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Cato Dispatch for November 25, 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.)

Senate to Vote on Health Care Bill Saturday

Senate Majority Leader Harry Reid released a Senate version of the government health care overhaul, weighing in at a massive 2,074 pages. McClatchy news reports, "The Senate Thursday began what promises to be a bitter, lengthy battle over the future of health care in America, and taxes, abortion, affordability and federal deficits emerged as key flashpoints. Senate Democratic leaders expect the first test vote on their new $848 billion, 2,074-page health care overhaul bill will come on Saturday evening. Although Democrats are likely to get the 60 votes they need to move forward with the debate, the outcome is uncertain."

The Congressional Budget Office reports the bill will cost taxpayers $848 billion over 10 years, imposing a number of new taxes on everything from prescription drugs to Botox. Michael F. Cannon, Cato's director of heath policy studies, says the $848 billion only accounts for part of the federal government's share of the tab:

Private-sector mandates--the legal requirements that individuals and employers purchase health insurance -- accounted for 60 percent of total costs.  That suggests that if the Reid bill's cost to federal and state governments is $1 trillion, then the total cost is probably $2.5 trillion, and Harry Reid — like House Speaker Nancy Pelosi — is hiding $1.5 trillion of the cost of his bill. Without a cost estimate of the private-sector mandates, Reid has not yet satisfied the request made by eight Democratic senators for a "complete CBO score" of the bill 72 hours prior to floor consideration. Fortunately, by law, the CBO must eventually score the private-sector mandates.  When that happens, the CBO will reveal costs that the bills' authors are trying to hide. The House passed its bill without a complete CBO score.  The Senate should not follow suit.

If history is any indicator, says Cato Executive Vice President David Boaz, the costs of the health care overhaul will inevitably spiral out of control:

Just look at the record: In 1967, the House Ways and Means Committee said the entire Medicare program would cost $12 billion in 1990. The actual cost in 1990 was $98 billion. In 1987, Congress projected that Medicaid would make special relief payments to hospitals of less than $1 billion in 1992. The actual cost, just five years after the projection, was $17 billion. Similarly, Medicare's home care benefit was projected in 1988 to cost $4 billion in 1993, but the actual cost — again, just five years after the projection — was $10 billion. The government is running a trillion-dollar annual deficit already, and Congress and the president propose to create a new program that promises to cover millions more people with health insurance, drag currently insured people onto government programs, and save billions of dollars in the process. No wonder levels of trust in government are at record lows.

Nearly 80,000 Fake Jobs 'Saved or Created' by the Stimulus

The Washington Examiner reports, "More than ten percent of the jobs the Obama administration has claimed were 'created or saved' by the $787 billion stimulus package are doubtful or imaginary, according to reports compiled from eleven major newspapers and the Associated Press."

At the height of the debate over the "stimulus" legislation, Cato ran a full-page ad in the New York Times, the Washington Post, the Chicago Tribune, the Los Angeles Times, and other papers, signed by nearly 300 economists against the president's stimulus plan. Cato analysts discussed the plan's waste and consequences on dozens of leading news programs and talk shows.

Writing in the New York Times Online months after the legislation passed, Senior Fellow Jeffrey A. Miron asks, "Did the stimulus work?"

Two elements of the fiscal stimulus — cash-for-clunkers and the $8,000 tax credit for first-time home buyers — probably shifted significant activity from the fourth quarter and beyond to the third quarter because consumers knew these provisions would expire soon. Thus the stimulus plausibly shifted the timing of economic activity without necessarily improving the long-term path.

The case for additional stimulus is weak. If further stimulus occurs, it should focus on changes in policy that make sense independent of the recession. This means reductions in tax rates rather than increases in expenditure.

Budget Analyst Tad DeHaven calls the stimulus "political theater":

The Obama administration will continue to trumpet the number of jobs the stimulus package "created." It will brag that the government's efforts were not only successful, but that they were conducted with unprecedented transparency and accountability. But taxpayers and citizens should not buy into these claims. The stimulus jobs report is simply political theater: a charade intended to maintain public support for, or acquiescence to, Washington's multiplying encroachments.

Cato Quick Hits

• Why America leads the world in medical innovation.
• In the past eight months, the unemployment rate has jumped from 7.2 percent to 10.2 percent. Here's why.
• How delayed economic reform in India killed 14.5 million children. More details, here.
• Unintended Consequences: Could government efforts to redesign cities to make them more pedestrian friendly, concentrate jobs in selected areas, and increase mass transit actually raise C02 emission levels?
• Allan Meltzer, professor of political economy at Carnegie Mellon University, keynoted Cato's 27th annual Monetary Conference this week. In a Cato Daily Podcast, Meltzer discusses the diminishing independence of the Federal Reserve.

Chris Moody, editor, cmoody@cato.org