September 2011

September 21, 2011 8:40AM

Private Insurance Is More Efficient than Medicare–By Far

Diane Archer has a post at the Health Affairs blog arguing that Medicare is more efficient than private insurance.  One can only reach such a conclusion through such sleights of hand as conflating spending with cost, and by ignoring most of Medicare's administrative costs.

As a pre-buttal, I offer this excerpt from a paper I wrote about a "public option" (emphases generally added and citations omitted):

Is Government More Efficient?

Supporters of a new government program note that private insurers spend resources on a wide range of administrative costs that government programs do not. These include marketing, underwriting, reviewing claims for legitimacy, and profits. The fact that government avoids these expenditures, however, does not necessarily make it more efficient. Many of the administrative activities that private insurers undertake serve to increase the insurers’ efficiency. Avoiding those activities would therefore make a health plan less efficient. Existing government health programs also incur administrative costs that are purely wasteful. In the final analysis, private insurance is more efficient than government insurance.

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September 20, 2011 2:37PM

‘The Difference Between Governments Where There Is Responsibility, and Where There Is None.’

Over at Volokh Conspiracy, Professor Orin Kerr has taken to defending the individual mandate on supposedly libertarian principles. Professor Kerr, a Cato Constitution Day participant and an excellent defender of civil liberties, argues that the individual mandate preserves our liberties better than a top-down, government-controlled program à la Medicare. He writes, “If the courts conclude that the mandate approach is unconstitutional, then the more market-oriented approach to benefits would be ruled out. Congress would have a choice: Don’t mandate benefits, or else mandate using a 1960s Great Society government monopoly model.”

While I have the utmost respect for Professor Kerr, his analysis here is woefully mistaken. First of all, I will only mention what my colleague Michael Cannon has tirelessly pointed out: ObamaCare will throttle the operation of a free market in numerous ways. It will not only stifle innovation, it will likely result in the evacuation of insurance providers from the market as they get caught in a “death spiral” caused by the simultaneous mandatory insurance of the sick while healthy individuals increasingly choose to pay the fine rather than purchase health coverage. Richard Epstein has also argued that ObamaCare’s regulatory controls on health insurance providers will “systematically strip[] the regulated health-insurance issuers of their constitutional entitlement to earn a reasonable rate of return on the massive amounts of capital that they have already invested in building out their businesses,” thus converting “health insurance companies into virtual public utilities.” Or, in the words of Cannon, “Compulsory health insurance enables, and ultimately would require, politicians and government bureaus to control nearly all aspects of health care and medical practice.”

But perhaps the most insidious thing about ObamaCare is precisely the aspect that Professor Kerr seems to fall for: This is a government take-over clothed in market-based rhetoric. This take-over has been facilitated by nearly a century of constitutional misinterpretations that have left us with the "choice" between one unconstitutional system, a single-payer health care system, and another, the "market reform" of the individual mandate. Professor Kerr, like so many others, has been taken in by the façade of choice and markets. But this façade not only has political significance, it has constitutional significance.

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September 20, 2011 1:58PM

Tax the Rich? Depends On How You Define Rich

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Q3 2011 Reason-Rupe Public Opinion Survey[/caption]

As the myriad of media polls have made clear, Americans are typically averse to tax increases except if offered the option to tax the “wealthy.” However, few polls ask respondents how they would define wealthy. The latest Reason-Rupe poll takes on this task by asking respondents to define what level of income they would define as wealthy and thus would be subject to higher taxes. Similar to a step function, as individuals’ incomes increase their definition of “wealthy” increases also, especially for households with annual incomes over $200,000. For instance, the median household making $25,000-$49,999 a year believes that “wealthy” is defined as $200,000 year. However, the median household actually making over $200,000 a year believes that “wealthy” is defined as $500,000. More discussion can be found here.

September 20, 2011 1:16PM

‘Incredible Shrinking Presidency’? I Wish!

My Washington Examiner column this week looks at the eternal recurrence of a media myth, “the Incredible Shrinking Presidency.” We go through a cycle of media hand‐​wringing about a weakened presidency virtually every time a president runs into trouble in the polls. The most recent example is the Politico’s September 7 cover story on “The Incredible Shrinking President,” examining “a once muscular presidency’s dramatic downsizing.” (Richard Cohen actually beat them to the punch, a year to the day before the Politico story ran, with “Obama’s Shrinking Presidency.”)


As I write in the Examiner, “it’s a peculiar office, the presidency. Apparently, it keeps shrinking, but — with an executive branch of some 2.1 million civilian employees and counting — it never gets any smaller.” I take a look at the “shrinking presidency” meme during the Bush years:

A little over 10 years ago, the Wall Street Journal ran a column by then‐​Washington editor Al Hunt with the same title, “The Incredible Shrinking President.”


President Bush was “on the defensive,” Hunt insisted — increasingly weak and irrelevant. Three days later, al Qaeda toppled the twin towers, and, in short order, America had embarked on a seemingly permanent war, with permanently enlarged powers for the commander in chief.


But the shrinking‐​CINC meme somehow refused to die. After Bush’s Republicans lost the House and Senate in the 2006 midterms, the Economist led with a story on, yes, “The Incredible Shrinking Presidency.” The magazine’s cover featured a caricature of a dwarfish Bush, his head peeking above the top of a cowboy boot.

During the Clinton administration, Arthur Schlesinger Jr., who coined the phrase “Imperial Presidency,” could be found announcing the institution’s demise—-and sounding almost despondent about it. In an August 1998 New York Times op‐​ed, “So Much for the Imperial Presidency,” Schlesinger complained that independent counsel Ken Starr had left the executive branch ‘‘harried and enfeebled.’’ Not too long after, the ‘‘harried and enfeebled’’ president carried out a 78‐​day air war over Kosovo despite Congress’s refusal to authorize it.


This silly meme is, it seems, as resilient as the modern presidency itself. But the truth is, as Yale’s Jack Balkin wrote on the eve of Obama’s inauguration, “in terms of the possibilities of power, the Presidency has never had more tools at its disposal.…This trend in Presidential power building poses enormous risks for liberty whoever occupies the White House.” The presidency isn’t “shrinking”–but it should.

September 20, 2011 12:49PM

Calderón Hints at Drug Legalization Again

Mexican President Felipe Calderón seems to be experiencing a dramatic change of mind regarding his war against drug cartels. Soon after a drug gang set fire to a casino in Monterrey a few weeks ago killing 52 people, Calderón told the media that ““If [the Americans] are determined and resigned to consuming drugs, they should look for market alternatives that annul the stratospheric profits of the criminals, or establish clear points of access that are not the border with Mexico.” Many people interpreted that as a veiled reference to drug legalization.


Yesterday, during a speech to the Americas Society and Council of the Americas in New York, Calderón was at it again: “We must do everything to reduce demand for drugs,” he said. “But if the consumption of drugs cannot be limited, then decision‐​makers must seek more solutions—including market alternatives—in order to reduce the astronomical earnings of criminal organizations.”


After launching a military offensive against drug cartels that has resulted in approximately 42,000 people killed in drug‐​related violence thus far, it appears that President Calderón has finally realized that the war on drugs is a futile endeavor and that drug legalization is the only alternative to the mayhem.


Calderón has flirted with an alternative approach before. A year ago, he said that it was “fundamental” to have a debate on drug legalization. Shortly afterwards, Colombian President Juan Manuel Santos openly supported the call for a debate. However, Calderón soon recanted, firmly stating that he was against legalization, and the possibility of a high‐​level hemispheric debate on drug reform died there.


If we take his recent statements seriously, perhaps the massacre in Monterrey finally broke Calderón’s faith in his war on drugs. His two immediate predecessors, Ernesto Zedillo and Vicente Fox, have been vocal proponents of drug legalization in the years since they left office. Calderón still has over a year left in his term. He has been very assertive in the past, demanding that Americans reduce their demand for drugs and change their gun laws in order to curb violence in Mexico. But his rhetoric has proven fruitless time and time again, all the while thousands have needlessly died. Calderon must remain assertive towards Washington, but now he should demand a change in drug policy in the U.S.


Nothing will reverse the damage that his war against drugs cartels has inflicted on his country. But Felipe Calderón could do his country a great service if he becomes the first sitting president to raise his voice to Washington and demand an end to the war on drugs.

September 20, 2011 11:09AM

Sweet Commerce in South Asia

Tom Palmer is very fond of this quotation from Voltaire on the connections among commerce, toleration, and the erosion of prejudice:

Go into the Exchange in London, that place more venerable than many a court, and you will see representatives of all the nations assembled there for the profit of mankind. There the Jew, the Mahometan, and the Christian deal with one another as if they were of the same religion, and reserve the name of infidel for those who go bankrupt. There the Presbyterian trusts the Anabaptist, and the Church of England man accepts the promise of the Quaker. On leaving these peaceable and free assemblies, some go to the synagogue, others in search of a drink; this man is on the way to be baptized in a great tub in the name of the Father, by the Son, to the Holy Ghost…

You can find it in Tom’s essay “Globalization and Culture,” which is included in Realizing Freedom: Libertarian Theory, History, and Practice.


I found a very similar thought in a Wall Street Journal review of the book Ghetto at the Center of the World by Gordon Mathews. The book focuses on “the most notorious flophouse in Asia,” which accommodates people from all over the world, but especially from Africa and South Asia and especially merchants who trade cheap Chinese‐​made goods to buyers from other countries. The review notes:

Interpersonal relations at the building, the author says, might not be reliably friendly, but “they are generally peaceful.” He adds: “As a Pakistani said to me vis‐​à‐​vis Indians, ‘I do not like them; they are not my friends. But I am here to make money, as they are here to make money. We cannot afford to fight.’ ”

Voltaire and Mathews, like many other observers, have noticed that people trying to make money don’t generally get too upset about other people’s race or religion. This is part of the “doux commerce” or “sweet commerce” thesis that goes back to the Middle Ages. Albert O. Hirschman wrote about it in 1982, and much of Deirdre McCloskey’s current work explores the idea of “doux commerce” and bourgeois virtues.

September 20, 2011 10:26AM

The Decline in Global Economic Freedom

After having risen for decades, global economic freedom has fallen for a second year in a row. That’s according to Economic Freedom of the World: 2011 Annual Report co-published today with the Fraser Institute. The average global economic freedom score rose from 5.53 (out of 10) in 1980 to 6.74 in 2007 and has fallen to 6.64 in 2009, the last year for which data is available.

As the graph below shows, the United States has had one of the largest declines in the past decade. It now ranks in 10th place compared to 3rd in 2000, largely due to higher government spending and lower ratings on “rule of law” measures. The report documents the strong, positive relationship between economic freedom and a range of indicators of standard of living including wealth, economic growth, longer life spans, better health care, lower poverty, civil and political liberties, and so on. Economic freedom is central to human progress. As the response of activist governments to financial and ongoing debt crises fails to address underlying issues responsible for low growth and high unemployment, this report is an important empirical reminder about the wide-ranging consequences of politics or markets in determining the use of resources.