Politics Corrupts Everything

The president of West Virginia University, Michael Garrison, is hanging on after the school’s faculty voted 77 to 19 to demand his resignation. Faculty members are outraged that Garrison retroactively awarded an MBA to a friend, who is the daughter of Gov. Joe Manchin III. The Washington Post reports:

Garrison’s critics note that he is a former classmate of Bresch’s. He once worked as a lobbyist for Mylan Inc., where Bresch is an executive and whose chairman is one of WVU’s biggest donors. They also note that Garrison was chief of staff for former West Virginia governor Bob Wise (D).

The Post failed to add the detail that Garrison served on Manchin’s transition team when he succeeded Wise. So yes, when you hire a lobbyist and political operator to run a university, you can expect some favors for politically connected friends.

Philly Cops on Tape

A TV News helicopter filmed Philadelphia police officers as they repeatedly kick three suspects as they lay on the ground.  Go here to see the video clip.

Police Commissioner Charles Ramsey says 5 officers have been taken off street duty because of their actions.   Why are those 5 not under arrest for battery?

Philadelphia authorities reportedly hope to identify the other police officers involved in the incident.  Hope?!    If the Commissioner can’t or won’t issue an order to come forward or face dismissal by the close of business, there are deeper problems with the police department.

Cato Forum: Whatever Happened to Medicare Reform?

Consider the following:

  1. Research suggests the federal Medicare program spends as much as $100 billion per year on medical care that makes seniors neither healthier nor happier.
  2. Medicare’s payment system continues to reward low-quality and even harmful medical care.
  3. The trustees of the Medicare program have issued yet another annual report containing dire warnings about Medicare’s financial sustainability, including an unfunded liability of $86 trillion.
  4. According to economist and former Medicare trustee Tom Saving, Medicare alone will require tax rates to rise by 25 percent within a generation, and to double within 75 years, absent reform.  
  5. The picture is far worse than it was when politicians were developing fundamental Medicare reforms 10 years ago.

You would think that Medicare reform would be a high priority for politicians.  You would be wrong. The president has proposed reforms that would barely slow the program’s growing dependence on general revenues – a proposal that Congress has largely ignored. The leading presidential candidates advocate tweaks – such as reducing payments for private plans and prescription drugs, or tying payments to quality measures – rather than fundamental reforms.

To help get the politicians focus on this crucial issue, the Cato Institute will host a policy forum on Thursday, May 15, titled, ”Whatever Happened to Medicare Reform?”  Tom Saving, the Commonwealth Fund’s Stuart Guterman, and I will discuss the current state of the Medicare program, and how the program needs to be reformed.  The forum will run from 12pm to 1:30pm

Click here to register.

Health Insurance: Individual Market Protects Sickies Better than Small-Group Coverage

Market-oriented health-care wonks have proposed various ways of reforming the tax treatment of health insurance that would level the playing field between job-based coverage and coverage that consumers purchase directly (i.e., on the “individual” market).  The key to those proposals is that they would let workers control money their employer now controls, and generally would allow workers to spend those earnings on the mix of medical care and health insurance that meets their needs. 

The political Left typically protests that if workers had the freedom to spend their earnings however they want, the multiplying villainies of the market would swarm upon the sick, leaving them with no insurance coverage.  For example, Elizabeth Edwards and others chide Sen. John McCain because, they claim, people with chronic conditions could not obtain health insurance in an unregulated individual market.  Edwards even wrote: “The insurance company makes money when it doesn’t have to pay for our health care. (I suspect that if they could, they would write obstetrical-only policies for nuns.)”

An economist at the University of Pennsylvania named Mark Pauly spends much of his time collecting evidence – I repeat, evidence – that this view does not reflect the reality of unregulated health insurance markets.  Pauly and his colleagues have found:

[A]ctual premiums paid for individual insurance are much less than proportional to risk, and risk levels have a small effect on obtaining coverage. States limiting risk rating in individual insurance display lower premiums for high risks than other states, but such rate regulation leads to an increase in the total number of uninsured people. The effect on risk pooling is small because of the large amount of risk pooling in unregulated individual insurance.

and

[T]here was substantial cross-subsidization of high-risk by low-risk persons in the individual insurance market in a period in which there was only minimal state regulation. Premiums do rise with risk, but the increase in premiums is only about 15 percent of the increase in risk. Premiums for individual insurance vary widely, but that variation is not very strongly related to the level of risk.

A new Health Affairs Web Exclusive by Pauly and colleague Robert Lieberthal offers further evidence that a freer market would provide high-cost patients more protection than today’s government-created employment-based system.  Pauly and Lieberthal write:

[A] young high-risk male who initially had small-group coverage faces a 44 percent chance of becoming uninsured in the next period—a risk nearly twice as great as it would be if he initially had individual insurance.  Somewhat ironically, the usual blame for such a person’s lacking coverage will be laid at the door of the medically underwriting individual insurer, which quotes a high premium, rather than being referred in part to the group insurance system that plunged this person into such a vulnerable situation in the first place.

Thus, it is not true that more freedom would mean no health insurance for people with costly medical conditions.  Provided consumers insure while they are still healthy, individual-market coverage offers as much or more protection to high-cost patients than they have now.

In the transition to a level playing field between employer-sponsored and individual-market coverage, there may be some people with high-cost conditions who lose their existing coverage, and cannot obtain subsequent coverage.  If that occurs, most Americans will want to offer some form of subsidy to those hard cases – a group that does not include wealthy people like Elizabeth Edwards, John McCain, or Jay Cutler.  

When fashioning those subsidies, policymakers should bear two things in mind.  First, as Pauly’s work suggests, this is likely to be a temporary problem; markets can and will cover tomorrow’s high-cost patients.  Second, policymakers should not try to force insurance markets to provide the desired subsidies; that would undo the substantial good that unregulated insurance markets can achieve.

Antiwar Republicans Win in NC

Over at The American Conservative blog, Jim Antle points out that Rep. Walter Jones, an antiwar Republican incumbent, as well as another antiwar Republican, B.J. Lawson, won big in last night’s North Carolina primary.

Although the Republican establishment in Washington seems to have sacrificed every other governing principle at the altar of reckless militarism, it appears that a contingent of Republican voters haven’t. Maybe Bill Kauffman is onto something

No Way to Treat the Customers

Suppose you work for a company experiencing phenomenal revenue growth. Most of that growth is attributable to rapidly increasing sales to new customers with potentially limitless demand for your products.

Then the CEO unveils next year’s strategic plan, which includes actions likely to offend and financially injure those new customers, causing them to take their business elsewhere and jeopardizing your company’s future.

If you work in almost any goods-producing industry in Indiana or North Carolina, the above is not hypothetical. It is precisely what you confront if either Senator Clinton or Senator Obama becomes the next president.

You see, both candidates profess deep skepticism about international trade. Both plan to halt new trade agreements and to force our partners to renegotiate existing deals. Both support provocative, unilateral actions that would ultimately hurt American producers, consumers, and investors. And both insinuate that our trade partners are untrustworthy adversaries.

But Indianans and North Carolinians should recognize those trade partners as something different – like their fastest-growing customers.

Indiana’s producers shipped $26 billion worth of goods to foreign customers in 2007, which was 14 percent more than the year before and 80 percent more than in 2001. Since 2001, the state’s exports have grown at a rate one-third faster than U.S. exports overall.

North Carolina’s producers shipped $23 billion worth of goods to foreign customers in 2007, which was 10 percent more than the year before and 59 percent more than five years ago.

In 2007, exports accounted for 20 percent of U.S. manufacturers’ total sales revenues -— the highest percentage in modern history. And nowhere in America is manufacturing more important to the economy than it is in Indiana, where the sector accounts for over 30 percent of the state’s gross domestic product. Manufacturing accounts for 22 percent of North Carolina’s economy, ranking it fifth in that measure.

In China, Canada, and Mexico – the primary villains in the candidates’ antitrade narratives – Indiana’s and North Carolina’s producers are building relationships that are yielding extraordinary returns. Exports from Indiana to China increased by a whopping 36 percent between 2006 and 2007 (twice the rate of total U.S. export growth to China) and nearly quadruple Indiana’s exports to China in 2001. Indiana’s exports to our NAFTA partners (Canada and Mexico) grew 9 percent from 2006 and 67 percent from 2001, eclipsing overall U.S. export growth to NAFTA in both periods.

Exports from North Carolina to China increased a spectacular 32 percent between 2006 and 2007 (nearly twice the rate of total U.S. export growth to China), and its exports to NAFTA customers grew 46 percent to $7.4 billion over the past five years.

This export growth is not concentrated is one or two industries either. Out of 32 broad industry groupings, 28 in Indiana experienced export growth between 2006 and 2007 and 30 experienced growth between 2001 and 2007. Of the 28 industries showing export growth between 2006 and 2007, 23 experienced double- or triple-digit percentage growth.

In North Carolina, 25 of 32 industries experienced export growth between 2002 and 2007 and the growth rates were at least double-digit for each industry. Over the past year, 23 industries in North Carolina experienced double-digit export growth rates.

From the largest goods-producing industries to the smallest, in Indiana, North Carolina, and, indeed, throughout the country, strong export growth is evident. A study just published by the U.S.-China Business Council found that 406 of 435 congressional districts experienced triple-digit export growth to China between 2000 and 2007. Those figures and other facts from the study were highlighted in a Wall Street Journal editorial today.

Blaming trade for all that ails is a time-honored political tradition. Acting on that impulse by imposing trade barriers or otherwise retreating from the global economy is never the proper course, but it would be particularly foolish in the current environment, where industry after industry is experiencing and benefiting from an export boom.

That boom couldn’t be happening at a better time. In the past, when the U.S. economy slowed, the world economy slowed along with it. But with the recent awakening of demand in long-slumbering developing economies, growth remains strong in many parts of the world. The U.S. economic slow down might therefore be short-lived, as export growth keeps the economy moving ahead. That is unless policymakers do something to risk U.S. access to foreign markets.

Treating the customers with disdain and hostility just might be the plan that kills the golden goose.