Scandalous Pensions for European Parliamentarians

While the US Congress is infamous for its taxpayer-subsidized perks, US lawmakers are amateurs compared to the scammers in Brussels. Members of the European Parliament have a lavish taxpayer-financed retirement scheme that enables them to get $2 of taxpayer money for every $1 they put into their pension fund. But this immense perk does not even require them to necessarily use their own money. As the UK-based Telegraph reports, some MEPs – perhaps most MEPs – use office administrative funds:

The European Parliament’s bureau, the body that oversees the assembly’s administration, has voted to prevent publication of a list naming the 475 MEPs who benefit from a pension scheme worth more than £1,400 a month to Euro-MPs with the taxpayer matching every euro personally contributed with two from the public purse. Payments are controversial because, for “administrative reasons”, the MEP’s personal contributions are taken automatically from office expenses. No one checks whether the politician actually pays anything into the fund from his own salary. Many in Brussels believe that a “large proportion” of Euro-MPs are using their office payments to get a free second pension on top of national schemes.

New Report Unwittingly Reveals Small Impact of China Trade on U.S. Jobs

Our friends and ideological rivals at the Economic Policy Institute in Washington are releasing a report this week that supposedly documents that trade with China has cost more than 2 million Americans their jobs. The report is illuminating, but in ways its author did not intend.

Here’s how EPI’s press release on the study describes its results:

The dramatic rise in the United States’ trade deficit with China from 1997 - 2006 has cost jobs in every region in the country.  In a new report, Costly Trade with China, to be issued May 2, 2007 by the Economic Policy Institute, economist Robert Scott reports the growth of the trade deficit with China in this period has displaced production that supported 2,166,000 U.S. jobs, with New England being the hardest hit region of the country. 

For reasons I’ve explained in detail before [.pdf], EPI’s methodology for calculating job losses from trade is fundamentally flawed. Its model ignores the dynamic effects of trade on U.S. economic growth, the beneficial effects of foreign investment, and the tremendous and healthy “churn” of the U.S. labor market.

Even if we accept EPI’s calculation of 2.2 million jobs lost, that is a drop in the bucket in an economy that employs almost 150 million people. Note that EPI’s number is spread over a decade, meaning that the actual number of jobs lost each year on average would be 216,600.

Compare that to the 320,000 or so Americans who line up EVERY WEEK to claim unemployment insurance after being displaced from their jobs–mostly because of technology, and domestic competition. In other words, trade with China, even by EPI’s exaggerated measure, accounts for about three business days’ worth of unemployment claims in a typical year.

More than compensating for the relatively small job displacement caused by trade with China are the huge benefits it delivers through lower prices at the store, lower interest rates, growing export opportunities, and greater peace and stability in East Asia.

For more on trade with China, check out our research at

Auerswald on “The Irrelevance of the Middle East”

Philip E. Auerswald of the George Mason University’s Center and Science and Technology Policy has an interesting piece in the current issue of The American Interest (sub. req’d). In it, Auerswald argues that

the long-term importance of the Middle East is roughly proportionate to the share of the world population for which the region accounts–less than 5 percent. The time is long overdue for policymakers and analysts alike to put the many urgent issues that confront the people of the Middle East in the context of dramatic and unprecedented global transformations in process today. …Any country that persists in focusing intently on peripheral concerns risks ultimately becoming peripheral itself. Even a massive power like the United States is not immune to such a fate.

Shorter version of the Auerswald argument here, and go here for Eugene Gholz and Daryl Press’s excellent Policy Analysis for Cato of the many problems of “energy alarmism.”

May Day in Latin America

This Tuesday, May 1, Venezuelan ruler Hugo Chavez will take control “of Venezuela’s last remaining privately run oil projects.” The symbolism is obvious: the socialist May Day. Last year, Bolivian president Evo Morales sent his soldiers to occupy the gas fields in his country on May Day.

So I’m reminded, as I was last year, that May 1 is also the anniversary of the institution of private retirement accounts in Chile. Since then Chile has been a great economic success story.

Perhaps 25 or 50 years from now, we will know whether Chile’s privatization or Bolivia’s and Venezuela’s nationalizations brought a higher standard of living to their citizens.

“The Most Important Health Care Legislation of Our Lifetimes”

That is how Gov. Mitch Daniels describes his health care reform plan (which the Indiana legislature passed last night) in an email his staff helpfully forwarded my way.  According to the Indianapolis Star, Daniels’ plan will:

  • Expand Medicaid eligibility for pregnant women and children
  • Provide health insurance subsidies to individuals making $20,420 and families of four making $41,300 per year (i.e., 200 percent of the federal poverty level)
  • Provide those beneficiaries with $500 of free preventive care and $1,100 in a health savings account
  • Institute a “slacker mandate” that requires insurers to allow children to remain on their parents’ insurance policy up to age 24
  • Increase the cigarette tax by $0.44/pack, to $0.995/pack

Daniels was understandably moved.  Here is his full quote:

The health plan passed last night can fairly be described as the most important health care legislation of our lifetimes.  I have asked a host of people whether they can think of a better example and nobody has.  I am excited about the passage of the plan and what it can mean for uninsured Hoosiers and for low-income children, and, of course, to try to bring down the second-highest smoking rate in America.

Did Gov. Daniels (R!!) bother checking with anyone who has actually set foot outside of Indiana?  Whatever the case, here are a few things the Daniels plan will also do:

  • Crowd-out private coverage
  • Encourage cigarette smuggling and related crime
  • Trap more Indianans Hoosiers in low-wage jobs
  • Re-create in Medicaid the dependence problems that Congress sought to eliminate with welfare reform
  • Impose a brutally regressive tax on the poor.  According to Harvard’s Kip Viscusi: “The usual concerns about regressive taxes involve those that are regressive in percentage terms, that is, the poor pay a higher percentage of their income in taxes than do the wealthy. Cigarette taxes are actually so regressive that the poor pay a much higher absolute level of taxes than do the wealthy. In 1990, people who made under $10,000 per year paid almost twice as much in cigarette taxes as those who made $50,000 and above. The people who will bear the cigarette taxes are not the legislators who enact them but rather the janitors and support staff for the legislature.
  • Cost more than projected

When conservatives finally do start questioning why so many supposed good guys keep turning to the Dark Side, they might launch their inquisition with an examination of the Medicaid program, which makes Democratic and Republican governors alike this very tempting offer: big government at one-half the price.

Sen. Obama’s Fan Base

Sen. Barack Obama’s presidential campaign received some modest support over the weekend, one from a predictable source, the other modestly surprising.

An editorial in Saturday’s Washington Post welcomed Obama’s attempt to flesh out his foreign policy views in a speech last week before the Chicago Council of Global Affairs. While appropriately knocking his silence on trade issues, the Post praised Obama for his support for a larger military; his willingness to exert pressure on Iran – he stressed that the military option must remain on the table; and his proposal to double U.S. foreign aid to $50 billion by 2012.

Overall the Post editors were encouraged by Obama’s invocation of Franklin Roosevelt, who said that the United States must “lead the world in battling immediate evils and promoting the ultimate good.” Obama might have cited a more recent speech, by a still living politician, that made essentially the same argument (see George W. Bush, Second Inaugural Address, January 20, 2005), but that presumably would not have played well with the base.

Robert Kagan’s praise for Sen. Obama is more troubling. After all, Robert Kagan, one of the founding members of the Project for a New American Century, is a leading advocate of the decision to go to war with Iraq in the first place. Kagan is also a passionate believer in the Bush administration’s stay-the-course strategy in Iraq. (He also wrote recently in favor of preparing the groundwork for a war with Iran.)

Kagan and Obama are ostensibly on opposite sides with respect to Iraq, with Obama favoring a timeline for withdrawal. On this crucial issue, Sen. Obama does seem to be differentiating himself from the policy elite and reflecting the will of the country; 64 percent of Americans favor a timetable for withdrawal in 2008, according to the most recent New York Times/CBS poll.

How to explain, therefore, that Senator Obama has a fan in Mr. Kagan? It could be that Kagan, who is advising Sen. McCain “on an informal and unpaid basis”, wants to undermine Obama’s credibility on the left, thereby ensuring that a less charismatic candidate will emerge from the Democratic field. But that seems too cynical. It also assumes that McCain will be the nominee, which is an even greater stretch.

A more likely explanation is that Kagan is genuinely excited about Sen. Obama’s embrace of the foreign policy status quo. Kagan had a hand in shaping this status quo in the mid-1990s, when he (along with William Kristol) called for the United States to play the role of benevolent global hegemon, aka friendly empire, aka world’s policeman. At a time when 76 percent of Americans say that the U.S. plays the role of world policeman too much, Kagan has found yet another politician who believes the U.S. doesn’t play the role often enough. 

This is disappointing. Sen. Obama had earlier said, when asked about his opposition to the war in Iraq, that he was not opposed to all wars, just dumb wars. This makes for a good soundbite, but it does not illuminate the philosophy guiding the most important decisions that a president will make concerning the use of military force abroad. His speech last week shed little additional light on the subject.

Simply put, which of the major actions conducted by the U.S. military since the end of the Cold War classify as “dumb wars”? Would President Obama have sent troops to Panama? To Haiti? To Somalia? Would he have declared, as George H.W. Bush did, that Saddam’s aggression against Kuwait would not stand? Would President Obama have favored using ground troops in Kosovo (as Chris Dodd, Joe Biden, and, reportedly, Hillary Clinton did) or would he have opted for Bill Clinton’s approach – relying on a bombing campaign that killed perhaps 1,500 people in order to force Slobodan Milosevic to the bargaining table?

And what of the military actions that were not taken during the 1990s? Would President Obama have sent U.S. troops into Rwanda in 1994 in an attempt to halt the genocide that occurred there? And what would their mission have been, specifically? To pry the machetes out of the hands of murderous thugs, mainly Hutus? Or would U.S. troops commanded by President Obama have sought merely to provide safe haven for endangered Tutsis?

In the course of the 2004 presidential campaign, one of Senator John Kerry’s advisers turned aside questions about whether Kerry would have launched a war with Iraq in March 2003 with the response “We don’t answer hypothetical questions.” With all due respect, what other kinds of questions are there? Indeed, necessarily hypothetical questions are essential to helping voters to sort out the positions of the various candidates.

U.S. foreign policy since the end of the Cold War has involved the promiscuous use of our military power, often in places that had no connection to U.S. vital interests. Americans are justifiably frustrated by the high costs and questionable benefits of these policies, and they are looking for realistic alternatives that would more equitably share the burdens of policing the globe with other countries. While many Americans still value “engagement,” loosely defined, they reject the presumption that this engagement must take the form of the U.S. military undertaking dubious missions of questionable import, while the rest of the world looks on from a distance.

Robert Kagan is on the side of those who believe that U.S. military power has not been used often enough in the 15 years since the end of the Cold War. The editors of the Washington Post seem squarely in this camp as well, given that they have consistently supported the use of force abroad, even clamoring for several interventions that the White House ignored. These opinion leaders stand on the opposite side of most Americans, three out of every four of whom are fed up with Kagan and the Post’s benevolent global hegemony.

Where does Senator Obama stand? We still don’t know.

Faked Out by One Chart and One Subsidy-Seeking Industry

In a recent post, Ezra Klein offers two arguments to beat back the “commenters hanging around demanding we redefine the word “uninsured,” attempting to downplay the problem of lack of coverage, denying all widely accepted measures of the uninsured, and, when that fails, writing the uninsured off as statistical artifacts of momentary lapses in coverage.”

Klein’s first argument is based on this chart:

According to this chart, 61 percent of those who were uninsured when surveyed reported that in the past year, they had one of the following problems:

  • Did not fill a prescription
  • Did not see a specialist when needed
  • Skipped recommended medical test, treatment, or follow-up
  • Had a medical problem but did not visit doctor or clinic

I see two problems with trying to get too much out of these data. 

  1. The Commonwealth Fund survey asked respondents about their insurance status right now, but asked if they had to forgo medical care during the past year.  With the exception of respondents who were “insured all year,” it is not clear whether care was forgone while respondents were insured or uninsured.  Therefore, this survey says nothing about to what extent being uninsured caused respondents to forgo care.  (To his credit, Klein acknowledges that even those with coverage forgo care.  To my mind, the fact that medical care grows increasingly expensive even for those with coverage argues against reforms that would mindlessly cover the uninsured without changing the incentives faced by those with health insurance.)
  2. These data say nothing about the health consequences of the care forgone.  Some of the uninsured suffer disastrous health consequences as a result of their lack of access to care, as Jonathan Cohn documents.  But these data do not tell us how much of the reported forgone care was necessary and how much was unnecessary.  So it’s a bit of a stretch to refer to these findings as “the effects of being totally uninsured.”

Klein’s second argument concerns the estimate that 45 million Americans lack health insurance.  That estimate is generated by the Census Bureau’s Current Population Survey.  It has been criticized for a number of reasons, which are not important for present purposes.

Klein argues that if the insurance industry uses that estimate then it must be valid.  That’s because the insurance industry “isn’t prone to overhyping the millions of Americans without insurance.”  Certainly the insurance industry has no interest in exaggerating the number of Americans without health insurance.

Evidently, Klein hasn’t been paying attention to the insurance industry’s political agenda, which includes massive subsidies to the insurance industry to provide health insurance to the uninsured.  (Will the Left express shock when the insurance industry hijacks “universal coverage” just as it is hijacking Medicare?  Consider yourselves warned.)