Norwegian Government Attempts Shakedown as Price of Lower Tax on Shipping

In an excellent example of the benefits of tax competition, Bloomberg reports that Norway’s left-leaning government intends to eliminate the corporate tax on shipping because of pressure from Bermuda, Liberia, and other open-shipping registries. But there is a dark lining to this silver cloud. The politicians want to extort $3.5 billion of alleged back taxes as part of the deal. Needless to say, Norway’s shippers are understandably suspicious about any deal that requires higher payments today in exchange for promises of less tax in the future:

The government said after the market closed on Sept. 7 it would seek 20 billion kroner ($3.5 billion) of payments in exchange for scrapping corporate tax on shipping companies. Shippers have been allowed to defer tax since 1996 provided they don’t use the money for dividends. … “The government is reneging on its previous agreement,” said Rikard Vabo, an analyst at Fearnley Fonds in Oslo who has a “sell” recommendation on BW Gas. “We will probably see shippers move abroad. It will also affect related companies, such as suppliers.” … The government wants to abolish corporate tax on shippers because lower rates outside Norway have encouraged companies to register new vessels in countries such as Liberia and Bermuda. … The Oslo-based Norwegian Shipowners’ Association will “consider everything” to reverse the tax ruling, spokeswoman Marit Ytreeide said by phone today.

Response To My USA Today Oped

Regarding my recent USA Today oped about how to reduce the number of U.S. residents who lack health insurance, The Physician Executive writes:

I reviewed the articles which Mr. Cannon offers as references and have trouble connecting the articles to the point being made. There are also some logical inconsistencies.

Some of the confusion stems from the fact that I went on vacation two days before the piece ran, and the mobile phone reception in Zion Canyon is terrible. Thus USA Today had to cut my original oped by about 100 words without any help from me – much to their irritation and that of a few Cato colleagues. Sorry, guys.

So here is my effort to shed some light on some of The Physician Executive’s questions. In each case, I begin with the relevant part of my oped.

“The truth is, there are not 47 million U.S. residents who can’t get health insurance. According to the Department of Health and Human Services, that [Current Population Survey] estimate ‘appears to overstate the uninsured substantially compared to other surveys.’ Those other recent surveys put the number between 19 million and 36 million.”

The Physician Executive notes that the link provided by USA Today takes the reader to a document “which does not support Mr. Cannon’s statement.” True enough, and a result of my being incommunicado. The oped should have linked to this study for the 19 million figure and this study (page 4) for the 36 million figure.

Obtaining the 19-million figure required applying the percentage without any coverage in 2001 as reported by the Survey of Income and Program Participation (6.8 percent of U.S. residents; see page 13 of the former study) to the Census Bureau’s 2001 estimate of the U.S. population, contained here (page 58). Sadly, 2001 is the most recent SIPP estimate of the full-year uninsured that I could locate.

The Physician Executive did miss an error, though. My oped attributes that “appears to overstate” quote to HHS. My original draft attributed that quote to a study prepared for HHS, but the attribution was truncated.

As many as 20% of the ‘uninsured’ are eligible for government health programs, so in effect they are insured.”

Some of those counted among the 47 million “uninsured” are eligible for and enrolled in Medicaid, the mammoth government health program ostensibly for the poor. Other people counted as uninsured are eligible for Medicaid but not enrolled.

The non-partisan Congressional Budget Office notes that the former group – those who are eligible and enrolled in Medicaid – may account for 12-15 percent of the SIPP’s estimates of the full-year “uninsured.” My oped links to a study prepared for HHS that estimates that those who are eligible and enrolled in Medicaid account for 9 million of the 45 million people counted as “uninsured” by the CPS in 2003 (see page 3). That gets you to 20 percent, and we haven’t yet counted the latter group – those eligible for but not enrolled in Medicaid.

“[E]conomists Kate Bundorf and Mark Pauly estimate that as many as 75% of the uninsured can afford to buy insurance.”

The Physician Executive correctly notes that Bundorf and Pauly presented a range of estimates of the share of the uninsured that can afford coverage. The range was 31-76 percent. My original draft gave a range of one-quarter to three-quarters of the uninsured, but I was told to pick a single estimate for clarity’s sake. I picked the larger, and represented it as an upper bound.

Those estimates were based on different definitions of affordability, which are of course inherently subjective. Nevertheless, I used this (apparently credible) estimate by two distinguished economists to support my claim that “there are not 47 million U.S. residents who can’t get health insurance.” I am not sure why The Physician Executive describes my use of that estimate as an “inexplicable peripatetic diversion.” I looked up peripatetic, and I’m still not sure. Perhaps she would prefer an essay on this point. (USA Today would not.)

[M]any economists can find no evidence that [simply expanding coverage] is a cost-effective way to improve health.”

Here I linked to a working paper that The Physician Executive describes (in part) as “a non-peer reviewed piece of secondary literature.” It is in fact an early draft of a chapter in this book, published by the left-leaning Urban Institute. (Both the working paper and the final product reach the same conclusion. I linked to the former so people could read the author’s perspectives without purchasing the book.) That chapter concludes:

It is clear that expanding health insurance is not the only way to improve health…Policies could also be aimed at factors that may fundamentally contribute to poor health, such as poverty and low levels of education. There is no evidence at this time that money aimed at improving health would be better spent on expanding insurance coverage than on any of these other possibilities.

In other words, if your aim is to improve people’s health, it is not clear that expanding health insurance coverage is the way to do it. (As far as I know, that claim is not controversial among economists.) Of course, if your aim is to pump more money into the health care sector, expanding coverage is the way to go.

“Simply expanding coverage would have little effect on the quality of care, health disparities, or how long we live, nor would it stop free-riders from shifting costs to others.”

The Physician Executive raises questions about each of these claims. Here’s more information about each:

  1. The “quality of care” link takes the reader to a well-respected study that observes: “We found that health insurance status was largely unrelated to the quality of care among those with at least minimal access to care. Although having insurance increases the ease of access to the health care system, it is not sufficient to ensure appropriate use of services or content of care. Indeed, within systems where access to care is more equitable … substantial gaps between observed and optimal quality remain.”
  2. The “health disparities” link refers to a study that observes: “Although increasing insurance coverage and access to care would most likely contribute to narrowing disparities … the available data suggest that the variation in health plan coverage … is small relative to the very large gradient in health outcomes. It is likely that expanding insurance coverage alone would still leave huge disparities in young and middle-aged adults.”
  3. How long we live” links to a New York Times article where the invaluable Gina Kolata writes that health economists find that health insurance “pale[s] in comparison” to education when it comes to extending longevity. Kolata quotes Rand Corporation health economist James Smith as saying that health insurance “is vastly overrated in the policy debate.”
  4. Free-riders from shifting costs to others” links to a study by two Urban Institute scholars who estimate that uninsured free-riders account for just 2.8 percent of health care spending. Moreover, 1.2 percent of health care spending is attributable to insured free-riders. Thus, despite there being precious little free-riding to begin with, expanding coverage to everyone still wouldn’t eliminate it.

“[A]ccording to data from the Kaiser Family Foundation, that family spends $11,000 for its own employer-controlled coverage.”

The Physician Executive is puzzled:

The Kaiser Family Foundation says that the average family of four spends $11,000 a year. Individuals are pegged at $4,000. What the average cost per employee is, I just don’t know. Using one number without the other is not an honest presentation of the problem and I may be a little dense here… what was the point? Health care is expensive? We know that.

Obviously, self-only coverage is cheaper and all coverage is expensive.

My point, however, was not about families versus individual workers, nor is it about how much health insurance actually costs. My point is about who controls the money. My initial draft read:

the average family of four will spend roughly $25,000 on health insurance this year: $14,000 in taxes to fund government programs for others; and $11,000 for its own employer-controlled coverage.

More than 200 million Americans have public or employer-controlled coverage, and all are essentially purchasing it with someone else’s money. And that’s the problem …

A substantial chunk of workers’ earnings go to health care, but workers own and control essentially none of that money. We would have a far more efficient, accessible, and useful health care sector if they did.

Actually, the Kaiser Family Foundation today released an updated estimate of the average cost of employer-controlled family coverage: $12,106 (see page 24). So we might make the total $26,000. Or not. My point is qualitative, not quantitative.

Much of what we believe about the uninsured and expanding coverage is deeply ingrained, intuitively appealing, and wrong. You can’t challenge that kind of conventional wisdom without getting some very educated and incredulous blowback.

Charter Trade-offs … Is Public Choice Killing Private Schools?

Typically, charter schools are lumped together with the movement for private school choice, but there is increasing evidence that charter schools hurt private schools and may close off the path to educational freedom.

The Washington Post reported this weekend that Archbishop Donald W. Wuerl is proposing to convert 8 of the 12 inner-city Catholic schools known as the Center City Consortium into secular charter schools:

Soon after he arrived in the District in June 2006, Wuerl said he heard from Catholic education officials that the inner-city schools were no longer financially viable. Part of the reason was that many poor families were choosing charter schools, which are free.

“One by one, families left to go to charters … and it was a kind of steady drifting away,” said Monsignor Charles Pope, pastor of Holy Comforter-St. Cyprian Roman Catholic Church in Southeast Washington, whose parish school, which dates to the 1920s, would be converted to a charter.

The charter school drain on private school enrollment is not limited to DC. A 2006 report from the National Charter School Research Project, for instance, finds that 20 percent of Michigan charter school students came from private schools.

These results should come as no surprise. Private schools struggle under a massive disadvantage compared with government schools; they have about half the public sector’s per pupil revenue and parents have to pay tuition on top of taxes for the government system. That’s a high hurdle to clear to attract customers.

The big advantages they have are diversity in curriculum and mission and freedom from the counter-productive regulations that often bog down government schools. And because they operate at such a financial disadvantage to government schools, private schools need to make sure they offer something parents can’t get from their state-run counterparts.

Charter schools add significantly to the disadvantages of private schools; charters get most of the higher funding that regular government schools do, but for now, at least, more autonomy and freedom to diversify. In the long term, there is no reason to believe that charter schools will not succumb to the same regulatory ratchet effect that has hamstrung the public schools. The local public schools of the late 1800s had more autonomy than charter schools do today – and look what happened to them….

Supporters of educational freedom – the freedom to choose the best option, whether public, independent, or religious – need to carefully consider the serious trade-offs involved when supporting charter school policies. If they don’t, they may be looking at a 99% government school monopoly in 20 years time, instead of the 90% monopoly that exists today.

Petraeus and Iraq: The Story vs. the Headlines

Headline writers at several major newspapers have chosen to highlight Gen. David Petraeus’s proposal to reduce the number of troops in Iraq by 30,000, essentially returning the presence there to pre-surge levels.

  • “Petraeus Backs Partial Pullout,” proclaims the print edition of today’s Washington Post.
  • “Petraeus Eyes Troop Reductions,” blares the Washington Times.
  • USA Today’s lead story appeared under the slightly more qualified headline “General Plans Cut in Troops as Tension Rises over Timing.”

But these headlines obscure the true story behind Petraeus’ and Amb. Ryan Crocker’s testimony yesterday and today. Greg Jaffe and Neil King, Jr., at the Wall Street Journal do a better job of fixing on the essential unanswered question: How quickly will the pullout proceed beyond July?

Members of Congress have tried to get at this issue, but Petraeus and Crocker have – so far – deftly parried these questions. Not knowing the answer, we are forced to rely on a speculative but, I think, ultimately accurate assessment by Karen DeYoung and Tom Ricks on the front page of the Post:

“If Gen. David H. Petraeus has his way, tens of thousands of U.S troops will be in Iraq for years to come.”

Will he get his way? It will be up to the next president to decide. George Bush has already made up his mind: for as long as he is in the Oval Office, we’re staying.

You Know It’s a Dark Hour When…

…you’re having wistful fantasies about staff meetings. In all seriousness, though, there’s great news: once imprisoned by Iran, Wilson Center scholar Haleh Esfandiari is back at home in Washington–and back at work at the Wilson Center. But as she says, during her stint in Evin prison, she was indeed dreaming about being back at Wilson Center staff meetings:

I had blocked, you know, thinking about my husband, my daughter, my grandchildren, the house; I blocked all that out because that would have led me to despair. So, for eight months, or for the four months in prison, I didn’t think about it.

I dreamt of my first staff meeting at the Wilson Center. (Laughter.) I seriously did. I really did that, I said, OK, I would [not] tell anybody I’m in town … I would open the door Monday morning at 9:00, walk in to the staff meeting and everybody [would say], “She’s here!”

Full transcript of Esfandiari presser here. (.pdf)

Ramesh Ponnuru Joins the Anti-Universal Coverage Club

From his excellent article [$] on health care reform in the most recent issue of National Review:

No matter how cheap free-market reform made basic insurance policies, some people, chiefly the young, would not buy them. Republican reformers are divided about what to do about these holdouts. Some of them believe that they should be forced to buy insurance, so that they would not visit emergency rooms and send everyone else’s premiums higher. Others argue that the premium increase is small, and the risks of mandatory coverage large. The Urban Institute estimates that uncompensated care is less than 3 percent of health spending. Eliminating that cost through forced coverage would require the government to define a basic benefits package, which would be an invitation to provider groups to lobby the government to re-create the mandates that state governments have piled on insurance. My own view is that, in a fairly free system, the holdouts should be left to do as they please.

Click here for more on the Anti-Universal Coverage Club.