Archives: 10/2011

Praise (Sort of) for Latest Cato Health Care Study

Physician assistant and health policy wonk Michael Halasy blogs about Shirley Svorny’s new study on medical malpractice liability reform:

Cato has truly shocked me….stupefied really…

Well, just the other day, I received an update from Cato. Now, Michael Cannon is a good guy, and while he and I simply don’t agree on … well much of anything from a health policy perspective, his colleague, Shirley Svorny, wrote this: “…Reducing physician liability for negligent care by capping court awards, all else equal, will reduce the resources allocated to medical professional liability underwriting and oversight and make many patients worse off. Legislators who see mandatory liability caps as a cost-containment tool should look elsewhere.”

I believe that I have been consistent with this…over and over…caps on noneconomic damages DO NOT WORK.

So, I have to (gulp) swallow some pride, and tip my hat to Cato…Now I need to go take a shower. I feel a little dirty.

It’s a good reminder that libertarians do not fit neatly into the usual political categories. We oppose direct government regulation of health care quality, such as through clinician licensing. But we support indirect regulation, such as through the medical malpractice system, and defend that system from critics who want to impose top-down rules on that system like mandatory caps on noneconomic damages. We prefer bottom-up approaches, like letting free individuals choose their own med mal reforms.

The CLASS Act: This Is Confidence-Inspiring?

In the Daily Caller, I explain how the failure of ObamaCare’s “CLASS Act” highlights the fatal flaws in the rest of the law:

As it turns out, CLASS collapsed even before its 2012 start date. The same thing happened when Obamacare imposed the same sort of price controls on health insurance for children in September 2010: the markets for child-only coverage collapsed in a total of 17 states, and are slowly collapsing in even more…

In the face of this setback, Obamacare supporters are naturally declaring victory. Jonathan Cohn of The New Republic sees “vindication.” Kevin Drum of Mother Jones proudly announces, “What happened here is that government worked exactly the way it ought to.” The Washington Post’s Ezra Klein instructs, “The CLASS experience should, if anything, make us more confident in the underlying law.” It’s hard to argue with such logic, but let’s try…

Obamacare inspires confidence in its supporters, then, because one part of the law throws a Hail Mary pass to prevent another part of the law from stripping Americans of the insurance that currently protects them from illness and impoverishment. Feel safer?

So if you’d like secure protection from illness and impoverishment, repeal ObamaCare. Or say your prayers.

Europe to Rating Agencies: Shut Up, or Else

Now I’m no fan of the current government created oligopoly we have among the credit rating agencies, but the EU’s recent proposal to ban downgrades on government debt, when the country in question is undergoing a “rescue”, shows why the answer is to deregulate the market for credit ratings.   

Of course the EU claims it wants to eliminate the “conflicts of interest” between the issuers of debt, who often pay for the ratings, and the agencies that provide those ratings.  If investors were truly free to decide on the merit of ratings, rather than required by regulation to use them, then this conflict of interest could easily be solved via reputational effects.  And while the EU proposal might lessen this problem, it does so at the cost of creating a far bigger one:  the conflict of interest between governments and rating agencies. 

As witnessed by S&P’s treatment by the U.S. government, after it downgraded the U.S., having the rating agencies regulated by the very entities they are supposed to rate is a recipe for disaster.  Instead of Europe trying to create its own rating agencies, in order to avoid inconvenient truths about European government finances, Europe should do us all a favor by encouraging European-based rating agencies that would be beyond the reach of the U.S. government.

Tea Party vs. Occupy Wall Street

Cato’s Tom Palmer discusses the Occupy Wall Street movement and the Tea Party in a debate with The Nation’s Peter Rothberg at PolicyMic:

The Tea Party has a coherent message: Stop the bailouts, stop the cronyism, and stop swindling today’s voters with empty promises and sinking future generations under mountains of debt…

What caused the crisis, the indebtedness, the unemployment, the stagnation? The culprits are state agencies and enterprises, including our Federal Reserve…

The Occupiers have the wrong address. The subprime crisis was designed in Washington, not New York…

Government debts and printing-press money will harm future generations. It’s unfair. It’s immoral. And it’s going to be solved not by occupying Phoenix, or Wall Street, or Atlanta, but by demanding that spendthrift politicians stop the bailouts and the cronyism, put the brakes on spending, and pay attention to a truly radical concept: arithmetic. Those are sound Tea Party values.

Read the full article: “Who Should Americans Support: the Tea Party or Occupy Wall Street?

This Week in Government Failure

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

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State Government Business Subsidies in the News

Federal energy subsidies to business are a hot national topic thanks to the Solyndra scandal. Flying below the radar—and deserving more national media attention—are grants and other targeted incentives given to businesses by state governments. There is little doubt in my mind that there are state-subsidized “Solyndras” waiting to be discovered.

The Wall Street Journal took a step in this direction by noting in an editorial that a struggling lithium-ion battery maker subsidized by the Obama administration also received handouts from the State of Indiana. The editorial chides the administration for having “made a habit of investing your cash in their clunkers.” A series of investigations from WTHR-TV in Indianapolis has demonstrated that the administration of Indiana Gov. Mitch Daniels shares that same bad habit (see here).

The Journal editorial’s concluding lines correctly sum up the problem with government subsidies to businesses:

Better to leave commercial financing decisions to private investors and bankers who are likely to take more care with their own money. Politicians write the press releases first and worry about the taxpayer losses later.

As I’ve previously discussed, it was my experience as a state budget official in the Daniels administration that led me to coin the phrase “press release economics” to describe these subsidies. Indeed, WTHR’s investigations of the Indiana Economic Development Corporation showed that the Daniels administration was adept at taking credit for “creating jobs” that never materialized.

It might seem like I’m picking on Daniels, but he’s hardly alone. The Wall Street Journal recently ran an article on similar shenanigans in Texas Gov. Rick Perry’s administration:

In Texas, Mr. Perry in a 2011 report to the legislature credited the Texas A&M Institute for Genomic Medicine with already producing more than 12,000 additional jobs. That’s ahead of the 5,000 promised by 2015.

According to the institute’s director, however, 10 people currently work in its new building. A Houston-area biotech firm that agreed to produce about 1,600 of the project’s jobs has instead cut its Texas staff by almost 400 people, and currently employs 220 people in the state.

What accounts for the discrepancy? To reach their estimate of 12,000-plus jobs created by the project, officials included every position added in Texas since 2005 in fields related sometimes only tangentially to biotechnology, according to state officials and documents provided by Texas A&M. They include jobs in things like dental equipment, fertilizer manufacturing and medical imaging.

Republican governors aren’t the only ones who enjoy playing pretend venture capitalist with taxpayer money. The Mackinac Center for Public Policy’s Capitol Confidential reported this week on state subsidies given to Michigan solar companies by the administration of now-former governor Jennifer Granholm:

Michigan Capitol Confidential took a look back at the nine solar power companies that were approved for state tax credits. Many have fizzled with reports that the companies are laying off employees at a time they were supposed to have been adding jobs.

For example, in 2009 a company from Georgia called Suniva announced it planned to open a $250 million manufacturing plant in Saginaw County. It was to add 500 jobs. Media reports said the company is holding off plans for a Michigan plant after deciding not to pursue a Department of Energy loan.

Energy Conversion Devices and United Solar Ovonics are affiliated companies that have been approved for state tax credits for four different projects that were supposed to add about 5,700 jobs. Both companies announced layoffs this year.

Evergreen Solar opened a solar plant in Midland in 2009. The company announced in August it was filing for bankruptcy.

I’ll end on a (hopefully) positive note. Taxpayers in New York fed up with the state handing out their money to businesses have been fighting a long-running battle to end the practice. The New York State Court of Appeals is currently hearing a lawsuit brought by 50 taxpayers that challenges state grants given to business.

From the Associated Press:

The taxpayer group cited a provision in New York’s constitution that says: “the money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking; nor shall the credit of the state be given or loaned to or in aid of any individual, or public or private corporation or association, or private undertaking.” It has an exception for funds or property used for education and mental health.

Defendants countered that the funding for public purposes through state-designated economic development agencies is supported by law and precedents and doesn’t violate the constitution. “Doesn’t that just invite evasion?” Judge Robert Smith said. “All you’ve got to do is put an intermediary between the state and the recipient?”

Hopefully, Judge Smith’s question foretells a favorable outcome. A win for New York taxpayers could raise the issue’s profile and embolden fed-up taxpayers in other states.

Obama: U.S. Troops to Leave Iraq

President Obama has just announced that U.S. troops will leave Iraq by the end of this year. Some might wonder if the Obama administration is bluffing, in the hope that Iraqi politicians will relent to U.S. demands.

The key sticking point appears to have been the Iraqis’ unwillingness to afford U.S. servicemen and women the legal protections extended by most other governments around the world. As I argued earlier this week, the United States should not concede to the Iraqis’ demands, which would expose our troops to serious threats to their rights and liberties.

It is possible that the two sides could resume negotiations. There will still be a very large U.S. diplomatic presence, including a sizable number of security personnel. But there will be only about 150 troops.

By that token, I think it increasingly likely that we will be celebrating the end of the Iraq war come January 1, 2012. I’m trying not to be overly optimistic. My hopes have been dashed many times. But the White House is trying to put a positive spin on the story. They are speaking of the progress that the Iraqis have made in the political and security realms. They have suggested that the Iraqis are truly capable of defending themselves and governing themselves. Whether they actually believe that is anyone’s guess, but if the Obama administration carries through on its promise to remove U.S. troops by the end of the year, the president and his national security team will have heeded the wishes of the American people, not to mention abided by their promises, and those of their predecessor.

This costly and counterproductive war—launched under false pretenses, sold to the American people as a cakewalk and an operation that would be paid for by Iraqi oil revenues—may finally, mercifully, be coming to an end. I certainly hope that is the case.