Debating the Massachusetts Health Plan

Tuesday the 23rd at noon, on Capitol Hill. I will be one of four participants. Details here.

My challenge will be to prioritize what I want to say. I have lots of criticisms of the Massachusetts plan, but I think I should stick to the most important ones. These are:

1. It doesn’t add up.

2. It leaves the elephants in the room. The two elephants in the health care room that no one wants to talk about are (a) the unfunded liability in Medicare and (b) what I call “gray-area medicine” (procedures that are long on cost and short on benefits). These elephants in the room are ignored in most discussions of health care policy, but they are addressed in Crisis of Abundance, a must-have book that incidentally makes a great gift.

3. Instead of freeing private insurers from its regulatory stranglehold, Massachusetts is creating a government-sponsored enterprise whose main advantage, if any, will be that it is exempt from some of the regulations that ordinary insurance brokers face.

4. Rather than bipartisan political compromise at the state level, I would prefer to see clean experiments. A single-payer approach in states that lean that one way, and a relatively unregulated and unsubsidized approach in states that lean the other.

But the interesting thing about the live event won’t be my planned remarks.  It will be the interaction with the other panelists and the audience.

Why Massive Tax Increases Are Not Inevitable

Optimistic economist (no, that’s not an oxymoron) David Henderson provides some food for thought on the question of whether the explosion in government spending – current and future – will inevitably lead to a tax increase. Henderson argues in this very compelling essay from the Hoover Institution’s journal Policy Review that the prospects for entitlement reform and spending restraint are not as grim as some conservatives and libertarians think they are.

Government revenue has never exceeded 21 percent of GDP in the past half-century. And as Brink Lindsey pointed out on this blog last week, government spending has been stable for at least a generation. These conditions persist for a variety of reasons, but Henderson suggests the primary influence is a “political equilibrium” we have reached in the U.S. That equilibrium is likely to tip in favor of entitlement reform as the Social Security and Medicare systems become more costly per worker than they are now.

Thus, the odds are that when it finally becomes politically necessary to do something about the entitlements problem, reform is likely to be the more politically preferred avenue than massive tax hikes. Just because something is not yet politically feasible, argues Henderson, does not mean it never will be.

Money quote:

“The budget numbers are such that various market-based reforms will be looked at seriously – soon and for a long time. We must not give up on these reforms because they are not politically popular today. What reformers should do, instead, is keep honing their proposals for reining in government spending and keep their powder dry.”

Mission Creep?

The government says it wants everyone’s phone records so that it can thwart acts of terrorism. Said one administration spokeswoman:  “This is terrorist surveillance, not domestic surveillance.”

But does anyone really believe that ABCNews reporters are part of an al-Qaeda sleeper cell?

The phone records program may have already morphed into just a criminal investigative tool for the government. If that turns out to be accurate, it is deeply disturbing.


A bit ago Bob Levy posted what he said he hoped would be two brief “final points” on our NSA exchange. I responded – just to him. He wrote back, suggesting that I post the response as “the last word” between us. Here it is:

Point 1: When President Carter signed the FISA bill, his attorney general, Griffin Bell, said it “does not take away the power of the president under the Constitution.” Either he’s wrong, in which case Congress is supreme; or he’s right, and FISA is merely precatory. Further on Bob’s first point, one can “explain” President Bush’s signing as his playing both sides – statutory and constitutional: (a) he didn’t want to pick a fight with Congress so he signed the bill, believing that the AUMF overrode it in any event; (b) he didn’t want to pick a fight, believing he had inherent power in any event. It’s hard to know just why he signed it, of course, or what implications can be drawn from that.

Point 2:  Bob is right, to be sure, that it seems incoherent for Congress to have the greater power to defund a program but not the lesser power to regulate it. But that, I argue, is the Constitution we have. Perhaps this helps to explain it: Given the range of foreign affairs powers the president has that are inherent in the “executive Power,” the Framers wanted to place only certain checks in Congress’s hands, because regulatory checks beyond those they enumerated would begin to compromise the unitary executive, tending toward a co-presidency (as happened under the Articles in some states). So Congress was left with a few foreign-affairs regulatory powers – which Jefferson, Hamilton, and Madison all said were to be “strictly construed” – but mainly with the power of the purse, much like the arrangement that had evolved in England, with which they were familiar. Finally, pinpoint defunding of a secret program should not be a problem. Pinpoint funding is done by using obfuscatory “black hole” language.

Joe Barton - Economic Menace

Rep. Joe Barton (R-TX), chairman of the House Energy & Commerce committee, has surprised analysts by discovering yet more horrifically ill-considered ideas to tackle soaring gasoline prices. According to the trade press, the Republican point-man on energy is now working with Democrats to draft a bill that would establish a Strategic Gasoline Reserve. The Congressman would reportedly direct the feds to ensure that the reserve would be large enough to accomodate 5 percent of annual demand at the pumps.

The fact that Rep. Barton would look to the Strategic Petroleum Reserve for inspiration is bad enough given the poor economic performance of that program. Worse, however, is the lack of any appreciation for the fact that a Strategic Gasoline Reserve would increase pump prices - the exact opposite of what Rep. Barton claims to want out of this bill.

Why? Because the feds would represent new buyers in the market, and they would be competing with consumers for tight supplies. More demand = higher prices. How much higher would depend upon the pace and degree of inventory buildup, but it would almost certainly be substantial once the buying began.

Question - why is this guy chairman of the energy committee?


NSA Spying and the Supreme Court

As I noted in an earlier post, I’m supportive of Bob’s legal argument that the President’s NSA surveillance program is illegal and unconstitutional. (My level of certainty on this: moderate). But for me this doesn’t settle the matter. There’s a separate question: What should the Supreme Court do about it?

For me, this is the hard but all important question. In Baker v. Carr, the Court suggested (in so many words) that justices may want to avoid resolution of a constitutional question if, for example, there is a significant chance another branch might ignore its decision. The reason for this seemingly weak-kneed approach to constitutional adjudication is straightforward. The Supreme Court, a tribunal of nine geriatric lawyers, doesn’t have much muscle. It can’t arrest a recalcitrant President. It relies on the force of its mystique as the oracle of our fundamental law and its soft political power to confer public legitimacy on political branch actions. That’s generally enough to compel the grudging respect and deference of Congress and the President. But in extraordinary times, its possible that a headstrong President convinced of the rightness of his mission, and backed by popular support and a waffling Congress, might simply ignore the Supreme Court. If that happens too often, the Court risks losing its power to command. And a disrespected Court that is repeatedly ignored is far, far worse for the long-term protection of liberty than a Court that occasionally ducks the wrong fight.

So what should the Court do about the NSA surveillance program?

There are seven red flags counseling caution:

  • First, early polls suggest the program seems to be popular with the public (although, admittedly, this may change).
  • Second, the actual tangible harm these programs pose to individuals is rather slight.
  • Third, Congress to date seems willing to go along with the program.
  • Fourth, these programs are difficult to detect: Secret surveillance programs are just that—they are instituted in the shadows by relatively small, committed cadres of spies.
  • Fifth, they respond in part to fears of a catastrophic risk: the possibility, however remote, of a nuclear terrorist attack on American soil.
  • Sixth, some surveillance, such as mass data profiling, appear nearly impossible to undertake under standard interpretations of statutory surveillance warranting procedures.
  • Seventh, reasonable people can disagree about the wisdom of this kind of surveillance.

    Given these six variables: popularity, slight immediate harm to individual citizens, congressional acquiesence, secrecy, high stakes, difficulty complying with current law, and reasonable policy arguments for executive policy, there’s a good reason to think the administration might ignore a Supreme Court that orders the President to take surveillance programs offline.

    What should the Court do then if presented with a legal challenge?
    Here’s one obvious alternative: It might simply leave the question to lower courts for the time being. The Court doesn’t have to take every constitutional challenge that comes its way. Lower courts have passed on the scope of the President’s foreign affairs authority to conduct warrantless national security surveillance—without Supreme Court review. (See, for example, United States v. Smith, 321 F. Supp. 424 (C.D. Cal. 1971)).

    If the Court stayed above the fray, lower courts would likely disagree on the merits of the President’s arguments. The administration would press ahead, citing the line of lower court precedent in its favor. But another, competing line of precedent would remain—casting doubt on the President’s actions, raising the cost of the program to the executive, and giving support to his political opponents. At a later date, those decisions might be affirmed when the risk of presidential resistance has faded (perhaps due to a change in administration or a change in control of Congress).

    But the Court might press against the President in areas where the President is on less secure ground: Indefinite detention of American citizens as enemy combatants without a civil trial is one area where the President’s legal arguments are weak, the harm to individuals is large, public opinion isn’t wholly on the President’s side, and congressional acquiesence isn’t a given. A Supreme Court opinion on this point might bolster political will against executive power.

    The Court might also encourage private resistance to the surveillance program by taking appeals on collateral issues–such as the scope of the state secrets abstention doctrine, which counsels in favor of dismissing claims in which “state secrets” are central to determination of liability. As George Washington University’s Orin Kerr has noted, the administration is likely to invoke the doctrine in civil litigation against telecommunications companies. Narrowing the doctrine will expose telecommunciations companies to greater risk of civil liability for handing over its data–deterring perfunctory corporate cooperation with the NSA.

    Should the Supreme Court follow this route–or something like it?

    Absent a change in the permissive political climate on the surveillance issue, I reluctantly tend to think yes (Degree of confidence: low).

  • Why the Cost of the GOP’s Medicare Rx Program Will Rise

    Republicans are boasting that their Medicare drug plan costs less than had been forecast. (As I’ve discussed elsewhere, that is hardly due to efficient program design.) Yet at the same time, Republicans are demonstrating why the cost of the program will keep growing until it exceeds all expectations.

    In April, the Bush Administration changed the rules so that when plans drop drugs from their formularies, the change cannot take effect until the next open enrollment period. Before that, seniors could enroll only to see their plan quickly drop coverage for the drugs they use the most. Though nice for seniors, the new policy will increase the program’s cost.

    This week brings news that Republicans are considering another costly change. Seniors who don’t enroll by today have to wait until the next open enrollment period, which begins November 15. If they eventually enroll, they will be assessed a penalty equal to 1 percent of their premiums for every month they waited. From May to November is six months; thus the minimum penalty will be 6 percent of one’s premium. This penalty is the only part of the program that works like real insurance: the longer you wait to enroll, the higher your expected medical expenses, and therefore the higher your premium.

    Fearful of treating seniors like adults in an election year, Republicans reportedly want to soften that penalty. In monetary policy, backing down from such committments is called time-inconsistent behavior, and it wrecks the credibility of central banks. Reneging on the late-enrollment penalty would certainly wreck the credibility of future efforts to contain costs by preventing seniors from gaming the system. Seniors would reasonably conclude that since Congress wimped out on past threats, it will wimp out on future threats too.

    Every perceived failing of this program will lead to “patches” that further gouge taxpayers. That process has only begun. Republicans are leading the charge.