The House is expected to vote today on an expansion of the State Childrens Health Insurance Program (SCHIP). My colleague, Michael Cannon, has frequently written on the problems of this poorly targeted program that moves six children from private to public coverage for every four uninsured children that it covers. However, it is interesting to note that the $33 billion expansion is supposedly paid for primarily through a 61-cent-per-pack increase in the federal cigarette tax. Yet, at the same time, President-elect Obama announced that his choice for Deputy Secretary of Health and Human Services is William Corr, an anti-tobacco lobbyist and executive director of the Campaign for Tobacco-Free Kids. So we can shortly expect the Obama administration to step up efforts to stop people from smoking, thereby reducing the taxes they are counting on to pay for their SCHIP expansion. One hardly knows whether to wish them success.

Thanks to the economic crisis and its impact on state revenues, most states are faced with a tough and unpopular set of choices: which and how many services to cut; how much to raise taxes? Wouldn’t it be great if there were a way to cut taxes while expanding the services available to citizens? As it happens, there is.

I’m in Las Vegas this morning to present a new study showing how broad-based education tax credits would impact Nevada’s finances. Over the first 10 years, I estimate the program would save nearly a billion dollars, and that by its fifteenth year in operation it would be saving $426 million annually. Not only that, per pupil spending in the state’s public schools would actually rise over time under this program.

One of the most interesting things about this study was how easy it was to complete, and how easily it could be reproduced in other states. Last year, economist Anca Cotet and I published a Cato Institute paper presenting a generalized Excel spreadsheet tool for calculating the fiscal impact of education tax credits on any state’s finances, based on some state-specific data input by the user. Using that tool (and in fact refining its model a little) I was able to run the numbers for Nevada quite easily. The only new math in this paper is the calculation of the marginal cost of public schooling in Nevada (the amount district spending rises in response to the enrollment of one additional student, and the amount it falls when enrollment declines by one student).

So if there are any legislators out there fretting over how to balance their state budgets in these difficult economic times, consider education tax credits: they cut taxes while dramatically expanding the range of educational options available to families. And they’re an increasingly bipartisan idea.

In a new Cato Daily Podcast, Director of Information Policy Studies Jim Harper discusses overreaction to terrorism and what is required to avoid it.

In its story yesterday about Obama pushing for release of the second half of the TARP boodle, the New York Times reported that

Lawmakers are angry about many aspects of the bailout, which they intended for the government purchase of troubled assets, particularly mortgage-backed securities, but instead has been used to recapitalize banks and even prop up failing Detroit automakers.

Initially, I had a lot of sympathy for this critique. I had a little burst of outrage myself right before Christmas when I read the following quote from White House spokesman Tony Fratto, explaining why the White House was going to use the TARP authority to bail out GM and Chrysler–despite Congress’s having just voted down the auto bailout:

“Congress lost its opportunity to be a partner because they couldn’t get their job done,” Fratto said. “This is not the way we wanted to deal with this issue. We wanted to deal with it in partnership. What Congress said is … ‘We can’t get it done, so it’s up to the White House to get it done.’ ”

So by not giving the president the power to bail out the automakers, Congress has “lost its opportunity to be a partner,” and the president’s going to do it anyway? By what authority? The TARP statute gives the Secretary of the Treasury the power to buy “troubled assets” from “financial institutions.” Yet in the past three months TARP’s morphed from a plan to buy toxic mortgage-backed securities, to one that involves buying shares in banks (like Wells Fargo ) that aren’t themselves troubled, to a program giving loans to car companies, which surely can’t qualify as “financial institutions.”

More Bush administration lawlessness, I thought. We already knew they didn’t care about the Constitution. Now they’re showing they can’t be restrained by plain statutory language. 

And then I looked at the statute. And it turns out the definitions of “troubled asset” and “financial institution” are so gobsmackingly, irresponsibly broad, that the administration has at least a colorable argument that it can legally reshape the bailout in the ways it has. “Troubled assets” include:

any… financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability 

And “financial institution”:

means any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company, established and regulated under the laws of the United States or any State, territory, or possession of the United States [emphasis added]

That’s why, as the University of Chicago’s Randy Picker argues, you can probably “fit cars under the TARP.” (For a contrary argument, see here ).

Given how far the administration has pushed loose legislative language in the past, can Congress credibly claim to be surprised here? Lawmakers may, as the Times reports, be “angry” about the scope of the bailout, but when they write language that broad, their outrage is more than a day late and $700 billion short.

• Writing for Independent Advocate, a political blog devoted to “independently minded news analysis,” Wes Kimbell quotes Senior Fellow Richard W. Rhan’s December op-ed about Obama’s proposed stimulus plan.

• The Hill’s Congress Blog posts analysis from Senior Fellow Michael D. Tanner on Barack Obama’s proposals for Social Security and Medicare.

• The International Law and Policy Blog links to Cato Trade Policy Analyst Sallie James’s appearance on Reason TV, discussing presidential trade policies.

• Blogging for the Weekly Standard, Brian Faughnan cites Director of Health Policy Studies Michael F. Cannon’s recent post on Obama’s proposal to eliminate Medicare Advantage, which would oust nine million seniors from their health plans.

• Baltimore Sun financial columnist and blogger Jay Hancock plugs an upcoming forum at Stanford University on the similarities and differences between liberals and libertarians, featuring Cato Research Fellow Will Wilkinson and Vice President for Research Brink Lindsey.

• Writing for the Peace Freedom & Prosperity Movement Web site, Michael Shanklin discusses Cato’s video on the auto bailout.

In their zeal to achieve universal health insurance coverage, President-elect Barack Obama and congressional Democrats are likely to exacerbate a real crisis in America’s health-care sector.

Americans generally receive medical care from a fragmented collection of doctors, hospitals, pharmacists, and other health care providers. All too often, those providers don’t communicate and collaborate. The result is too many unnecessary services and too many medical errors. The problem is particularly acute when it comes to complex patients with multiple conditions.

In a paper released today by the Cato Institute titled, “Does the Doctor Need a Boss?”, Arnold Kling and I explain that government prevents coordination of care, and that improving coordination requires reducing government’s role:

Medical care typically lacks coordination, in part because payment systems such as Medicare have not kept pace with technology and patients’ changing needs, and because many doctors are unwilling to cede authority to a boss. Medicare and other payers continue to pay doctors according to the independent-craftsman model. For example, Medicare’s payment system generally does not reward coordination. Instead, Medicare and other fee-for-service payers tend to favor technologically intensive specialist services over those of general practitioners who might be best suited to play the role of project manager…

In the home-building analogy, it is as if the concrete contractor, the drywall contractor, the electrician, and the plumber all refuse to work under a general contractor. Instead, they each try to do their jobs independently, regardless of the impact on the rest of the project.

The culprit is not market forces, but government interventions that protect physicians from competition from better-coordinated providers.

Licensing of medical professionals, state health insurance regulations, corporate-practice-of-medicine laws, and policies that encourage fee-for-service payment (i.e., Medicare, Medicaid, and the federal tax code) hold at bay the market forces that would improve coordination of care…

Improving coordination of care requires two consumer-empowering reforms:

First…consumers should control the money that purchases their health insurance, and should be free to choose their insurer and health care providers.

Second, state licensing regulations make it difficult for corporations to design optimal work flows for health care delivery. Under institutional licensing, regulators would instead evaluate how well a corporation treats its patients, not the credentials of the corporation’s employees. Alternatively, states could recognize clinician licenses issued by other states. That would let corporations operate in multiple states under a single set of rules and put pressure on states to eliminate unnecessarily restrictive regulations.

By centralizing control in Washington, the ruling Democratic left will give new strength to the protectionist forces that have blocked quality improvements in health care.

Many of you have seen the video I narrated explaining why big-government “stimulus” schemes do not make sense. That mini-documentary discussed the theoretical shortcomings of Keynesianism and also reviewed the dismal results of real-world Keynesian episodes.

While the video has been very successful, both measured by the number of “views” and positive feedback, some have suggested that it would be good to produce shorter videos. The hypothesis is that most people have only a limited interest in economics, so a brief video is more likely to attract viewership. My personal bias is that longer videos are sometimes necessary to allow an appropriate level of analysis and explanation, but I do believe in letting the market decide. As such, I invite you to watch this condensed, four-minute video debunking Keynesian fiscal policy.

Please feel free to provide feedback. For purposes of comparison, the original video can be seen here.