Tag: special interests

Trump Is Right & His Critics Are Wrong: Let Consumers, Employers Buy Insurance Across States Lines

An important part of Donald Trump’s health care agenda is his pledge to let consumers and employers avoid unwanted regulatory costs by purchasing insurance licensed by states other than their own, a change that would make health insurance both more affordable and more secure. The Congressional Budget Office has estimated that allowing employers to avoid these unwanted regulatory costs would reduce premiums an average of 13 percent. That’s a nice contrast to what Bill Clinton calls ObamaCare’s “crazy system where…people [who] are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half.”

A reporter recently wrote to me: “I’ve talked to many people – health policy experts, regulators, industry leaders – and none of them think it is a good idea. They worry that the policy would promote a race to the bottom, with insurers consolidating in states with the most lenient regulations. They say state regulators would lose their power to protect consumers. They argue that healthy people may save money by selecting cheaper plans, but sick people would end up paying more and/or have trouble accessing care.” Below is my response.

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What you have stumbled across is a grand conspiracy against consumers by industry, regulators, and left-wing ideologues.

The big, incumbent insurers like banning out-of-state purchases, because that protects them from competition.

Providers and patient groups like government mandates that force consumers to buy coverage for their products (mental health coverage, contraceptives coverage, acupuncture coverage, etc.). The freedom to purchase insurance licensed by other states would allow consumers to avoid those unwanted costs.

State insurance regulators like banning out-of-state purchases, because they are in the business of providing consumer protections, and the ban gives them a monopoly. Little wonder they produce what monopolies always produce: a high-cost, low-quality product.

The ideologues want to impose Gruber-style hidden taxes on consumers. The freedom to purchase insurance licensed by other states would allow consumers to avoid those hidden taxes.

It would be embarrassing if these groups said any of this explicitly, so they describe the prospect of losing their privilege as a “race to the bottom.”

Nonsense. There would be no race to the bottom. It would be a race to what consumers want: affordable, secure health coverage.

If letting people purchase insurance licensed by other states would lead to a vastly different health-insurance market than we have right now, it merely illustrates how far astray these groups have led us from the sort of health insurance consumers want.

Cronyism in Maryland

Martin O’Malley, the former governor of Maryland and Democratic presidential candidate, is no Bill and Hillary Clinton, who have made more than $100 million from speeches, much of it from companies and governments who just might like to have a friend in the White House or the State Department. But consider these paragraphs deep in a Washington Post story today about O’Malley’s financial disclosure form:

While O’Malley commanded far smaller fees than the former secretary of state – and gave only a handful of speeches – he also seemed to benefit from government and political connections forged during his time in public service.

Among his most lucrative speeches was a $50,000 appearance at a conference in Baltimore sponsored by Center Maryland, an organization whose leaders include a former O’Malley communications director, the finance director of his presidential campaign and the director of a super PAC formed to support O’Malley’s presidential bid.

O’Malley also lists $147,812 for a series of speeches to Environmental Systems Research Institute, a company that makes mapping software that O’Malley heavily employed as governor as part of an initiative to use data and technology to guide policy decisions.

I scratch your back, you scratch mine. That’s the sort of insider dealing that sends voters fleeing to such unlikely candidates as Donald Trump and Bernie Sanders.

These sorts of lucrative “public service” arrangements are nothing new in Maryland (or elsewhere). In The Libertarian Mind I retell the story of how Gov. Parris Glendening and his aides scammed the state pension system and hired one another’s relatives.

In some countries governors still get suitcases full of cash. Speaking fees are much more modern.

Attorneys General Aim at New Targets, Who Respond as Expected

The New York Times launches a series of investigative reports on corporate lobbying of state attorneys general. But you have to read fairly far down in the story to find the “nut graf” on why this is happening now. Radley Balko summed it up in a tweet: “As prosecutors get increasingly powerful, lobbyists will increasingly spend money to try to influence them.” And the article does note that: 

A robust industry of lobbyists and lawyers has blossomed as attorneys general have joined to conduct multistate investigations and pushed into areas as diverse as securities fraud and Internet crimes….

The increased focus on state attorneys general by corporate interests has a simple explanation: to guard against legal exposure, potentially in the billions of dollars, for corporations that become targets of the state investigations.

It can be traced back two decades, when more than 40 state attorneys general joined to challenge the tobacco industry, an inquiry that resulted in a historic $206 billion settlement.

Microsoft became the target of a similar multistate attack, accused of engaging in an anticompetitive scheme by bundling its Internet Explorer with the Windows operating system. Then came the pharmaceutical industry, accused of improperly marketing drugs, and, more recently, the financial services industry, in a case that resulted in a $25 billion settlementin 2012 with the nation’s five largest mortgage servicing companies.

The trend accelerated as attorneys general — particularly Democrats — began hiring outside law firms to conduct investigations and sue corporations on a contingency basis.

I wrote about this 30 years ago in the Wall Street Journal, citing Hayek’s assessment from 40 years before that:

Nobel laureate F.A. Hayek explained the process 40 years ago in his prophetic book The Road to Serfdom: “As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power.”

As the size and power of government increase, we can expect more of society’s resources to be directed toward influencing government.

Those who work to increase the size, scope, and power of government need to recognize: This is the business you have chosen. If you want the federal government to tax (and borrow) and transfer – and reallocate through prosecution – $3.8 trillion a year, if you want it to supply Americans with housing and health care and school lunches and retirement security and local bike paths, then you have to accept that such programs come with incentive problems, politicization, corruption, and waste. And that special interests will find ways to influence such momentous decisions, no matter what lobbying restrictions and campaign finance regulations are passed.

If an Interest Group Says We Need to Spend More Money, Check It Out

Young journalists are told, “If your mother says she loves you, check it out.” Every day journalists follow that advice, protecting us all from reading rumors and unconfirmed stories in the morning papers (though of course the increasing pressure to be first with the news is threatening this rule).

But journalists are still too quick to take the word of special interests without seeking other viewpoints, especially in stories about things the taxpayers need to spend money on. Take this morning’s story about water infrastructure on Marketplace Radio:

Following the expensive water-main break that flooded UCLA’s campus, Los Angeles officials say they’re trying to aggressively fix the city’s aging infrastructure. 

The costs are daunting. It’s going to take the city of Los Angeles billions of dollars to fix.

“They estimate some over 20 millions of gallons of water were lost and of course it wound up on that new floor at the Pauley Pavilion Basketball Arena,” says Greg DiLoreto, former president of the American Society of Civil Engineers. “We have some 240,000 water main breaks a year in this country. And the age of our water infrastructure continues to get older and older and older.”

Big Government Wants in Your (Spare) Bedroom

It’s very expensive to visit many cities in the United States. New York City is perhaps the most expensive, not only because of the finite space in such a densely populated city, but because of numerous taxes on lodging and regulations like rent control that artificially create lodging shortages.

Nevertheless, there is still high demand to visit cities like New York and the market has found a way to make those visits more affordable. AirBnB is an online service that allows members to stay in people’s spare rooms, apartments, and homes in cities all over the world, often much more cheaply than the average hotel stay in the area.

New York State Attorney General Eric Schneiderman, however, is challenging the entrepreneurial innovation—probably under pressure from special interests who would like the government to stifle their competition. This is crony capitalism as usual. As we’ve seen here in DC, established businesses like brick and mortar restaurants and taxicab drivers use their connections to government to squeeze out competition like food trucks and the Uber personal car service that challenge the status quo.

Cato has long supported free markets, entrepreneurship, and innovations to make goods and services more affordable. Government overreach like General Schneiderman’s campaign punishes not only AirBnB hosts and travelers, but also the New York economy as a whole as fewer people will be able to visit New York. I was on Fox Business last night talking about this protectionist government overreach. You can watch that here:

Water Infrastructure Bill: Bipartisanship Lives!

Last week, the Republican-controlled House overwhelmingly passed a water infrastructure bill with only three members (two Republicans and one Democrat) voting against. In what must have been a moving scene for beleaguered supporters of unabated big government, tea party “radicals” joined hands with Democrats to support special interests at the expense of taxpayers. 

The Water Resources Reform and Development Act (H.R. 3080) authorizes $8 billion for U.S. Army Corps of Engineers projects like dam construction and river dredging that will benefit parochial constituencies and commercial interests. It’s called a “reform” bill, but a study of the bill by Taxpayers for Common Sense completely undermines that claim (see here). 

From Reuters: 

Colorado High Court Rejects School-Finance Litigation

By a 4-2 margin, the Colorado Supreme Court has rejected a lawsuit claiming that the state’s method of funding public schools is unconstitutional. It overturned a lower court ruling that had held that the current arrangement of funding fails to meet a requirement in the Colorado constitution that the state operate a “thorough and uniform” system of education. [decision in State v. Lobato via KDVR coverage

For years, pushing their Lobato case in the court of public opinion, school-spending advocates have been decrying Colorado schools as underfunded. The state has been given a series of bad ratings on education scorecards, many of which turn out on inspection to measure quality by how much money is spent—thus ensuring that Colorado, which spends less than many other states, will come off badly. This one, for example, ranks Colorado at “C-minus” for reasons that include low overall spending, low teacher salaries, and the state’s failure to fund “induction, mentoring or reduced workloads for new teachers.” 

When you measure outputs as opposed to inputs, on the other hand, the state comes off looking far better. In this ranking of SAT scores, Colorado scores 15th among the 50 states, the best performance of any Western state. In this ranking based on 4th and 8th grade testing, Colorado comes in 11th among the 50 states, trailing only Washington among Western states. 

But modern school-finance litigation only poses as being about educational quality. Its deeper mission is control—specifically, transferring control over spending from voters and their representatives to litigators whose loyalty is to a mix of ideologues and interest groups sharing a wish for higher spending. As I wrote in a draft chapter on school finance litigation cut for space from my book Schools for Misrule:

In the forty years since the pioneering Serrano v. California (California Supreme Court, 1971) school finance lawsuits have been filed in nearly every state, courts in around half the states have thrown out existing finance systems as unconstitutional, and many of them have ordered states to raise school budgets, not merely change the way in which they are financed. Vast sums have been redistributed as a result. Lawmakers in Kentucky enacted more than a billion dollars in tax hikes. New Jersey adopted its first income tax. Kansas lawmakers levied an additional $755 million in taxes after the state’s high court in peremptory fashion ordered them to double their spending on schools.

While filed on a state-by-state basis, the suits have been very much a coordinated national project. For many years their impetus came from the Ford Foundation and its various grantees, notably the American Civil Liberties Union. Furnishing, presumably, the brains of the operation, law-school-based groups have been instrumental, particularly the Education Law Center at Rutgers Law School in New Jersey. …

The educational establishment had always resented the periodic need to go hat in hand – such a demeaning phrase! – to local electorates for tax and bond measures, as if the voters were somehow the bosses and they the servants. School finance litigation promised a more indulgent master, a jurist or panel of them who (it was hoped) would glance over the rows of costing-out numbers, nod appreciatively and feel good afterward about having done something for the children. … School finance litigation is the ultimate monument to the triumph of governance by litigation at the cost of democracy itself. 

Despite the victory in Colorado, there’s no reason to think this war of forty years’ duration (so far) is drawing to a close. 

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