January 30, 2010 7:07AM

Obama Admits CBO Cost Estimates of ObamaCare Are Incomplete

Yesterday -- day #224 of the ObamaCare Cost-Estimate Watch -- President Obama told House Republicans:

You can't structure a bill where suddenly 30 million people have coverage and it costs nothing.

And just like that, the president admitted that the official Congressional Budget Office estimates of his health care plan do not reflect its full costs.

Both the House and Senate versions of ObamaCare would cover millions of uninsured Americans by requiring them to purchase private health insurance.  As President Obama notes, even if you force people to spend their own money on health insurance, it still costs something to cover them.  And if the government partly subsidizes those premiums, the remaining mandatory premium is still part of the cost of covering them.

Yet Democrats have systematically blocked the CBO from including those costs in its official cost projections.  The Senate bill's estimated price tag of $940 billion, for example, includes only the costs that bill would impose on the federal government.  By my count, that's only 40 percent of total costs.  By Mr. Obama's admission, that's not the full cost of the bill.

Now that the President of the United States has acknowledged that the CBO's cost estimates are incomplete, could we maybe get a complete cost estimate?  Maybe just for the Senate bill?

January 29, 2010 4:43PM

Karl Rove’s Spending

Former George W. Bush adviser Karl Rove enjoys complaining about the spendthrift ways of President Obama and the Democrats. But I noted in a Wall Street Journal letter today:

 Annual average real spending grew faster under President George W. Bush than any president since Lyndon Johnson... Even leaving out defense, President Bush was the biggest spender since Republican Richard Nixon.

My letter pointed to two prior op-eds by Rove, but he was at it again yesterday in the Journal. He said that his former boss "cut in half the growth of discretionary domestic spending from the sizzling 16 percent rate of President Bill Clinton's last budget." Call me crazy, but I don't think supporting domestic spending growth of 8 percent during a time of very low inflation is an acheivement to crow about.

Over at National Review, Veronique de Rugy apparently gets just as annoyed as I do hearing big-spending Republicans complain about big-spending Democrats.

Mr. Rove's columns are usually very interesting, but I'd like to see him accept at least some of the blame for the exploding size of government during his tenure at the White House.

Here are the data on spending by presidents.

January 29, 2010 4:14PM

Larry Lessig and the Lunching Libertarians

Outside the realm of copyright, Cato folk (and libertarians generally) don't often see eye-to-eye with left-leaning cyberlawyer and Harvard prof Lawrence Lessig. Nevertheless, I wasn't too surprised when Lessig signaled his interest in opening a dialogue with Cato scholars about his Change Congress project and his research on political corruption. After all, we've long argued that an expansive state will inevitably attract moneyed interests eager to feed at the public trough or co-opt well-intentioned regulation to stifle competitors. And as Lessig argues, legislators may come to see growing government as a means of creating supportive constituencies.

He's posted the presentation he gave to a group of us at a luncheon discussion earlier this week, which I think makes an interesting case:

As he writes over at the Huffington Post, we see many of the same structural problems, though we differ as to the solutions.  Lessig has been critical of the legal reasoning behind the recent Citizens United decision, which we at Cato welcomed. Despite this, we were pleasantly surprised to hear Lessig aver that he is not interested in overturning the decision—that he prefers, rather, to find ways of reducing the political influence of special interest money without restricting speech. Lessig's favored solution is public financing of elections, whereas I think the majority here at Cato share the skepticism of my colleague John Samples about the viability of that kind of reform.

Part of what explains the difference may be that, while we agree in very broad terms that there is a problem of policy capture, Lessig focuses above all on the influence of campaign contributions, which political scientists have not generally found to be the prime culprit. Here I'm inclined to agree with remarks by my friends Ezra Klein and Matt Yglesias, who saw the same presentation later that same day with a mixed liberal/libertarian group. Money is a symptom: The core public choice problem is a function of the informational and incentive asymmetries created by policies that concentrate benefits and diffuse costs.  While that fundamental fact remains, if I may paraphrase John Gilmore, money will interpret regulation as damage and route around.

Look at it this way: We don't get draconian copyright policies because the RIAA and MPAA actually have more money, all told, than those of us who'd benefit from a more balanced intellectual property regime.  They're richer, of course, but there's a lot more of us. The problem is that their resources are already pooled, and they're far more acutely aware of which side their bread is buttered on. That's the asymmetry we need to address. And as Clay Shirky has so cogently argued, we may finally have the means to do so, because for the first time in human history, we have in the Internet (and Web 2.0 especially) a mass medium that is simultaneously good at enabling interactive conversations (as the telephone does) and groups (as magazines or television did).  The costs of processing and disseminating information have fallen dramatically over the past decade, and now the same is happening to the costs of organizing people and coordinating action.

That's why I think Lessig's focus on public finance as a silver bullet is less likely to bear fruit than an array of solutions that exploit transformative technology—something he's so keenly analyzed in his writing on Free Culture. My colleague Jim Harper's Washington Watch project, or the efforts of the folks at the Sunlight Foundation, are one part of the solution: Backroom deals are typically held in the back room for a reason. Sites like ActBlue and Slatecard are another, because they make it easier for a national audience to punish bad actors in their local races.  Note that it's only in the last four or five years that "primary" has become a transitive verb, as in "The Netroots primaried Joe Lieberman." What might we do with a transpartisan cloud of activists committed to targeting the most egregious policy vendors on both sides of the aisle? What disciplinary effect might the loss of a few "safe" seats have on the rest of Congress?

At the same time, I expect the Internet to gradually undermine the central importance of television ads, which have done so much to drive up the cost of modern campaigns. It's not just that audiences fragment as video programming moves online and the outsized importance of the broadcast networks drops off. Rather, it's that paid ads themselves matter less as more sources of information open up. Ten years ago, I might give a restaurant or other business a shot on the basis of an appealing advertisement, but in 2010? Even if the ad gets my attention, I'm going to go check Yelp and see what actual customers have to say.

Lessig is eager to channel just this kind of networked engagement, but he appears to see it primarily as a means to get his preferred process reforms implemented.  I think the more promising approach is going to ultimately be to cut out the middleman entirely: Don't organize online to regulate the money out of politics; organize in ways that make money less relevant, and that raise the electoral costs of trading outcomes for campaign cash.

That aside, I thought we had a productive conversation, and I'm glad that in these polarized times it's still possible to engage constructively with people despite substantial differences.  For those interested in a short primer in the problems of public choice, Lessig's presentation is well worth a viewing.  And for further reading, I'll humbly recommend this fine survey we published in our journal Regulation, and Gordon Tullock's wonderful and concise primer Government Failure.

January 29, 2010 4:12PM

The Presidential Scold

Today, Politico Arena asks for comments on:

Duking it out in Baltimore

My response:

It's all well and good that President Obama wants to meet with Republicans -- giving the appearance of reaching out -- but when it's mainly to "chastise" them for opposing his programs, as the AP is reporting after his session at the House Republicans' retreat in Baltimore today, it's little but a continuation of the lecture he gave to Congress, the Supreme Court, and even the American people on Wednesday evening.  "I am not an ideologue," he's reported to have said.  Yet it appears that he rejected the Republicans' proposals for a different approach to health care, a line-item veto for spending bills, and across-the-board tax cuts.

But why should that surprise?  Ideologues aren't open to new or different ideas, because they have the truth.  Yet the deeper truth that's been apparent all along is that we have here a president who, along with so many on his staff, has little grasp of economic reality, because he has no experience in the business world -- indeed, appears often to be hostile to that world.  Just today, for example, the White House unveiled its plan for a new tax break to spur job creation.  As reported by CNN, Obama "wants to give businesses a $5,000 tax credit for each net new employee they hire this year."  The CNN headline captures it all:  "Here's $5,000.  Go hire someone."  That's not the way the world works.  Temporary tax gimmicks like that, which the White House estimates will cost $33 billion, are hardly what's needed.  If businesses are to start hiring on a regular basis, they need assurance of a regular climate that will enable them to plan rationally.  This administration has given them anything but that kind of assurance.  And today's meeting in Baltimore, like Wednesday night's lecture, hasn't helped.

January 29, 2010 4:08PM

Weekend Links

January 29, 2010 4:06PM

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

January 29, 2010 4:05PM

The Next Step after Citizens United

The debates following the Citizens United decision continue, thanks in part to President Obama’s criticism of the U.S. Supreme Court during the State of the Union address.  Keeping track of those debates might cause you to miss what may well turn out to be the next step in liberalizing our campaign finance laws, the case of SpeechNow.org v. Federal Election Commission which was argued last Wednesday before the entire U.S. Court of Appeals for the D.C. Circuit.

SpeechNow is a group of individuals with a clear mission: “SpeechNow would like to run advertisements urging voters to elect federal candidates who support full protections for First Amendment rights and to defeat candidates who are hostile to those rights.” The group has made sure that its members are independent of candidates for office and the political parties.

You would think they could set up the group and spend as they wish since SpeechNow is not tied to a candidate or party and hence cannot pose a threat of corruption. After all, the First Amendment protects speech by individuals, and the courts have only permitted regulations related to corruption (contribution limits) or public education (mandatory disclosure of spending).

Unfortunately federal law requires any groups that receives contributions of more than $1,000 during a calendar year or spends more than $1,000 during a year to register as a “political committee.” That status would mean disclosure of SpeechNow’s members and limits on contributions and spending. Fulfilling reporting and other requirements and observing the contribution limits would kill SpeechNow’s effort before it started. No group, no ads, no speech.

The Federal Election Commission argues that allowing speech by SpeechNow’s members would lead to corruption. Elected officials, they assert, will reward people who support favored speech even if those people are independent of a candidate or a party. Justice John Paul Stevens endorsed this corruption argument in Citizens United. He was dissenting and had the support of a minority of his fellow justices. The judges who heard the case for the circuit court seemed to believe Citizens United had weakened this sort of corruption argument.

Citizens United limited the power of the federal government over independent expenditures and speech by groups taking a corporate form. The reasoning in that case should apply with added force to individuals associating together to speak, individuals who have no ties to candidates or the political parties.

We’ll keep you up-to-date on the fortunes of the SpeechNow effort. For now, you can read more about the case at the Institute for Justice website or see an account of the circuit court hearing  here.