Getting Better All the Time (Generally)

A few weeks ago, Don Boudreaux (on Cafe Hayek) and Will (here at Cato@Liberty) offered a thought experiment challenging the claim that American middle class living standards have been stagnant since the 1970s.

The stagnancy claim is rooted in federal statistics indicating that middle class wages have barely kept pace with inflation. Since childhood, I’ve heard many sober-faced adults (including some of my political science and econ professors in undergrad) voice this claim by saying that my generations would “be the first to have lower living standards than its parents.”

Don and Will respond to this claim by pointing out that the quality of “stuff” that a person can purchase with those wages has increased dramatically over that time. Federal statistics may see no difference between X real dollars spent on an 8-track player in 1970 and the same X real dollars spent on an iPod today, but consumers certainly do (especially joggers who don’t have to lug 8-track players and extension cords on their evening runs).

This response is the thesis of today’s New York Times “Economix” column by David Leonhardt. Leonhardt opens the article describing Chicagoan (and Northwestern economist) Robert J. Gordon and his snowblower:

“People can die from shoveling snow,” Mr. Gordon said. “I bet a lot of lives have been saved by snow blowers.”

Yet the benefits of the snow blower, namely more free time and less health risk, are largely missing from the government’s attempts to determine Americans’ economic well-being. The same goes for dozens of other inventions, be they air-conditioners, cellphones or medical devices. The reasons are a little technical — they involve the measurement of inflation — but they’re important to understand, because the implications are so large.

Gordon has worked on quantifying those benefits. The Times nicely captures the contrast between his research and the “stagnancy” federal data in this graphic on the median earnings for men, and notes that women do even better:

Two Views of Pay

This leads to two important conclusions:

  1. Living standards have improved markedly since the early 1980s.
  2. There has been a decline since about 2002.

Cato@Liberty readers may grumble about Leonhardt’s final graf, but the article is a great read.

As for my former profs, instead of their sobering worries, perhaps they should drop some Jiffy-pop in the microwave, turn on their plasma-screen TV, plop a Netflix in the DVD player or flip on the TiVo, and relax.

Help Wanted: New Medicare Administrator

Dr. Mark McClellan recently announced his intention to resign from the position of administrator of the Center for Medicare and Medicaid Services (CMS). 

Finding a replacement shouldn’t be hard.  The job description is simple.  The next Medicare administrator must run a sprawling program that buys health care for approximately 42 million Americans in every state of the union, and he must simultaneously:

  1. Spend less money on health care (to keep Congress and the Administration from calling for your head);
  2. Spend more money on health care (for example by averting the 5 percent cut in physician payments scheduled to take effect next year) to keep providers from calling from your head - and seniors from doing so once they can’t find a doctor to treat them;
  3. Using modest carrots and no sticks, dramatically improve the mediocre quality of care currently being delivered to Medicare beneficiaries - but don’t interfere with the way in which providers deliver health care, particularly if a low-quality provider has the ear of a congressman or employs lots of people in a swing district;
  4. Buy lots of pharmaceuticals for seniors - but don’t pay too much (because Congress and the Administration will have your head) or too little (or the pharmaceutical companies will stop developing innovative products);
  5. Using inadequate and outdated information, set the price that Medicare will pay for every single good and service that beneficiaries need in every county in the United States;
  6. Assure Congress that you are protecting the program from fraud and abuse, even though your own fraud control personnel have doubts about whether they have the tools to do so, and the program is routinely labeled as being at “high risk” for fraud;    
  7. Prepare Medicare for the impending tidal wave of baby boomers, who will stop paying into the system and will start expecting benefits in 2011; 
  8. Keep a straight face while you explain that Medicare will be there for future generations, even though your trustees have determined that putting just one part of the program in actuarial balance for the next 75 years will require an “immediate 121% increase in the tax rate or an immediate 51%reduction in expenditures;”
  9. Surrender your every waking hour to the thankless task of bailing out a sinking ship while being forced to cheer on the efforts of your bosses (in the Administration and Congress) to drill more and bigger holes in the bottom; and finally 
  10. Walk on water in your (non-existent) free time. 

The last item on the list is obviously a stretch, but the next administrator of CMS will face all of the other challenges. 

How did the Medicare program – born of such high hopes and good intentions – end up in this mess?  What can we do to address these problems? 

For some answers to these questions, along with a satirical perspective on the Medicare program, attend the book forum for Medicare Meets Mephistopheles at the Cato Institute on September 21, 2006.  Sign up here.

Islam and Enlightenment

Let me start by saying that I was not and am not a supporter of the Iraq war, and personally I’m an old-fashioned skeptic about religion. But I was appalled to hear Seyyed Hossein Nasr, a leading Islamic scholar, declare on an NPR interview show on Tuesday that the Pope’s statements “themselves are acts of violence.”

Interviewer Diane Rehm wanted to make sure what she’d heard. She asked him, “You’re saying that the language itself is an act of violence?” “Of course it is,” Nasr replied. Discussing the violent reaction to the Pope’s quotation, he declared, “He who uses the sword shall perish by the sword.”

Later in the show, Rehm read a quotation from a column by Anne Applebaum, who wrote that westerners of all political stripes “can all unite in our support for freedom of speech - surely the Pope is allowed to quote from medieval texts - and of the press. And we can also unite, loudly, in our condemnation of violent, unprovoked attacks on churches, embassies and elderly nuns.”

Asked for his reaction, Nasr said that such violence was “not unprovoked–it is provoked.” “Because words are violence?” asked Rehm. “Of course,” replied Nasr, “of course.”

I want to be careful not to pick out obscure members or adherents of any philosophy and draw large conclusions from them. But Nasr is not so obscure. He’s a distinguished professor at a leading American university. He holds a Ph.D. in the history of science and philosophy from Harvard and is the author of more than 20 books, from publishers including Oxford University Press. His university held a conference honoring him, titled Beacon of Knowledge. The website of the Seyyed Hossein Nasr Foundation declares him “one of the most important and foremost scholars of Islamic, religious and comparative studies in the world today.” So it seems fair to say that Nasr is not an oddity; he’s a recognized Islamic scholar.

And that’s why it’s so shocking to hear the claim that words “are acts of violence” from such a distinguished scholar. A scholar, we might note, who teaches at George Washington University, named in honor of the great Enlightenment statesman. I don’t want to believe that we are faced with a clash of civilizations, much less World War III. But if Islamic scholars who teach at great American universities believe that violent attacks “on churches, embassies and elderly nuns” are “provoked” by the words of a religious leader in a university speech a thousand miles away, then we certainly have a clash of world views.

The west went through the wars of religion and emerged with a modern understanding of toleration. We have learned through bitter experience that we can worship God without forcing everyone else to worship in the same way. We allow our neighbors to practice their religion, we practice our own or none at all, we criticize views we deem unsound, and we accept that our own views and faith will also be subject to criticism.

What we forswear is violence in response to words. In the present crisis we should seek peaceful dialogue between Muslims and Christians, not to mention Jews and freethinkers and all the others who share our world. But we who live in Enlightenment societies should not apologize for the fact that freedom of thought and freedom of speech sometimes lead to hurtful words.

Instead, we should reaffirm our own commitment to free speech - “hate speech” laws, anyone? - and urge Muslims to appreciate the benefits of liberal values, such as liberty and prosperity and social harmony. And we should hold Muslim leaders to the same standards we expect of western leaders, both civil and religious: we expect them to condemn, yes, “unprovoked” violence.

Cross-posted from Comment is free.

The United States of Agriculture?

Every year, Congress spends nearly $20 billion and maintains steep trade barriers to benefit a small group of farmers growing one of about half a dozen “program crops.” A hearing on U.S. farm policy before the full House Agricultural Committee today illustrates the problem beautifully.

All farmers together make up less than 2 percent of the U.S. population, and those receiving federal production subsidies or trade protection are less than 1 percent of the population. Yet our farm programs are designed not to serve the interests of the 99+ percent of us who pay the taxes and consume the food, but the small fraction who grow certain favored crops. In fact, U.S. farm programs benefit a small number of producers at the expense the majority and the nation as a whole.

[In a major Cato study last year, we documented six ways that current U.S. farm programs hurt the average American—through higher food prices, lost jobs, more government spending, environmental damage, stifling of rural development, and the undermining of America’s image abroad. We also hosted a policy forum last month featuring the pro-reform Secretary of Agriculture Michael Johanns.]

So why do these programs persist despite their cost to the general public? Classic interest group politics. Agricultural producers, although small in number, are concentrated, well organized, and highly motivated to save programs that can mean big bucks to their bottom line. Meanwhile the mass of consumers and taxpayers, although an overwhelming majority, are diffused, disorganized and mostly unaware of the cost they pay as individuals for those same programs.

Which brings us to today’s hearing in the House. Who do you think Congress will be hearing from as it begins to rewrite the farm bill? Of the 17 witnesses, not a single one will represent taxpayers, consumers, or non-farm businesses that use those commodities to make their final products. Every witness represents a sector of farm producers. No wonder Congress routinely ignores the interest of the vast majority of its constituents when it writes farm legislation.

Here is the witness list:

Bob Stallman - president, American Farm Bureau Federation

Tom Buis - president, National Farmers Union

Allen B. Helms Jr. - chairman, National Cotton Council, Clarkedale, Ark.

Paul T. Combs - chairman, USA Rice Producers’ Group, Kennett, Mo.

Dale Schuler - president, National Association of Wheat Growers, Carter, Mont.

Gerald Tumbleson - president, National Corn Growers Association, Sherburn, Minn.

John R. Hoffman - first vice president, American Soybean Association, Waterloo, Iowa, also representing National Sunflower Association and U.S. Canola Association

Greg Shelo - president, National Grain Sorghum Producers Association, Minneola, Kan.

Jim Wysocki - president, National Potato Council, Bandcroft, Wis., representing Specialty Crop Farm Bill Alliance and National Potato Council

Jack Roney - director of economics and policy analysis, American Sugar Alliance

Mark Kaiser - board member, Alabama Peanut Producers Association, Seminole, Ala., representing Alabama Peanut Producers Association, Florida Peanut Producers Association, Georgia Peanut Commission and Mississippi Peanut Growers Association

Richard Groven - vice president, National Barley Growers Association, Northwood, N.D.

Jim Evans - chairman, USA Dry Pea and Lentil Council Inc., Genesee, Idaho

Mike John - president, National Cattlemen’s Beef Association, Huntsville, Mo.

Joy Philippi - president, National Pork Producers Council, Bruning, Neb.

Ron Truex - president and general manager, Creighton Brothers, Atwood, Ind., representing United Egg Producers

Paul R. Frischknecht - president, American Sheep Industry, Manti, Utah.

Holman Jenkins on Health Care

In the Wall Street Journal, he writes,

That Rand’s clinicians found care quality so uneven is evidence both of the problem and the effort to grapple with it. But patients are not being called upon to know whether removing their spleens is the recommended treatment for a headache. If you were thinking that’s what “consumer-directed” health care meant, you can relax.

The sole object is to put price tags back on health care so consumers can see them and respond to them.

Health care is said to be different from other markets, but the difference that really jumps out is that we are unwilling to let people go without these services just because they can’t pay. The solution is equally obvious, if easier said than done efficiently: provide subsidies to those who can’t afford care.

Just saying so throws a clarifying light on the very different dilemmas for which consumer-directed health care is meant as a corrective. These dilemmas arise because of our habit of shoveling subsidies at those who don’t need them. We give the biggest tax breaks for employer-provided insurance to those in the highest brackets. We make everyone over 65 eligible for taxpayer-funded medical care regardless of financial need and, more insidiously, regardless of past opportunity to save.

Read the whole thing. From a Crisis of Abundance perspective, it’s common sense.

Cheney’s Questions: Still Unanswered

I worry that this is so old and worn that everyone’s seen it already, but the NYT ran an article on April 13, 1991, that quoted then-Defense Secretary Dick Cheney’s response to questioning as to why the US military didn’t depose Saddam in 1991:

Defense Secretary Dick Cheney, elaborating today on Mr. [GHW] Bush’s sentiments, said that sending the United States military to finish the job violates a number of “basic principles” about setting clear-cut military objectives to support policy goals.
 
‘What Kind of Government?’

“If you’re going to go in and try to topple Saddam Husein, you have to go to Baghdad,” Mr. Cheney said. “Once you’ve got Baghdad, it’s not clear what you do with it. It’s not clear what kind of government you would put in place of the one that’s currently there now. Is it going to be a Shia regime, a Sunni regime or a Kurdish regime? Or one that tilts toward the Baathists, or one that tilts toward the Islamic fundementalists? How much credibility is that government going to have if it’s set up by the United States military when it’s there? How long does the United States military have to stay to protect the people that sign on for that government, and what happens to it once we leave?”

Sure hearkens back to Brent Scowcroft’s remark that “The real anomaly in the Administration is Cheney.  I consider Cheney a good friend—I’ve known him for thirty years. But Dick Cheney I don’t know anymore.”

The President’s Prerogative to Torture

Tom Palmer links to this truly remarkable clip of a recent presidential press conference.  In it, David Gregory asks the president what his reaction would be if a US operative were captured in Iran or North Korea and subjected to the type of treatment the administration is currently arguing for.  The response is typical Bushian avoidance and obfuscation, but the president over and over makes one point that I think is totally wrongheaded.

He repeats (I’m paraphrasing) that “you cannot ask a young intelligence officer to violate the law.  They will not violate the law…And that’s why we need to clarify and codify [our new] Common Article 3 interpretation so that officers have a defined standard to go by.”

The answer, of course, had nothing to do with the question, but I think President Bush isn’t making sense here.  Bush is trying to play to the ”ticking nuke” scenario that we’ve heard so much about.  (Whenever somebody starts with an absurd hypothetical and then starts reasoning backward in order to make policy, you know you’re in trouble.)

Mark Bowden, author of Black Hawk Down, took up this issue in the Wall Street Journal the last time the president was trying to defend torture.  Bowden argues that apropos of John McCain’s last attempt to pass a law prohibiting American torture (successful, but arguably negated by a signing statement from Bush)

Cruel treatment of prisoners is already banned. It is prohibited by military law and by America’s international agreements. American citizens are protected by the Constitution. I see no harm in reiterating our national revulsion for it, and maybe adding even a redundant layer of legal verbiage will help redress the damage done to our country by pictures from Abu Ghraib and reports of widespread prisoner abuses in Iraq and Afghanistan.

But Bowden got to the bottom line about torture, too, without any doe-eyed illusions about the nature of war:

The point the White House is missing here is that even with important captives like Khalid Sheikh Mohammad, official authorization for severe interrogation is not necessary. Just as there is no way to draw a clear line between coercion and torture, there is no way to define, a priori, circumstances that justify harsh treatment. Any attempt to codify it unleashes the sadists and leads to widespread abuse. Interrogators who choose coercive methods would, and should, be breaking the rules.

That does not mean that they should always be taken to task. Prosecution and punishment remains an executive decision, and just as there are legal justifications for murder, there are times when coercion is demonstrably the right thing to do.

That, it seems to me, is an essential point, and totally runs against Bush’s current protestations.  The president is arguing that, in the ticking time bomb scenario, the intelligence officer will just stand there, twiddling his thumbs and waiting for the Sears Tower to implode, because he doesn’t have preauthorization to slap around the terrorist.

That’s absurd.  People commit murder in extreme circumstances, and they have the chance to explain the extreme circumstances in a process of law.  Sometimes the circumstances are so extreme that they’re exonerated.  The point is that most murders don’t occur under such extreme circumstances, and you want the law to govern the broadest possible swath of situations.  The guy who beat up the terrorist–in contravention of the law–and in so doing defused the ticking time bomb and saved Chicago is going to be a national hero, should that ever happen.  No judge would convict him, no president would refuse to pardon him, and it’s hard to believe there’d even be much international outrage.

But Bush’s approach is to assume a lifeboat ethics hypothetical, and then reason backward to make the law.  (Bush even concedes during the interview that as to an intel officer in the ticking time bomb scenario, ”I know nobody’s gonna prosecute ‘em.”)

Bush should worry less that an intelligence officer is going to sit on his hands and watch the time bomb tick, and worry more about what writing torture into law would do for everyday interrogations.