Sen. Jim Bunning (R., Ky.) blocked “extended” unemployment benefits beyond their scheduled expiration on February 27. That thwarted bill would also have put off, again, a scheduled 21 percent cut in Medicare payments to physicians. Democrats were outraged. But why?
Bunning just wanted to use leftover “stimulus” money to pay for the benefits. Why not? Such transfer payments accounted for over 80 percent of stimulus spending last year.
Besides, as Federal Reserve policymakers noted, the evidence is overwhelming (see here and here) that extending unemployment benefits from six months to nearly two years has raised the unemployment rate by a percentage point or two. I’ve waited since 1991 for someone to prove I’m wrong about that. Nobody has, because nobody can.
If the maximum duration of jobless benefits were trimmed by 13 to 20 weeks (which is all that’s at stake), they would still be far more extended than ever before. But the unemployment rate by the time of this November’s elections would be much lower than otherwise. Would Democrats prefer to go into the elections with an unemployment rate near 10 percent or a rate below 9 percent?
As for Medicare, slashing payments to physicians is the Democrats’ favorite way of paying for expanding Medicaid enrollment and health‐insurance subsidies for the non‐poor. If they really think that will work, how can they possibly object to saving money sooner rather than later?
[Cross‐posted at The Corner]
Over at Downsizing Government, we focused on the following issues this week:
- The two most recent first quarter deficits have been about $100 billion higher than the average annual deficits run from 2002 to 2008.
- Utah legislators call for fiscal federalism.
- Small businesses are citing government as the problem, but the media ignores the story.
- Fannie Mae and Freddie Mac should be put in the budget, and then privatized.
- The Economic Development Administration, National Association of Development Organizations, and the Appropriations Committees aren’t exactly taxpayer‐friendly.
Since many of the politicians in Washington want America to be more like Europe (including complete government‐run health care instead of the partially government‐run health care system we have now), it’s worth contemplating what that would mean for the economy.
America today is richer than Western Europe. Indeed, per‐capita living standards are about 30 percent higher in the United States — and that’s according to the statists at the Paris‐based Organization for Economic Cooperation and Development (see page 6 of this report). And we have been growing faster, which presumably should not be the case according to convergence theory (see Annex Table No. 1 of this OECD database).
It also seems that Europe’s economy is more likely to endure a double‐dip recession. Bloomberg reports:
Europe’s economy may be coming unstuck from the global recovery as governments to the south of the region struggle to reverse budget deficits and consumers in the north pull back spending. After the 16‐nation euro economy almost stagnated in the fourth quarter, data this week showed the weakness reaching into 2010. …“Europe is where we see the biggest risk of a double dip at the global level,” said Julian Callow, chief European economist at Barclays Capital in London. “Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.” …“There are tentative signs that the U.S. economy may be pulling ahead from Europe,” [UBS strategist Nick] Nelson said in a Feb. 23 report… “The sovereign debt crisis in Europe’s periphery reinforces drags on euro‐area growth,” said Michael Saunders, an economist at Citigroup in London.
Left‐wing populists genuinely seem to believe that the economy is a fixed pie, so even though they are fundamentally wrong, their fixation on redistribution is understandable. After all, given their inaccurate view of the world, robbing Peter is the only way to lift Paul. What is more mystifying is why the (presumably) thoughtful left wants America to be more like Western Europe, where living standards lag America and the gap grows wider with each passing year. The only logical conclusion is that they are so fixated on differences in income (or, less charitably, are so resentful of success) that they are willing to make poor people worse off if they can impose even greater damage on rich people. As Winston Churchill noted, “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
- Republicans and Democrats are both missing the point of true health care reform: “Health care reform cannot just be about giving more stuff to more people. It should be about actually ‘reforming’ the system. That means scrapping the current bills, and crafting the type of reform that makes consumers responsible for their health care decisions.”
- Alan Reynolds: If people looking for individual health insurance policies were allowed to shop in any state, the number of uninsured could drop by 11.1 million … or more.
- And the winner for the worst idea for health care reform goes to…
- Something you might want to brush up on: The Reconciliation Rulebook.
- In case you missed it, Cato health policy experts live‐blogged part of Thursday’s health care summit.
On the heels of exploiting the name of perhaps the world’s all‐time greatest free‐marketeer, U.S. Secretary of Education Arne Duncan has decided to cut right to the chase and abuse the term “free market” itself. Writing in the Washington Post as part of his ongoing effort to demonize banks and push the Student Aid and Fiscal Responsibility Act over the finish line, Duncan offers the following:
The president’s plan actually creates jobs and draws on free‐market principles by selecting private companies through a competitive process to service student loans issued directly by the Education Department. These private companies, including Sallie Mae, compete for our business and are evaluated on the quality of their customer service and their default rates.
Got it? When the federal government decides which companies get to service loans that it completely controls, those are “free‐market principles” at work.
Right. And the legislation Duncan is trying to sell us really is fiscally “responsible.”
Rep. Gene Taylor, D-MS, thinks so. According to CongressDaily, Taylor is about to introduce a two‐page bill that would withdraw the United States from the North American Free Trade Agreement.
Taylor blames the agreement with Canada and Mexico for the loss of 5 million manufacturing jobs since it was enacted in 1994. This is a popular but false charge. Manufacturing jobs have declined in the past 15 years for one big reason: soaring productivity.
Overall output at U.S. factories was actually 37 percent higher in 2009 compared to 1993, the year before NAFTA took effect, according to Table B-51 in the latest Economic Report of the President. We are producing a higher volume of stuff with fewer workers because individual workers are so much more productive than they were in the early 1990s.
As I’ve argued before, NAFTA has spurred more trade and deeper integration among the three partner countries. It has created new opportunities for American companies and their workers to raise their competitiveness in global markets. It has strengthened ties to our two closest neighbors.
The U.S. government would be foolish to withdraw from an agreement that continues to pay huge dividends.