Archives: 02/2012

Oregon Legislature Blocks ObamaCare ‘Exchange’

From the Portland Oregonian:

House Republicans block Oregon’s health insurance exchange in surprise vote
Updated: Monday, February 13, 2012, 1:08 PM

A coalition of 30 Republicans and 1 Democrat in the state House of Representatives blocked approval of Oregon’s health insurance exchange this morning…

Last year, a bill to set up the exchange passed both houses of the Legislature with broad bipartisan approval.

House Bill 4164, which would give final approval to the exchange, cruised through its committee hearings without incident. But then, as the House met Monday morning to forward the bill to the Senate, Rep. Tim Freeman, R-Roseburg, made a motion to instead refer the bill to the Joint Ways and Means Committee, where he co-chairs a subcommittee on human services.

Freeman said questions had arisen in a recent caucus meeting of House Republicans over what commitments existed over federal funding of the program, as well as the potential for a change to the legal status of federal health care reforms, currently under consideration by the U.S Supreme Court…

The move led by House Republicans comes as Republicans in the Senate have vowed to block a companion bill on health care reform unless it is modified to include limits on lawsuit awards against health providers.

(HT: Eric Fruits.)

President Obama’s Spending

The new federal budget includes a range of accounting maneuvers to cast the administration’s 10-year projections in the best possible light. Senate Republicans point out some of President Obama’s funky accounting here. But note that the George W. Bush administration also used tricks to make deficit forecasts look more optimistic.

That’s why it’s useful to look at a president’s spending numbers for the current year and next year, rather than the make-believe numbers for later years in the budget. The chart shows total federal outlays since 2000 and Obama’s estimated spending for 2012 and proposed spending for 2013. Data are for fiscal years. Also, I’ve excluded TARP spending because reestimates of TARP costs distort the data.

Spending has gone up from $2.98 trillion in 2008—the year before Obama came into office—to a proposed $3.80 trillion in 2013. That is a 28-percent increase in five years, which represents a compound annual growth rate of 5.0 percent. Because the economy has stagnated during this period, spending has increased as a share of GDP.

Note that the lack of an overall spending increase in 2013 is not a victory for frugality. For one thing, spending on the 2009 “stimulus” bill peaked at $235 billion in 2010 and is now falling. It will be roughly $30 billion in 2013.

Similarly, Iraq/Afghanistan war costs peaked at $163 billion in 2010 and are expected to fall to $97 billion by 2013. There have been similar drop offs in spending for recession-related programs such as unemployment insurance.

Thus, as stimulus, war, and recession-related costs are falling by hundreds of billions of dollars, President Obama is using the money to increase spending on other programs. We have run deficits greater than a trillion dollars four years in a row, and yet the president seems oblivious to the need for real spending cuts.

Here’s a better fiscal plan, which focuses on ways to cut spending and balance the budget.


President’s Budget Shows Feds Can’t Create ObamaCare ‘Exchanges’

According to Politico Pro [$]:

More than $860 million of President Barack Obama’s proposed $1 billion increase in the CMS budget will go to building the federal exchange, acting [Centers for Medicare and Medicaid Services] Administrator Marilyn Tavenner said during a budget briefing at HHS on Monday.

This funding is necessary in part because the amount originally appropriated for the federal costs of implementing the Affordable Care Act — $1 billion — is expected to be gone by the end of this year, HHS officials said.

Assistant Secretary for Financial Resources Ellen Murray said at the briefing that half of these funds have already been obligated, and the remaining amount will be used by the end of the year.

She also said states will still be able to get help building exchanges, because other ACA funds are still available for exchange work.

“Funding for [state grants] was provided in the Affordable Care Act, so the money we’re asking for in this budget is just for the federal exchange,” Murray said.

In other words, the federal government doesn’t have the money to create ObamaCare Exchanges, and the administration has no hope of getting that funding through the Republican-controlled House. So if states don’t create Exchanges, they might not exist. (And even if the federal government does create them, they won’t work.)

Never mind the lawsuits. The Exchanges may be ObamaCare’s most serious vulnerability.

Guatemalan President Proposes Drug Legalization for Central America

It was going to happen sooner rather than later. Three years ago, a trio of former Latin American presidents denounced drug prohibition and called to “break the taboo” of discussing policy alternatives such as drug decriminalization. Then, a few months later, we had a former Mexican president calling for outright legalization. Late last year, a sitting Colombian president said that he would favor drug legalization “if the rest of the world does it too.” This weekend, a sitting Guatemalan president said he will propose drug legalization for Central America in an upcoming regional summit.

Otto Pérez Molina thus becomes the first sitting head of state to propose ending the war on drugs. Being a conservative former general who ran on a platform of fighting crime with “an iron fist,” Pérez Molina is an unlikely champion of sensible drug policy reform. As he described it, under his proposal “It wouldn’t be a crime to transport, to move drugs. It would all have to be regulated.” Pérez Molina says that with legalization, “you would get rid of money-laundering, smuggling, arms trafficking and the corruption that has crippled judges, police forces and entire government institutions, not only in our country but in the region.”

Central America is one of the hottest battlegrounds in Washington’s hemispheric war on drugs. Guatemala, along with neighboring Honduras, El Salvador and Belize, are among the most violent countries in the world. Most of the violence stems from turf wars between juvenile gangs, but Mexican drug cartels are increasingly escalating it as they extend their influence and operations in the region.

As Pérez Molina said, Central America’s biggest liability in its fight against organized crime is its institutional weakness. Judges, policemen, politicians, and soldiers are easily corrupted by cartels. Despite increasing their security budgets by 60% in the last five years, Central American countries spent approximately $4 billion in 2010 on security and justice. This amount dwarfs with the estimated $25-35 billion that Mexican cartels—who run the drug business in Central America—pocket every year.

The problem with Pérez Molina’s proposal is, of course, Washington. Central America is merely a transportation hub of cocaine from the Andean region to Mexico and then to the U.S. It is estimated that 90% of the cocaine consumed in the U.S. goes through Central America. Methamphetamine labs have been discovered in Guatemala in recent months, which might signal a displacement of production of synthetic drugs from Mexico to Central America.

Though a step forward, the proposal for one or all Central American countries to legalize drugs will hardly solve all or even the majority of problems associated with drug trafficking, especially if the rest of the Hemisphere sticks to prohibition.

Still, this doesn’t take away from the remarkable significance of having a sitting president arguing in favor of drug legalization. Maybe president Pérez Molina should have a chat soon with Colombia’s Juan Manuel Santos on this issue. Both could provide much needed leadership in an area where Latin America desperately needs it.

Credit Where It’s Due: Sarah Kliff Edition

On Friday, President Obama announced an “accommodation” to those who object to his contraceptives mandate. Since then, I have been astonished at how many reporters have portrayed the president’s announcement as some sort of compromise, even though it would not reduce – not by one penny – the amount of money he would force Catholics and others with a religious objection to spend on contraception.

In fact, the only reporter who seemed to grasp this may also have been the first out of the box. The Washington Post’s Sarah Kliff:

“If a charity, hospital or another organization has an objection to the policy going forward, insurance companies will be required to reach out to directly offer contraceptive care free of charge,” one administration official explained…

Numerous studies have shown that covering contraceptives is revenue-neutral, as such preventive measures can lower the rate of pregnancies down the line…

“Contraceptives save a lot of money,” a senior administration official argued.

The catch here is that there’s a difference between “revenue neutral” and “free.” By one report’s measure, it costs about $21.40 to add birth control, IUDs and other contraceptives to an insurance plan. Those costs may be offset by a reduction in pregnancies. But unless drug manufacturers decide to start handing out free contraceptives, the money to buy them will have to come from somewhere.

Where will it come from, since neither employers nor employees will be paying for these contraceptives? That leaves the insurers, whose revenues come from the premiums that subscribers pay them. It’s difficult to see how insurance companies would avoid using premiums to cover the costs of contraceptives.

The Post’s subsequent coverage would have benefited from such scrutiny of the president’s spiel. If I missed such scrutiny in the Post or elsewhere, I hope someone will let me know.

According to Obama’s Budget, Burden of Federal Spending Will Be $2 Trillion Higher in 10 Years

President Obama’s budget proposal was unveiled today, generating all sorts of conflicting statements from both parties.

Some of the assertions wrongly focus on red ink rather than the size of government. Others rely on dishonest Washington budget math, which means spending increases magically become budget cuts simply because outlays are growing at a slower rate than previously planned.

When you strip away all the misleading and inaccurate rhetoric, here’s the one set of numbers that really matters. If we believe the President’s forecasts (which may be a best-case scenario), the burden of federal spending will grow by $2 trillion between this year and 2022.

In all likelihood, the actual numbers will be worse than this forecast.

The President’s budget, for instance, projects that the burden of federal spending will expand by less than 1 percent next year. That sounds like good news since it would satisfy Mitchell’s Golden Rule.

But don’t believe it. If we look at the budget Obama proposed last year, federal spending was supposed to fall this year. Yet the Obama Administration now projects that outlays in 2012 will be more than 5 percent higher than they were in 2011.

The most honest assessment of the budget came from the President’s Chief of Staff, who openly stated that, “the time for austerity is not today.”

With $2 trillion of additional spending (and probably more), that’s the understatement of the century.

What makes this such a debacle is that other nations have managed to impose real restraints on government budgets. The Baltic nations have made actual cuts to spending. And governments in Canada, New Zealand, Slovakia, and Ireland generated big improvements by either freezing budgets or letting them grow very slowly.

I’ve already pointed out that the budget could be balanced in about 10 years if the Congress and the President displayed a modest bit of fiscal discipline and allowed spending to grow by no more than 2 percent annually.

But the goal shouldn’t be to balance the budget. We want faster growth, more freedom, and constitutional government. All of these goals (as well as balancing the budget) are made possible by reducing the burden of federal spending.

Pool Grants, Federalism, and the Wellsprings of Government Growth

As part of a 2007 law, Congress decreed the establishment of a new federal program to dangle grants in front of states that agree to enact more stringent laws on swimming pool safety. According to Consumer Product Safety Commissioner Nancy Nord, however, the multi-million-dollar pot Congress has set aside for this purpose has sat unused: “not one state has applied for a grant and not one dollar has been disbursed, despite changes made to improve the program. We will soon have paid CDC [the Centers for Disease Control] almost half a million dollars to administer a grant program with no takers.”

What do you think the odds are that lawmakers will learn from the experience and do away with the grant program? Contrariwise, what do you think the odds are that someone on Capitol Hill right now is preparing to argue that if no states have applied for grants, the amounts on offer must be too low, and new lawmaking is needed to provide for bigger subventions?

In all seriousness, this forlorn little program is a tiny and failed example of a genre of federal initiative that all too often enjoys success: using federal tax dollars to bribe states and localities into raising spending and extending regulation. The proliferation of such programs helps explain why the earlier and sounder idea of federalism – which saw the national and state governments as checking each others’ overweening powers – has given way to a spirit of mutual enablement (“cooperative federalism”) at the expense of the citizenry and its freedom. Thus the Obama administration, realizing that public opinion is not yet ready for a federal-level campaign to demonize fattening and salty foods, is happy to drop millions of dollars on local governments like Mayor Bloomberg’s in New York City to do exactly that. And for decades Congress has been creating programs subsidizing local hiring of teachers, police officers and other public employees – with the presumably unintended result of saddling localities with unsustainable payrolls and pension obligations when times turn tough.

Our friend Michael Greve has a new book out called The Upside-Down Constitution exploring how coordination between once-rival levels of government has been turned into an engine of growth for the leviathan state. You can read more about it here, here, and here at Liberty Fund’s Library of Law and Liberty site. Relatedly, Greve points out in this post something worth keeping in mind: federalism is a structure, not a balance.