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Cato Dispatch for August 21, 2009

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(Links to outside sources were active as of the date of this dispatch; however, not all news sources maintain links to current stories indefinitely. Some links also may require registration.)

Is a 'Public Option' On or Off the Table for Health Care Reform?

Last weekend, key Democratic lawmakers indicated that a government-run insurance option may be dropped from health care reform plans. The public option's status in the debate became less and less clear as the week wore on, however. On Thursday morning, The Washington Post editorial board wrote that in order to pass the Obama administration's health care reform proposal, it "will have to ditch its goal of a public plan." Later that day, House Speaker Nancy Pelosi insisted that there is "no way" a health care bill will pass without public option.

If a public option clause is not in the bill, many policymakers are advocating government controlled cooperatives. But a government "co-op", says Cato scholar Michael Cannon, does not offer much of an improvement:

Having Congress charter a health insurance "cooperative" is just another way of creating a new government-run program that would drive private insurers out of business.

The definition of a cooperative is a health plan governed by its enrollees. Since a government chartered co-op won't have any enrollees at first, it will be governed like any other government program. So when the Obama administration and congressional Democrats say, "We're going to create a co-op," what they mean is, "We're going to create a new government health program but we will turn it over to the members in five years. We promise."

Cato scholar Michael D. Tanner warns that a government cooperative plan won't look anything like a true co-op. "Under the government plan, the members wouldn't choose its officers — the president would," he said.

According to Tanner, that's the problem:

Supporters of government-run health care have no intention of letting the co-ops be independent enterprises that operate by the same rules as other insurers. This is not really about creating more choices and competition… If a "co-op" is run by the federal government under rules imposed by the federal government with funding provided by the federal government, it's simply government-run health insurance by another name. Opponents of a government takeover of the health care system should not be fooled.

'Cash For Clunkers' Program Hits a Few Roadblocks

While Congress cheered its "Cash for Clunkers" initiative, which offers car owners a rebate for trading in vehicles for new ones that get better gas mileage, it is turning out to be less of a success than originally thought. Despite the fact that the Transportation Department has more than 1,000 bureaucrats and personnel filing requests, hundreds of car dealers are dropping out of the program, claiming they can wait no longer for the government to reimburse them. USA Today reports that non-profit organizations that provide donated vehicles to the poor are worried that the government program will entice people to scrap their car for the voucher over donating it to the poor. One charity estimates a 10-15 percent decline in donations because of the program.

Cato scholar Jeffery A. Miron explains why "Cash for Clunkers" is bad medicine for the economy:

Government policy should not favor some industries at the expense of others, but that is exactly what cash for clunkers does. The program helps consumers who can take advantage, and it increases profit and employment in the auto industry. But funding for the program comes from all other taxpayers, so it harms the consumers and industries not supported by the program.

Thus cash for clunkers creates winners and losers based on political considerations, not economic values… Cash for clunkers is therefore just redistribution to certain consumers and to the auto industry; it is more bailout dressed up as environmental policy. Congress should end the program, not expand it.

The government announced that it will end the program next week.

President Obama Outlines a New Approach to Afghanistan

Speaking to a Veterans of Foreign Wars chapter in Phoenix on Monday, President Obama defended his decision to divert more military resources to Afghanistan in order to "disrupt, dismantle, and defeat al Qaeda and its extremist allies." This is despite a new Washington Post-ABC News poll that found that a majority of Americans think the war in Afghanistan is not worth fighting.

Cato foreign policy analyst Malou Innocent questions the reasoning behind this strategy:

Beltway orthodoxy tells us it's because extremists will emerge in ungoverned parts of the world and attack the United States. As my colleagues Justin Logan and Chris Preble point out here, there's reason to doubt whether state failure or poor governance in itself poses a threat.

But responsible leaders would be upfront about the expected costs of our policy: to transform what is a deeply divided, poverty stricken, tribal-based society into a self-sufficient, non-corrupt, stable democracy would require a multi-decade commitment — and even then there'd be no assurance of success.

Why Afghanistan's form of governance directly implicates America's security, or why it demands the deployment of tens of thousands of U.S. troops to police it are questions rarely asked let alone addressed.

Chris Moody, editor, cmoody@cato.org