November 17, 1999

by Peter J.M. Orvetti

Medical Savings?
Flight of Fancy
Sanctioning Terrorism?

Medical Savings?

For the first time ever, Medicare spending declined in fiscal year 1999, AP reported. Treasury Department statistics show that Medicare expenditures decreased by 1 percent to $212 billion from $213.6 billion in FY 1998. The decline was attributed to cuts ordered by Congress, more careful billing practices by health care providers and a crackdown on fraud. However, as more Americans age, Medicare costs are expected to increase again in the future.

"The Balanced Budget Act of 1997 made extensive Medicare reforms to delay the impending financial collapse of the system for a few years. But those changes do not sufficiently address the long-term problems of the program," Peter J. Ferrara writes in the Cato Policy Analysis "The Next Steps for Medicare Reform". "In fact, Medicare's long-term problems remain deep and intractable. Even after the 1997 reforms, by the time today's young workers retire, Medicare's current sources of funding will likely be sufficient to finance only 50 percent or less of the promised benefits. Such an enormous financial gap cannot be closed by raising taxes and cutting benefits, which would greatly harm working people and retirees. The only solution is to reform the system by taking advantage of the efficiencies, incentives, competition, and productivity of the private sector. Every retiree should be free to use his share of Medicare funds to purchase private health insurance. In addition, every worker should be free to put his Medicare taxes into a personal health savings account rather than the Medicare program, using the accumulated funds to pay for health care and health insurance during retirement. Because of the high returns that result from investing in private capital markets, those privately invested accounts would be able to pay significantly higher benefits than Medicare."

"What should government do if it is serious about cutting health spending and improving access to affordable health care?" asks Sue A. Blevins in the Cato Policy Analysis "The Medical Monopoly: Protecting Consumers or Limiting Competition?". "The first step should be to eliminate the anti-competitive barriers that restrict access to low-cost providers, namely licensure laws and federal reimbursement regulations. Americans should not be forced to substitute providers against their will; rather, they should be free to choose among all types of health care providers. Instead of imposing strict licensure laws that focus on entry into the market but do not guarantee quality control, states should hold professionals equally accountable for the quality of their outcomes. That will reduce the need for strict licensure laws and other regulations that are purported to protect the public at large."

Flight of Fancy

An $8 billion aircraft deal between the United Arab Emirates and the United States could be finalized during this week's Dubai air show, AP reports. UAE Defense Minister Mohammed bin Rashid al-Maktoum said Sunday, "There is still hope that the deal could be signed during this air show." The deal would transfer 80 F-16 fighter jets.

Writes William D. Hartung in the recent Cato Policy Analysis "Corporate Welfare for Weapons Makers: The Hidden Costs of Spending on Defense and Foreign Aid", "The defense and foreign aid budgets are the largest single source of government funding for private corporations. More than half of U.S. weapons sales are now being financed by taxpayers instead of foreign arms purchasers. During fiscal year1996 (the last year for which full statistics are available), the government spent more than $7.9 billion to help U.S. companies secure just over $12 billion in agreements for new international arms sales. The annual $7.9 billion in subsidies includes taxpayer-backed loans, grants, and government promotional activities that help U.S. weapons makers sell their products to foreign customers. Also, the provision of low-cost facilities and extensive subsidies for research and development and mergers and acquisitions to major contractors fosters a 'risk-free' environment in which weapons makers have little economic incentive to produce effective systems at affordable prices. Furthermore, a portion of the $120 billion the Pentagon spends each year on contracts with U.S. defense contractors is being wasted on defense pork-that is, redundant or unneeded weapons systems. Such subsidies and spending for defense pork can interfere with the fulfillment of legitimate security needs."

Sanctioning Terrorism?

The United Nations has imposed sanctions on Afghanistan, which is under the rule of the Taliban militia, AP reports. In an effort to win Taliban assistance in the arrest of suspected terrorist Osama bin Laden, stiff controls were imposed last weekend. The United Nations is demanding bin Laden be handed over to the United States or a third country to stand trial on charges he masterminded last year's bombings of two U.S. embassies in Africa.

Leon T. Hadar wrote in the Cato Policy Analysis "The 'Green Peril': Creating The Islamic Fundamentalist Threat": "Now that the Cold War is becoming a memory, America's foreign policy establishment has begun searching for new enemies... Topping the list of potential new global bogeymen, however, are the Yellow Peril, the alleged threat to American economic security emanating from East Asia, and the so-called Green Peril (green is the color of Islam). That peril is symbolized by the Middle Eastern Moslem fundamentalist--the 'Fundie,' to use a term coined by The Economist--a Khomeini-like creature, armed with a radical ideology, equipped with nuclear weapons, and intent on launching a violent jihad against Western civilization…

"The danger for the Western nations, in particular the United States, is that misperceptions will cloud their judgment of and produce counterproductive policies toward Islam and the Middle East. Instead of viewing Islam as a monolithic force, Western analysts and policymakers should recognize that it is a diverse civilization, divided along cultural, ideological, religious, ethnic, and national lines. Even the term 'Islamic fundamentalism' should perhaps be modified to reflect the different movements and groups that are lumped into that category. Moreover, neither Islam nor Islamic fundamentalism is by definition 'anti-Western.' As noted, the anti-American attitudes of Islamic groups and movements in the Middle East are not directed against Christianity or Western civilization per se. They are instead a reaction to U.S. policies, especially Washington's support for authoritarian regimes and the long history of U.S. military intervention."