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Cato Daily Dispatch for December 3, 2004

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Medicare Drug Benefit to Be Bigger Drain than National Debt
France's Socialist Party Backs EU Constitution
Fighting Terrorism with Free Trade

Medicare Drug Benefit to Be Bigger Drain than National Debt

According to USA TODAY: "The ultimate drain from the new Medicare prescription-drug benefit will be greater than the current national debt.

"Like most governmental numbers, this one requires a little explanation. The figure is based on a 75-year projection by the actuaries who scrutinize the Medicare program. While health care costs are notoriously difficult to forecast, this prediction assumes that the prescription-drug program, which has huge gaps in its coverage, will never be expanded."

In "War between the Generations: Federal Spending on the Elderly Set to Explode," Chris Edwards, director of tax policy studies, and Tad DeHaven, former researcher, write: "The main programs for the elderly, Social Security and Medicare, are primarily funded by taxes on the young. That funding mechanism has set the nation on a financial collision course as the number of elderly will soar 116 percent by 2040 while the number of workers supporting them will grow just 22 percent. Without reforms, the combined cost of Social Security and Medicare Part A is expected to rise from 13.8 percent of taxable wages today to 24.2 percent by 2040. Adding in projected spending on Part B of Medicare pushes up the total projected costs of the two programs to 30 percent of wages by 2040."

France's Socialist Party Backs EU Constitution

"France's opposition Socialist Party voted in favor of the European Union's proposed constitution, party leaders announced Thursday, a victory for the party's moderate, pro-European wing," reports the Washington Post.

"About 59 percent of party members voted yes in a series of nationwide caucuses Wednesday night. Turnout was high, with 80 percent of the party's 120,000 members casting votes."

In "US-EU: The Constitutional Divide," Marian Tupy, assistant director of Cato's Project on Global Economic Liberty, and Patrick Basham, senior fellow in Cato's Center for Representative Government, write: "The EU constitution makes European government more, not less, remote from the citizenry. The EU's operations are expanded, not streamlined, and its bureaucracy is made more complex, not simpler. There are no cuts to the EU's 97,000 pages of accumulated laws and regulations. The EU's powers are supposedly limited in this document but there is an escape clause in case the Brussels-based bureaucracy ever feels boxed in by popular sentiment. The decisions in Brussels are final and EU laws supersede laws made by national parliaments."

Fighting Terrorism with Free Trade

"The war on terrorism was high on the mind of U.S. Trade Representative Robert B. Zoellick as he signed a free-trade agreement with the Persian Gulf kingdom of Bahrain in mid-September. `A contest for the soul of Islam' is raging, and `we can help' by striking trade deals that generate jobs and reduce poverty, Zoellick said," according to the Washington Post.

"Countries in the Andean region, sub-Saharan Africa and elsewhere -- granted preferential, duty-free access to the U.S. market -- have enjoyed a comparative boom, with exports to the United States rising nearly 40 percent in some cases."

In "The Trade Front: Combating Terrorism with Open Markets," Brink Lindsey, vice president for research, writes: "The Bush administration should be congratulated for opening a trade front in the war on terrorism. With the proper commitment and follow-through, a major U.S. trade initiative in the Muslim world can give real encouragement to desperately needed growth and reform in that troubled region."

Wyatt Dubois, editor, wdubois@cato.org