Klein on Medicare Meets Mephistopheles

No one is going to accuse the American Prospect’s Ezra Klein of being a libertarian.  (Oh, wait.  I think I did once.) 

Which makes it all the more impressive that he was able to say such kind things about the Cato Institute’s latest health policy book, Medicare Meets Mephistopheles:

[T]he book is actually quite good. I’d happily recommend it to anyone with a basic grasp on health care and a desire to learn a bit more about Medicare. Hyman is a felicitous and fun writer, and he conveys an impressive amount of history and data in as accessible and absorbable a manner as one could hope. I know how tricky it is to make health care a quick and gripping read, and I tip my hat to anyone who is capable of enriching the debate and educating readers by doing so.

Full disclosure: Klein was less enamored with Hyman’s analysis and recommendations.  (Readers can find those comments in Klein’s post over at Tapped.)  Hopefully, Klein will raise his concerns at the Medicare Meets Mephistopheles book forum this Thursday.

Speak with Forked Tongue; Carry Large 2x4

The next time you meet a Canadian at a cocktail party and consider invoking fuzzy feelings of fraternity by toasting our countries’ recent softwood lumber accord, better to just smile, nod your head, and stare intently at your shoes.  Calling the U.S.-Canada Softwood Lumber Agreement (2006) an “agreement” mocks the fact that the Canadians had no viable alternative but to sign on the dotted line.

One option was to endure the cost and uncertainty of continuous litigation, continued restrictions on their lumber exports, and the specter of never again seeing the $5.3 billion in duties collected illegally by U.S. Customs on previous exports.  The other option was for Canadians to agree to impose export restraints (in the form of export taxes or quotas) on their lumber and see the return of about 80 percent of that $5.3 billion.

The U.S.-Canada softwood lumber dispute dates back many decades, but the most recent spate of protection, rulings, and edicts relates to litigation that began in the early 1980s, evolved into the Softwood Lumber Agreement of 1996, and then produced new trade remedy cases and a string of litigation beginning in 2001, when SLA 1996 expired.  (This paper attempts to present a chronology of events—but the most recent events are not documented therein.)

Make no mistake: the United States is the villain in the lumber dispute. 

Its agencies administered the trade remedy laws illegally and when they were required to make amends, pursuant to the terms of the North American Free Trade Agreement, they refused.

In short, antidumping duties can be imposed if the petitioning industry is materially injured by reason of dumped imports; countervailing duties can be imposed if the petitioning industry is materially injured by reason of subsidized imports.  In 2002, the United States imposed both antidumping and countervailing duties on Canadian softwood, which prompted Canada to challenge those findings under NAFTA’s dispute settlement procedures.  The NAFTA panel found that the U.S. International Trade Commission failed to meet the legal threshold for finding injury, and that the Commerce Department failed to find, legally, dumping or countervailable subsidization.

Second, third, and fourth attempts by those agencies to render affirmative findings within the law were also found wanting by the NAFTA panel, which eventually ordered the agencies to revoke the measures.  The United States refused, and instead insisted that an agreement to limit Canadian lumber sales was the only way to resolve the issue.  By that point, U.S. Customs had collected about $5 billion on softwood imported from Canada pursuant to those illegal antidumping and countervailing duty measures.  The U.S. industry was insistent that those monies be distributed to them, as beneficiaries of the now-repealed Byrd Amendment.  The importers (and the Canadian producers to whom many were related) demanded that those duties be refunded promptly.

Well, an ugly compromise was struck in the form of the Softwood Lumber Agreement (2006).  Under its terms, the importers/producers will be refunded about 80 percent of their rightful $5.3 billion, and despite the illegality of the measures and the fact that the United States completely disregarded its NAFTA obligations, the domestic petitioners will keep about $500 million and the U.S. government (actually, the Bush administration—these funds will be outside the domain of congressional appropriators) will keep about $450 million to be used for “meritorious initiatives.”  Such initiatives will include low-income housing projects, disaster relief, and various other vote-purchasing endeavors.

Meanwhile, the days when you could just pick up the phone, dial your favorite Canadian lumber producer, and place an order for 100 pallets of 2x4s at $344 per thousand board feet are over.  No longer will the purchasing agents at Home Depot, True Value Hardware, Ryan Homes, and elsewhere be able to negotiate lumber volumes and prices based on quaint considerations like supply and demand.  Canadian lumber will be required to sell for a minimum of $345 per thousand board feet.  If prices dip below that level, Canadian exports will be subject to a combination of export taxes (ranging from 5 to 15 percent) and volume restrictions.  So yes, the agreement does allow freedom of lumber trade to reign, as long as the prices are high enough.  Once the benefits of trade go too far and actually provide cost savings for consumers, freedom will be reined in.

On so many different levels, U.S. actions and attitudes in the lumber dispute–and the interventionist outcome it produced–betray an administration that is only rhetorically commited to free trade.  And that can’t possibly ignite the embers of global trade liberalization.

ACLU Sues to Limit Educational Liberty in AZ

Arizona passed a series of new school choice bills this June, and the ACLU has now filed suit to stop one of them from being implemented. For more than six years, individual Arizonan taxpayers have been able to claim a dollar-for-dollar tax credit on donations they make to private Scholarship Granting Organizations (SGOs). The SGOs, in turn, help families to pay tuition at the independent school of their choice. The recent bill that the ACLU is challenging extends that donation tax credit to businesses as well as individuals.

On what grounds does the ACLU claim to oppose this policy, you ask? They assert that “it violates state constitutional provisions prohibiting public funding for religious schools and mandating that the state provide a general and uniform public school system.”

The first objection is not likely to hold water, given that the AZ Supreme Court already ruled, in Kotterman v. Killian, that tax credits do not constitute public funding.

The second challenge is more interesting, having been inspired by the astonishingly inventive Florida Supreme Court ruling that struck down that state’s A+ voucher program early this year. Will foes of educational freedom find this argument a winner in AZ? Not knowing much about the AZ Justices, it’s hard to say. The argument certainly did not work with Wisconsin’s Supreme Court when it was used against Milwaukee’s voucher program during the 1990s.

What’s most interesting about all this is, however, is not the details of the legal arguments but the fact that opponents have been reduced to arguing about such minutia. In states where school choice programs are established and running, they tend to be very popular with the families who are able to participate. Hence, opponents find it hard to convince people that choice is bad – they have to try to show that some legal “i” has gone undotted to have any hope of herding the public back into state monopoly schools. In the Florida case, the plaintiffs openly acknowledged that the success of the voucher program was utterly immaterial to their argument.

Opponents of school choice don’t care whether or not educational liberty helps families. They are ideologically wedded to the status quo monopoly and will seek to preserve it by any means necessary.

How this benefits the American people, or advances “civil liberties,” I really can’t imagine.

Putting an End to “The War on Terror”

Our responses to the threat of terrorism are all too often described as “the war against terrorism.”  But this makes no linguistic sense; terrorism is one of many dangerous phenomena, not an enemy.  We do not describe our responses to the threat of hurricanes, for example, as a war against hurricanes.  More important, the war metaphor has severely biased both the nature and extent of our responses to the threat of terrorism.

First, the war metaphor implies that the primary response to the threat of terrorism should be a military response.  Terrorism, however, is the tactic of those who are motivated to seek political change by violence but are militarily weak.  The most important and too often neglected first question to address is whether some change in policy – such as the foreign basing of U.S. military forces – would reduce the motive for a terrorist threat against Americans at a lower cost than any other potential response.  Maybe not.  In that case, the most effective responses to the residual threat of terrorism are improvements in intelligence, intelligence sharing, and the capability of local police forces – with several special operations forces the only important military response.  The very expensive new weapons systems in the U.S. defense budget, in contrast, contribute nothing to increasing our security against the threat of terrorism.

Second, the war metaphor leads to an overreaction to the the threat of terrorism by inviting misleading comparisons of current conditions with those during prior conditions properly described as wars.  Those who defend an aggressive response to the threat of terrorism are quick to point out that the current losses of liberty and property to counter this threat have been small relative to those during wars.  But the threat of terrorism is very different than the threats during a war in three dimensions: Terrorism presents the small probability of a small loss (unless terrorists acquire a nuclear weapon) but one that may be extended indefinitely.  A war presents a larger probability of a large loss but one that is likely to be limited to a few years.  Most of us are prepared to sacrifice some liberty and property when there is an increased threat to our lives, but the difference in conditions presented by the threat of terrorism and wars strongly affects how much that we are prepared to sacrifice.  In general, people should be expected to be willing to pay a lower current price for security when the expected loss is lower and the period of potential loss is longer; for both of these reasons, how much liberty and property we should be expected to sacrifice in response to the threat of terrorism is far less than during a war.

This perspective leads me to conclude that the U.S. Government should substantially reduce the several dimensions of the current cost of responding to the threat of terrorism to a level sufficient to support only the most effective of these responses for a duration that may be indefinitely long.  Americans may have a lot to learn by a better understanding how Britain, Spain, and some other countries have responded to a threat of terrorism for decades with little sacrifice of liberty or property.

We may still need to replace the war metaphor with some metaphor that better reflects an effective, sustainable response to the threat of terrorism, but I will leave that to someone who is a better wordsmith.

Against Equity and Good Conscience, Indeed

Medicare watchers know that the federal government recently – and improperly – sent checks to 230,000 seniors. The checks were supposed to reimburse certain seniors for premiums paid under the new Medicare prescription drug benefit (Part D). But seniors who were not supposed to receive any money at all instead got checks worth an average of $215 – for a total of almost $50 million in erroneous payments.

The feds tried to get seniors to return the money – that is, until the Center for Medicare Advocacy, Inc. filed suit to stop them. In fact, the Center even argued that even though seniors were not entitled to the money, they should get to keep it:

In certain circumstances a beneficiary may be entitled to a waiver of the overpaid refund. Waiver of the overpayment may be available to a beneficiary who was without fault in causing the overpayment and where repayment would be against equity and good conscience.

(Bold and italics in original.)

So not only may seniors pressure Congress to grant them windfalls that they don’t really deserve (e.g., Part D), but according to the Center for Medicare Advocacy, a senior should also get to keep even unlegislated transfers from younger Americans if the senior feels that returning the windfall “would be against equity and good conscience.”

But this is par for the course with Medicare. For more examples of Medicare madness, attend or watch online this Thursday’s book forum for Medicare Meets Mephistopheles, a new book by Cato adjunct scholar David Hyman.

The Sun Also Rises

The latest issue of Geophysical Research Letters, one of the top peer-reviewed science journals publishing research on climate change, features a fairly arresting paper by physicists Nicola Scafetta and Bruce West on what’s driving atmospheric warming.  Their conclusion?  About 50 percent of the warming over the past century might well be due to … the sun.  From the executive summary:

We study the solar impact on 400 years of a global surface temperature record since 1600. This period includes the pre-industrial era (roughly 1600–1800 or 1600–1900), when negligible amount of anthropogenic-added climate forcing was present and the sun realistically was the only climate force affecting climate on a secular scale, and the industrial era (roughly since 1800–1900), when anthropogenic-added climate forcing has been present in some degree. We use a recent secular Northern Hemisphere temperature reconstruction (Moberg et al., 2005), three alternative total solar irradiance (TSI) proxy reconstructions (Lean et al., 1995; Lean, 2000; Wang et al., 2005) and a scale-by-scale transfer climate sensitivity model to solar changes (Scafetta and West, 2005, 2006). The phenomenological approach we propose is an alternative to the more traditional computer-based climate model approach, and yields results proven to be almost independent on the secular TSI proxy reconstruction used. We find good correspondence between global temperature and solar induced temperature curves during the pre-industrial period such as the cooling periods occurring during the Maunder Minimum (1645–1715) and the Dalton Minimum (1795–1825). The sun might have contributed approximately 50% of the observed global warming since 1900 (Scafetta and West, 2006). We briefly discuss the global cooling that occurred from the medieval maximum (1000–1100 AD) to the 17th century minimum.

Newsworthy?  Apparently not.  A Nexis search this morning finds not one single story in the print media referring to the paper.  Why?

A paper published this week in Nature comes to the opposite conclusion, and that paper hit the LA Times.  I don’t know which paper makes the stronger argument, but I do know that the print reporters are in no real position to judge.  Yet one gets some press and the other doesn’t.    

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