April 2007

April 30, 2007 7:28PM

May Day in Latin America

This Tuesday, May 1, Venezuelan ruler Hugo Chavez will take control “of Venezuela’s last remaining privately run oil projects.” The symbolism is obvious: the socialist May Day. Last year, Bolivian president Evo Morales sent his soldiers to occupy the gas fields in his country on May Day.

So I’m reminded, as I was last year, that May 1 is also the anniversary of the institution of private retirement accounts in Chile. Since then Chile has been a great economic success story.

Perhaps 25 or 50 years from now, we will know whether Chile’s privatization or Bolivia’s and Venezuela’s nationalizations brought a higher standard of living to their citizens.

April 30, 2007 5:26PM

“The Most Important Health Care Legislation of Our Lifetimes”

That is how Gov. Mitch Daniels describes his health care reform plan (which the Indiana legislature passed last night) in an email his staff helpfully forwarded my way. According to the Indianapolis Star, Daniels’ plan will:

  • Expand Medicaid eligibility for pregnant women and children
  • Provide health insurance subsidies to individuals making $20,420 and families of four making $41,300 per year (i.e., 200 percent of the federal poverty level)
  • Provide those beneficiaries with $500 of free preventive care and $1,100 in a health savings account
  • Institute a “slacker mandate” that requires insurers to allow children to remain on their parents’ insurance policy up to age 24
  • Increase the cigarette tax by $0.44/pack, to $0.995/pack

Daniels was understandably moved. Here is his full quote:

The health plan passed last night can fairly be described as the most important health care legislation of our lifetimes. I have asked a host of people whether they can think of a better example and nobody has. I am excited about the passage of the plan and what it can mean for uninsured Hoosiers and for low‐​income children, and, of course, to try to bring down the second‐​highest smoking rate in America.

Did Gov. Daniels (R!!) bother checking with anyone who has actually set foot outside of Indiana? Whatever the case, here are a few things the Daniels plan will also do:

  • Crowd‐​out private coverage
  • Encourage cigarette smuggling and related crime
  • Trap more Indianans Hoosiers in low‐​wage jobs
  • Re‐​create in Medicaid the dependence problems that Congress sought to eliminate with welfare reform
  • Impose a brutally regressive tax on the poor. According to Harvard’s Kip Viscusi: “The usual concerns about regressive taxes involve those that are regressive in percentage terms, that is, the poor pay a higher percentage of their income in taxes than do the wealthy. Cigarette taxes are actually so regressive that the poor pay a much higher absolute level of taxes than do the wealthy. In 1990, people who made under $10,000 per year paid almost twice as much in cigarette taxes as those who made $50,000 and above. The people who will bear the cigarette taxes are not the legislators who enact them but rather the janitors and support staff for the legislature.”
  • Cost more than projected

When conservatives finally do start questioning why so many supposed good guys keep turning to the Dark Side, they might launch their inquisition with an examination of the Medicaid program, which makes Democratic and Republican governors alike this very tempting offer: big government at one‐​half the price.

April 30, 2007 4:52PM

Sen. Obama’s Fan Base

Sen. Barack Obama's presidential campaign received some modest support over the weekend, one from a predictable source, the other modestly surprising.

An editorial in Saturday's Washington Post welcomed Obama's attempt to flesh out his foreign policy views in a speech last week before the Chicago Council of Global Affairs. While appropriately knocking his silence on trade issues, the Post praised Obama for his support for a larger military; his willingness to exert pressure on Iran -- he stressed that the military option must remain on the table; and his proposal to double U.S. foreign aid to $50 billion by 2012.

Overall the Post editors were encouraged by Obama's invocation of Franklin Roosevelt, who said that the United States must "lead the world in battling immediate evils and promoting the ultimate good." Obama might have cited a more recent speech, by a still living politician, that made essentially the same argument (see George W. Bush, Second Inaugural Address, January 20, 2005), but that presumably would not have played well with the base.

Robert Kagan's praise for Sen. Obama is more troubling. After all, Robert Kagan, one of the founding members of the Project for a New American Century, is a leading advocate of the decision to go to war with Iraq in the first place. Kagan is also a passionate believer in the Bush administration's stay-the-course strategy in Iraq. (He also wrote recently in favor of preparing the groundwork for a war with Iran.)

Kagan and Obama are ostensibly on opposite sides with respect to Iraq, with Obama favoring a timeline for withdrawal. On this crucial issue, Sen. Obama does seem to be differentiating himself from the policy elite and reflecting the will of the country; 64 percent of Americans favor a timetable for withdrawal in 2008, according to the most recent New York Times/CBS poll.

How to explain, therefore, that Senator Obama has a fan in Mr. Kagan? It could be that Kagan, who is advising Sen. McCain "on an informal and unpaid basis", wants to undermine Obama's credibility on the left, thereby ensuring that a less charismatic candidate will emerge from the Democratic field. But that seems too cynical. It also assumes that McCain will be the nominee, which is an even greater stretch.

A more likely explanation is that Kagan is genuinely excited about Sen. Obama's embrace of the foreign policy status quo. Kagan had a hand in shaping this status quo in the mid-1990s, when he (along with William Kristol) called for the United States to play the role of benevolent global hegemon, aka friendly empire, aka world's policeman. At a time when 76 percent of Americans say that the U.S. plays the role of world policeman too much, Kagan has found yet another politician who believes the U.S. doesn't play the role often enough. 

This is disappointing. Sen. Obama had earlier said, when asked about his opposition to the war in Iraq, that he was not opposed to all wars, just dumb wars. This makes for a good soundbite, but it does not illuminate the philosophy guiding the most important decisions that a president will make concerning the use of military force abroad. His speech last week shed little additional light on the subject.

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April 30, 2007 3:13PM

Faked Out by One Chart and One Subsidy‐​Seeking Industry

In a recent post, Ezra Klein offers two arguments to beat back the “commenters hanging around demanding we redefine the word “uninsured,” attempting to downplay the problem of lack of coverage, denying all widely accepted measures of the uninsured, and, when that fails, writing the uninsured off as statistical artifacts of momentary lapses in coverage.”

Klein’s first argument is based on this chart:

Media Name: Coverage%20Gaps-1.jpg

According to this chart, 61 percent of those who were uninsured when surveyed reported that in the past year, they had one of the following problems:

  • Did not fill a prescription
  • Did not see a specialist when needed
  • Skipped recommended medical test, treatment, or follow‐​up
  • Had a medical problem but did not visit doctor or clinic

I see two problems with trying to get too much out of these data. 

  1. The Commonwealth Fund survey asked respondents about their insurance status right now, but asked if they had to forgo medical care during the past year. With the exception of respondents who were “insured all year,” it is not clear whether care was forgone while respondents were insured or uninsured. Therefore, this survey says nothing about to what extent being uninsured caused respondents to forgo care. (To his credit, Klein acknowledges that even those with coverage forgo care. To my mind, the fact that medical care grows increasingly expensive even for those with coverage argues against reforms that would mindlessly cover the uninsured without changing the incentives faced by those with health insurance.)
  2. These data say nothing about the health consequences of the care forgone. Some of the uninsured suffer disastrous health consequences as a result of their lack of access to care, as Jonathan Cohn documents. But these data do not tell us how much of the reported forgone care was necessary and how much was unnecessary. So it’s a bit of a stretch to refer to these findings as “the effects of being totally uninsured.”

Klein’s second argument concerns the estimate that 45 million Americans lack health insurance. That estimate is generated by the Census Bureau’s Current Population Survey. It has been criticized for a number of reasons, which are not important for present purposes.

Klein argues that if the insurance industry uses that estimate then it must be valid. That’s because the insurance industry “isn’t prone to overhyping the millions of Americans without insurance.” Certainly the insurance industry has no interest in exaggerating the number of Americans without health insurance.

Evidently, Klein hasn’t been paying attention to the insurance industry’s political agenda, which includes massive subsidies to the insurance industry to provide health insurance to the uninsured. (Will the Left express shock when the insurance industry hijacks “universal coverage” just as it is hijacking Medicare? Consider yourselves warned.)

April 30, 2007 2:32PM

Busy Courthouses, Few Trials

From NYT columnist Adam Liptak:

Trials are on the verge of extinction. They have been replaced by settlements and plea deals, by mediations and arbitrations and by decisions from judges based only on lawyers’ written submissions. …

Instead of hearing testimony, ruling on objections and instructing jurors on the law, judges spend most of their time supervising the exchange of information, deciding pretrial motions and dealing with settlements and plea bargains. …

Those who have the temerity to “request the jury trial guaranteed them under the U.S. Constitution,” wrote the judge, William G. Young of the Federal District Court in Boston, face “savage sentences” that can be five times as long as those meted out to defendants who plead guilty and cooperate with the government.

The movement away from jury trials is not just a societal reallocation of resources or a policy choice. Rather, as Judge Young put it, it represents a disavowal of “the most stunning and successful experiment in direct popular sovereignty in all history.”

Indeed, juries were central to the framers of the Constitution, who guaranteed the right to a jury trial in criminal cases, and to the drafters of the Bill of Rights, who referred to juries in the Fifth, Sixth and Seventh Amendments. Jury trials may be expensive and time‐​consuming, but the jury, local and populist, is a counterweight to central authority and is as important an element in the constitutional balance as the two houses of Congress, the three branches of government and the federal system itself. …

I was on jury duty last week, in a state criminal court in Manhattan. During the orientation on Wednesday, a court officer, with mixed pride and hyperbole, said his was the busiest courthouse in America.

I never saw so much as the inside of a courtroom. After a couple of days of milling around in an assembly room with more than 100 other potential jurors, the State of New York thanked us for our service and sent us home.

For more about how plea bargaining tactics tax the right to jury trial, go here (pdf).

To listen to a talk that Judge Young gave at Cato, go here.

April 30, 2007 1:01PM

The Disaster that Is Dirigo

Health care reformers take note. An article on Maine’s experience with its Dirigo health care program in today’s New York Times highlights some important lessons for those who would use command‐​and‐​control tactics to achieve “universal coverage.”

1. Government Coverage Crowds out Private Coverage

The Times reports:

When Maine became the first state in years to enact a law intended to provide universal health care, one of its goals was to cover the estimated 130,000 residents who had no insurance by 2009, starting with 31,000 of them by the end of 2005, the program’s first year.

So far, it has not come close to that goal. Only 18,800 people have signed up for the state’s coverage and many of them already had insurance.

In fact, some 60 percent of Dirigo enrollees previously had private insurance. That’s consistent with recent estimates by economists Jon Gruber (MIT) and Kosali Simon (Cornell) that whenever government provides health insurance to 10 people, six people lose their private coverage. Thus only four people gain coverage as a result of the expansion.

That’s government efficiency for you: covering four people for the price of 10.

2. Adverse selection happens.

More from the Times:

[P]remiums have increased, not become more affordable, because some of those who signed up needed significant medical care, and there are not enough enrollees, especially healthy people unlikely to use many benefits…

The program completely covers preventive care, subsidizes premiums and deductibles, and unlike most insurance plans, covers treatment for mental illness and does not exclude people for pre‐​existing medical conditions…

An Anthem spokesman, Mark Ishkanian, said the increase was necessary because medical claims of DirigoChoice customers were “substantially higher” than anticipated, about double those of non‐​Dirigo plans…

[A spokeswoman for the governor] said the state was surprised that more than half of DirigoChoice enrollees qualified for the highest subsidy, 80 percent, which meant the program has been more expensive for the state.

Hmm. Benefits much more comprehensive than the market provides. And enrollees were disproportionately high‐​cost. Didn’t see that coming.

3. Predicted reductions in uncompensated care may not materialize.

Premiums are increasing under Dirigo. (One diabetic man dropped out after his rates increased 13.4 percent.) Part of Dirigo’s funding was to come from “assumed…savings because an increase in insured people would mean less charity care from hospitals.” Guess not. Gov. Romney, call your office.

4. For some, it’s not about better health care. It’s about more government control.

When even the New York Times sees fit to run an article about how your big‐​government health plan is a disaster, it takes chutzpah to say that the answer is more mandates, more taxes, and more regulation:

[Democratic] Governor [John] Baldacci said in an interview that when the Legislature enacted the Dirigo Health Reform Act in 2003, it gave him less money and more compromises than he had wanted. He said his administration had now learned more about what works and what does not.

His new proposals include requiring people to have insurance and employers to offer it and penalizing them financially if they do not; making the subsidized insurance plan, DirigoChoice, more affordable for small businesses; creating a separate insurance pool for high‐​risk patients; instituting more Medicaid cost controls; and having the state administer DirigoChoice, which is now sold by Anthem Blue Cross.

“We’ve got a reform package that takes Dirigo to the next level,” Mr. Baldacci said. “It takes the training wheels off.”

Seems like the training wheels — indeed all the wheels — have already come off.

April 30, 2007 11:06AM

Barney Frank, the Occasional Libertarian

Rep. Barney Frank, chairman of the House Committee on Financial Services, gave a resoundingly libertarian interview to NPR’s “All Things Considered” Friday evening. Frank has introduced a bill to repeal last year’s ban on online gambling. As he did in this 2003 Cato Policy Forum, he made his argument in libertarian terms. From the Nexis transcript:

ROBERT SIEGEL: First of all, what is your motive here? Is it libertarian? Is it to achieve more revenues for the government by taxing activity? What is it?

Rep. FRANK: It’s libertarian. I am appalled at the notion that the government tells adults that they cannot do certain things with their own money on their own time in ways that do not harm anybody else because other people disapproved of them. …

But my motive is overwhelmingly that I just don’t want to see the government telling people what to do.…

SIEGEL: How much money would taxing Internet gambling bring in to the federal government?

Rep. FRANK: Well, in the bill I am — not a lot — I really want to make it very clear, that’s not my major focal point here. Potentially this could be a useful source of revenue just like any other business. But I do want to stress, my main motivation here is that I do think I should mind my own business and I want to deal with the environment, and I want to deal with economic problems, and I want to deal with poverty and all these other things. But I spend a lot of energy trying to protect people from other people. I have none left for protecting people from themselves.

In between those segments, Frank said that we allow lots of things over the Internet–like wine sales–that are appropriate for adults but not for children. And he said that conservatives want to ban things they think are immoral, and liberals want to ban things they think are “just tacky.”

It’s good to hear an elected official use the word libertarian, and use it correctly, and apply it to issues. Would that more of his colleagues would do so. I’m reminded that seven years ago I did a libertarian rating of Congress. Frank did better than most Democrats, and indeed better than most Republicans (including 7 of the 11 members of the Republican Liberty Caucus Advisory Board). But he voted to restrict steel imports, restrict gun sales and gun shows, and implement the restrictive “Know Your Customer” bank regulations, and he opposed a tax cut. So his commitment to not telling what people to do with their own lives and their own money seems limited.

This year, as Financial Services chairman, he’s demonstrating his interventionist tendencies as well as his sometime libertarian instincts. He wants to push all workers into government health care, to regulate corporate decisions about executive compensation, to put more obstacles in the way of free trade across national borders, to keep Wal‐​Mart from creating an internal bank clearinghouse to hold down its costs. Not to mention expanding anti‐​discrimination rules to include gay, lesbian, bisexual and transgender people.

Frank told another journalist:

“In a number of areas, I am a libertarian,” Frank said. “I think that John Stuart Mill’s ‘On Liberty’ is a great statement, and I was just rereading it.

“I believe that people should be allowed to read and gamble and ride motorcycles and do a lot of things that other people might not want to let them do.”

Would that the Republicans who once took Congress on the promise of “the end of government that is too big, too intrusive, and too easy with the public’s money” also reread (or read) “On Liberty” and take its message to heart. And would that Barney Frank come to realize that adults should also be free to spend the money they earn as they choose and to decide what contracts, with foreign businesses or local job applicants, they will enter into.