November 17, 2008 9:58AM

Health Insurance: Why Markets Are a Better Bet Than Government

Two trends in job‐​based health benefits demonstrate why markets are a better bet than government for containing health‐​care costs and preserving choice.

Today’s New York Times reports:

even if they are fortunate enough to have a job at a company that still offers health benefits, many workers are finding that the buffet of options has been trimmed to a very short menu…

this year, at more than 100 large companies and hundreds of smaller ones … high‐​deductible plans are the employee’s single take‐​it‐​or‐​leave‐​it option. One of those companies is the automaker Nissan, which is offering only high‐​deductible plans to its 15,000 United States employees for the coming year. Another is Delta Airlines.

Expect to hear the usual nonsense about how employers are cost‐​shifting to workers (they aren’t) and how high‐​deductible coverage will harm workers’ health (it won’t).

The real lessons to be taken from this news are:

  1. Markets are better than government at cost‐​control. The cost of both public and private health insurance is rising. Despite being badly hampered by government intervention, the private sector is responding by cutting back on overly generous health coverage, a move that will reduce use and cost growth. How is the government responding? By expanding public subsidies, which contribute to cost growth.
  2. Forced pooling reduces choice. In unregulated markets, the healthy quite happily subsidize the sick. But when government forces the healthy to do so, healthy people bolt from comprehensive health plans, which then causes those plans to collapse. One of the ways that government badly hampers private health‐​insurance markets is by herding us all into job‐​based insurance pools, in an attempt to force the healthy to subsidize the sick. And wouldn’t you know, employers are now having to drop comprehensive plans.

There must be a lesson in here for Obauckennewyden.

November 17, 2008 9:32AM

No Experience Needed

The Washington Post reports today that job‐​seeking Americans who peruse employment listings for the ensuing holiday shopping season are likely to find far fewer openings than last year. That is hardly a surprise: unemployment is rising, and people are looking for work in places and industries that they wouldn’t have considered previously.

It is far more surprising that President‐​elect Obama’s job listings for personnel to fill the top posts in his new administration seem to all be prefaced with “only experienced persons need apply.” This from a man whose lack of experience did not block his path to the Oval Office, and might ultimately have cleared the way.

Don’t get me wrong: I much prefer a skilled surgeon to one who is performing his first operation. An accountant who has worked for dozens of clients will likely make far fewer errors than the person who has just started her own practice. But experience doesn’t automatically translate into competence; wisdom and insight might actually be impeded by years of working in the same field, exposed only to the canon of the profession.

New thinking is particularly needed in new industries. Most of the people that Jeff Bezos hired to staff his start‐​up had never worked in the Internet business, and quite a few had never worked in any business at all. Today, Ama​zon​.com is a retailing juggernaut. 

New thinking — and new faces — are also welcome in old, tired industries that have run out of new ideas. (Yes, that means you Detroit automakers.)

Alas, the Washington foreign policy community has also largely run out of ideas, and the men and women in both established institutions and those newly created are still marketing products that Americans no longer want to buy. Ignoring the manifest lessons of Iraq, “experienced” Washingtonians on both the left and the right are clamoring for new and better ways to build foreign countries and fight other people’s wars; Beyond‐​the‐​Beltway Americans want to build our own country, and bring an end to our own wars.

Given his recent victory, Barack Obama clearly understands the public’s desire for change. But that applies to both foreign and domestic policy. The debacle known as the Iraq War won the support of left‐​leaning think tanks and academics — and 29 of 50 Senate Democrats — and yet the President‐​elect appears to be turning to this same, small cadre to staff his new administration. Maybe he didn’t mean it when he said that good judgment matters more than experience? Or maybe he doesn’t fully appreciate just how harmful our foreign policies since the end of the Cold War have been, and therefore misses the urgency of the need for change at Foggy Bottom and the NSC?

November 17, 2008 9:17AM

What Does It Mean If the Marxists Are Excited about an Obama Administration?

More from our Marxist friend Norman Markowitz, contributing editor of Polit​i​calAf​fairs​.net (motto: “Marxist Thought Online”):

Obama certainly has a mandate, and it is a mandate for change. Obama’s slogan, “Change We Can Believe In,” was reminiscent of slogans like the “New Deal” of Roosevelt’s 1932 campaign and the “Great Society” banner under which Johnson won in 1964. In the latter cases, those slogans translated into the major policy domestic agendas of those administrations.

For the people who elected Obama and the increased Democratic majority, “change we can believe in”… is about creating a national public health care program more than 50 years after it was established in other major industrial nations … [a] “single payer” national health system – known as “socialized medicine” in the rest of the developed world …

The right‐​wing propaganda machine will scream socialism, and that is also a good thing. Because the more socialism comes to be identified with real policies that raise the standard of living and improve the quality of life for the working class and the whole people, the more socialism will be looked at seriously. A stronger left that follows the tradition of the Communist Party in its unbreakable commitment to a socialist future and to educating people about the value and necessity of socialist policies in the present could follow.

It would be a stretch to say that this guy speaks for president‐​elect Barack Obama, or anyone who voted for Obama.

But it is interesting how excited the Marxists are about Obama’s presidency. In particular, his health‐​care plan.

November 15, 2008 2:00PM

Would an Auto Bailout Lead to National Greatness?

There have been plenty of criticisms here of neoconservatism and “national greatness conservatism,” but two of the occasional targets, Charles Krauthammer and David Brooks, have just published devastating critiques of the auto industry bailout. Here’s Krauthammer in the Washington Post:

First, the arbitrariness. Where do you stop? Once you’ve gone beyond the financial sector, every struggling industry will make a claim on the federal treasury. What are the grounds for saying yes or no?

The criteria will inevitably be arbitrary and political. The money will flow preferentially to industries with lines to Capitol Hill and the White House. To the companies heavily concentrated in the districts of committee chairmen. To clout. Is this not precisely the kind of lobby‐​driven policymaking that Obama ran against?

Second is the sheer inefficiency. Saving Detroit means saving it from bankruptcy. As we have seen with the airlines, bankruptcy can allow operations to continue while helping to shed fatally unsupportable obligations. For Detroit, this means release from ruinous wage deals with their astronomical benefits (the hourly cost of a Big Three worker: $73; of an American worker for Toyota: $48), massive pension obligations and unworkable work rules such as “job banks,” a euphemism for paying vast numbers of employees not to work.

The point of the Democratic bailout is to protect the unions by preventing this kind of restructuring. Which will guarantee the continued failure of these companies, but now they will burn tens of billions of taxpayer dollars. It’s the ultimate in lemon socialism.

Democrats are suggesting, however, an even more ambitious reason to nationalize. Once the government owns Detroit, it can remake it. The euphemism here is “retool” Detroit to make cars for the coming green economy.

Liberals have always wanted the auto companies to produce the kind of cars they insist everyone should drive: small, light, green and cute. Now they will have the power to do it.

And David Brooks in the New York Times:

This is a different sort of endeavor than the $750 billion bailout of Wall Street. That money was used to save the financial system itself. It was used to save the capital markets on which the process of creative destruction depends.

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. A Detroit bailout would set a precedent for every single politically connected corporation in America. There already is a long line of lobbyists bidding for federal money. If Detroit gets money, then everyone would have a case. After all, are the employees of Circuit City or the newspaper industry inferior to the employees of Chrysler?

It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.

Hear, hear. The intellectual case for the bailout – if there was one – surely can’t survive these two clear and analytical critiques in the nation’s most influential newspapers. But then, protectionism couldn’t survive the analytical critique of Adam Smith in 1776, and yet it persists. So we can’t assume that members of Congress will read Brooks and Krauthammer and sheepishly drop the idea of handing a big pile of taxpayers’ money to corporate managers, stockholders, and unions who have dug themselves into a deep hole.

Krauthammer and Brooks both make a careful distinction between the financial bailout and the proposed auto industry bailout. Krauthammer posits the Wall Street intervention as “an emergency measure to save the financial sector on the grounds that finance is a utility. No government would let the electric companies go under and leave the country without power. By the same token, government must save the financial sector lest credit dry up and strangle the rest of the economy.” But bailing out Detroit is put forth as a scheme to save jobs, and where does that process stop? Krauthammer warns that the “drift toward massive industrial policy threatens to grow into the guaranteed inefficiencies of command‐​economy maximalism.”

For those of us who opposed all the taxpayer bailouts, starting back with Bear Stearns―or with Chrysler in 1979―all these bad ideas may seem to run together. Bear Stearns, AIG, the general financial industry, the auto industry―it’s all government intervening with taxpayers’ money to favor some businesses or industries that made mistakes. Perhaps because they weren’t so critical of the measures to deal with the financial crisis, Krauthammer and Brooks find it easier to see what’s very different about the Detroit bailout. And they both make crucial points: the dangers of political allocation of resources, the benefits of bankruptcy and restructuring, the industry’s partially self‐​inflicted wounds, the desire of some Democrats for political power over corporate decisionmaking, the dangers of corporate capitalism. Let’s hope members of Congress read and underline both columns.

November 14, 2008 2:38PM

For Better, Definitely for Better

Over at Flypaper, Mike Petrilli thinks that “for better or for worse,” when it comes to federal education policy, congressional Republicans will dump their eight‐​year, NCLB‐​led foray into big‐​government education and get back to following the Constitution.

OK, Mike didn’t mention the Constitution — I added that part — but the important point is that the sooner Republicans abandon a rotten law and a failed political strategy, the better.

OK, I added the “failed law and failed political strategy” part, too, but Mike does think congressional Republicans will get back to small government, and no matter what he thinks is the reason for that, it would be great news.

November 14, 2008 8:38AM

Should We Fear Sea‐​Smurfs?

On October 1, active duty US Army troops for the first time began an assignment under control of Northern Command, the Combatant Command created in 2002 for homeland defense. This deployment, and particularly the revelation that the troops were training for law enforcement missions like crowd control, caused an outbreak of consternation on liberal and libertarian blogs. There is great uncertainty about why the Pentagon assigned active duty troops for homeland security and what purpose they serve. The main fear is that the mission will contravene Posse Comitatus, the 19th century law that restricts the use of the military domestically. The ACLU even filed a Freedom of Information Act request to compel the release of plans for the troops’ use. This post is an effort both to answer some of these questions and to raise others.

Media Name: 200811_blog_friedman.jpg

Here’s the bottom line: The trouble is less this particular assignment, which probably does not upend Posse Comitatus, than the gradual militarization of various governmental tasks in the United States. The creation of the Sea Smurfs is just the latest step in that process.

The troops are the 1st Brigade Combat Team of the 3rd Infantry division. In this year‐​long assignment they will be a CBRNE Consequence Management Response Force, or CCMRF (pronounced Sea‐​Smurf). CBRNE stands for chemical, biological, radiological, nuclear or high‐​yield explosive. The 1st BCT is the first of three CCMRF teams, who will comprise 15,000 soldiers in total. The other two will come from the Army National Guard. The Pentagon assigned these troops to Northern Command — probably over the objections of the Army, which likes to train its troops for war — because there was concern in Congress and elsewhere that Northcom could not ensure a proficient response to large scale disasters unless it controlled forces. For an example of this thinking, see this GAO report from April.

The assignment essentially amounts to extra training and equipment for responding to unconventional weapons attacks. The training will occur at Fort Stewart in Georgia where the troops are based. It does not change rotation schedules to Iraq of Afghanistan.

Why is this not an obvious violation of Posse Comitatus? Because it is shot full of holes already. It is a statute, and other statutes create exceptions. Today, the military can provide equipment and expertise to police, fly fighter aircraft to protect airspace, respond to storms and do a host of other things in the United States. What Posse Comitatus now prevents the military from doing is law enforcement: arrests, crowd‐​control, detention, search and seizure activities, and so on. That does not apply to the National Guard when they are under state command. And of course, there is an insurrection exception to Posse Comitatus. If the President declares an insurrection, troops can engage in law enforcement.

The 2006 Defense Authorization bill appeared to create new exceptions to Posse Comitatus. Those exceptions were undone, the status quo restored, via legislation passed by Senator Pat Leahy in early 2008. However, the administration’s theory of executive power says that they can use the troops as they see fit to deal with terrorism, whatever the law. There is probably a secret Office of Legal Counsel memo from 2001 that asserts that Posse Comitatus does not apply in the event of terrorist attacks. (That memo should be near the top of pyre when Obama takes office.)

Sea‐​smurfs can then do tasks short of law enforcement, including cleaning up after attacks. If terrorist attacks qualify as an insurrection, troops could perform law enforcement tasks in their aftermath. That might explain why the Sea‐​Smurfs received law enforcement training, but the Army denies that the training was related to domestic duties. It is good that the ACLU is trying to figure what exactly is intended.

Even if this mission is legal, however, it does not make it wise. Homeland defense activities like storms and terrorist attacks are the job of local and state authorities, and in extreme cases, the National Guard. Historically, these forces have been sufficient. Failures like Hurricane Katrina resulted more from poor decision making than the lack of capacity.

It’s true that a biological or nuclear attack is another can of worms. (One reason to avoid man‐​power intensive occupational wars is that they prevent the National Guard from performing homeland missions.) It is also true that regular Army troops have more capacity. But the standard cannot be perfect preparation for all contingencies, especially when they are extremely low‐​probability events.

The real trouble with the Sea‐​Smurfs is the logic that justifies Northern Command: that Americans face a host of dangers at home that only military forces can protect them against. These dangers are grossly exaggerated, but even if they aren’t, someone beyond bloggers ought to be asking why it is the job of the military, let alone the federal government, to interdict drugs and refugees, clean up after storms, protect computers and hunt bad actors at home. Doesn’t this sap the military’s readiness for war? And doesn’t this militarization of government have some detrimental effect on liberal values?

November 13, 2008 4:01PM

Obama the Open?

A coalition of liberal, conservative, and libertarian groups has issued an excellent report encouraging the Obama administration to make reforms to create a more open, transparent, and accountable government. Candidate Obama has made extensive promises to further those principles, so let’s make sure he follows through.

The new report focuses on executive branch openness, but greater openness is needed in Congress as well. For tax wonks, the congressional Joint Committee on Taxation is the epitome of government secrecy. That secrecy causes serious problems, including the greater likelihood of passing bad tax laws. I don’t know how likely JCT reforms are in the new Congress or administration, but you can read more about the problems in this Cato report and this Heritage book.