t see this caliphate happening,” said London-based anthropologist Madawi al-Rasheed, referring to Sunni-Shi’ite tensions in Iraq and Lebanon.

“This is just part of (al Qaeda’s) war of slogans.”

[…]

Lebanese historian Kamal Salibi said the region had already failed to unite under the banner of Arab nationalism after World War Two.

“It didn’t work with Arab nationalism, and with pan-Islamism it is working less,” he said. “The likelihood that states would give up their sovereignty is now more remote than ever before.”

[…]

“For most of the mainstream and less mainstream political parties of political Islam, the borders of the contemporary state have been accepted,” said As’ad AbuKhalil from Lebanon, who teaches politics at the U.S. California State University.

“There is absolutely no credence to the notion that the quest for the caliphate is the overriding goal of the Islamist movement in the region.”

It’s disgraceful that the president is aping enemy propaganda, which no doubt gives people in the Islamic world the impression that we believe that al Qaeda is strong ― strong enough to have a shot at the caliphate that it gets mentioned in a presidential speech. The very idea is ridiculous. Al Qaeda is weak and should be destroyed, not revered as a world power.

Abolish the Federal Gasoline Tax!

Earlier this month, Peter Van Doren and I published a study calling for the total elimination of the federal gasoline tax. Well, the first wave of commentary is in and, thus far, we are greatly underwhelmed. Gas tax proponents are going to have to do a lot better than this to hold the intellectual fort.

Over at the Economist, we are accused of misrepresenting citations when we argue that a doubling of the gasoline tax would only reduce tailpipe pollution by about 6 percent over the long run; an accusation also levied by some commenters at Marginal Revolution. The Economist writes:

Consultation of the cited source seems to show not that an increase in efficiency leads to a 20 percent jump in vehicle miles traveled, but that roughly 20 percent of total energy savings from efficiency gains are lost to increased travel. That’s quite a different point, implying that efficiency gains could have a significant impact on emissions.

We happily accept the clarification. The Economist has crisply stated what we in fact meant to say. But clarifying the point does not undercut our argument.

The “rebound effect” discussed above is one reason why aggregate tailpipe emissions will not be reduced as much as gas tax proponent think. But the other – and more important – reason can be found in J. Daniel Khazzoom’s userID=d8b90bfe [at] cato [dot] org/01cce4405b00501c7188b&dpi=3&config=jstor">paper which we cited. To wit, current law regulates tailpipe emissions per mile traveled, not per gallon of fuel consumed. A gasoline tax will induce a consumer shift towards more fuel efficient vehicles, and that shift will lead to only modest reductions in vehicle miles traveled. The upshot is found on page 438 of Khazzoom’s paper: Just as we said, a doubling of the gasoline tax would only reduce tailpipe pollution by about 6 percent over the long run.

Now, a careful critic might point out that this problem could be remedied by regulating tailpipe emissions per unit of fuel consumed rather than by vehicles miles traveled. But we haven’t run into that careful critic as of yet. We do anticipate and acknowledge the point, however, in endnote 32 of our paper.

Another large batch of commenters score us for not conceding that gasoline taxes are an efficient means of addressing greenhouse gas emissions from cars. But it never occurred to us to state the obvious – that if society wants to reduce greenhouse gas emissions, the most efficient means of doing this isn’t with a gasoline tax. It’s with a carbon tax.

Greg Mankiw asks us: “If Congress were considering repeal of the gasoline tax together with an income tax increase to make up the lost revenue, would you favor this revenue-neutral change in the tax mix?” Answer – no. The best way to make up for the revenue loss associated with repeal of the federal gasoline tax would be to eliminate the federal spending associated with the tax. Transportation infrastructure should be a state or local undertaking – not a federal undertaking.

Lurking behind that question, however, is the belief that raising revenue via a gasoline tax imposes less efficiency losses on the economy than raising revenue via an income tax. We don’t think much of that argument, but we discuss it at length in our paper so we won’t go through it again here. Perhaps when Prof. Mankiw gets around to reading our paper, he’ll have something further to say on that score.

There is little else of substance for us to deal with after Round 1.

For instance, many commenters have argued that our paper does not properly take into consideration the underlying literature, which supposedly cuts strongly against our arguments. That literature, we are told, was most recently surveyed by Ian Parry et al. in the June issue of the Journal of Economic Literature.

But this simply tells us that most of the opinions being expressed on these blogs are uninformed by any actual reading. Even a casual look at our paper demonstrates that we review and discuss the same literature discussed in Parry et al and, in fact, we cite Parry’s work extensively throughout. Moreover, Parry et al.’s paper in the JEL makes the same point we make in our study – that a gasoline tax is a deeply problematic means of addressing the externalities associated with driving and that there are far better policy tools available to get the job done. Parry et al. suggest that federal gasoline taxes might be a reasonable “second-best” policy, but we anticipate and counter those arguments in our study, so I won’t go into them here.

Remarkably, no one has yet taken up the most radical challenge offered to the common wisdom in our paper: that even a perfectly efficient gasoline tax would do more harm than good because it would induce more mass transit use, and mass transit use imposes even more costs on society than passenger vehicle use. For this argument, we rely on work done by Mark Delucchi at the Institute for Transportation Studies at the University of California and Cliff Winston at Brookings. Is anyone up to the task?