December 20, 2019 8:33AM

Fixing Repo: A Follow Up

In a post published here in mid-November, I traced the Fed's repo-market troubles to post-2008 changes in the importance and volatility of two of the Fed's non-reserve liabilities: TGA balances and the foreign repo pool. Then, in a companion piece, I made some suggestions for reining-in those liabilities, as an alternative to having the Fed continue to increase the size of its balance sheet–one that could actually allow that balance sheet to shrink further. The proposed reforms would even make it relatively easy for the Fed to switch from its present floor operating system to a corridor system, with a correspondingly slim balance sheet.

Since I wrote those posts, I've come across further, relevant information. Besides reinforcing my confidence in the proposals' merits, the new information also suggests that implementing them will be even easier than I'd previously supposed.

Read the rest of this post »
December 19, 2019 3:02PM

Surprise Medical Bills

By David Kemp and Peter Van Doren

This week the House passed a $1.4 trillion omnibus spending package. As The New York Times noted, the package contains “a giant potpourri of unrelated spending and policy measures stuffed full of priorities with enough appeal to each political party to ensure their passage through Congress and smooth their path to Mr. Trump’s desk.”

Conspicuously missing, however, were provisions addressing surprise healthcare billing, which occurs when patients are unknowingly treated by a physician who is out of their health insurance network and they receive an unexpected, often expensive, bill. Typically, such treatment occurs in emergency situations or when an out‐​of‐​network provider is practicing at an in‐​network hospital. Out‐​of‐​network providers bill patients for the difference between their price and the (usually lower) reimbursement paid by insurance plans.

As recently as last week it seemed a consensus had been reached on how to address the problem, but the provisions were dropped at the last minute from the House bill. The language would have mandated that out‐​of‐​network doctors be paid the median price of in‐​network doctors in the area. For certain large claims, doctors would have been allowed to appeal to an outside arbitrator for reconsideration. A similar process also would have applied to hospitals that treat patients in medical emergencies and to air ambulances (the helicopters and planes that transport patients from remote areas to major hospitals).

The fall issue of Regulation includes two articles on surprise billing that propose different solutions. One endorses mandatory arbitration of surprise charges as the most neutral market‐​oriented solution. Unlike the dropped provision, this solution would not impose a rate for physicians’ services. Instead, in cases in which in‐​network reimbursement rates differed from out‐​of‐​network provider charges, patients would be responsible only for the usual in‐​network charge and the decision over whether the provider payment request or the insurer network reimbursement would prevail would be made by an independent arbitrator.

A second recommends a contract‐​based alternative in which in‐​network hospitals become responsible for resolving surprise billing by providers who work at the hospitals. This solution would require all providers at a hospital to contract with the same insurers as the hospital or to secure payment for their services from the hospital, which would bundle these payments in the in‐​network facility fees they charge insurers. This would incentivize hospitals to directly address the problem of surprise billing because if they did not the costs would fall on them. This is consistent with economic theory that recommends placing burdens on those that face the lowest transaction costs to resolve disputes.

The primary difference between these two proposals is their understanding of the root cause of surprise billing. Are surprise bills the natural outcome of failed negotiations between insurers and providers? Then an independent dispute resolution process replaces patients as the final backstop in negotiations. Or are surprise bills a symptom of a flawed system in which bad‐​faith actors set artificially high prices? The second solution requires hospitals to resolve the problem contractually or be responsible for the surprise bills.

Despite these different perspectives, both proposals are superior to the proposed Congressional solution, which would have imposed prices through policy. Whatever solution is eventually agreed upon, lawmakers should resist the temptation to specify the appropriate price in legislation.

December 18, 2019 5:52PM

Some Thoughts about the Ruckus over the Ohio Abortion Bill

There has been major pushback from many Ob/​Gyn specialists, reacting to a bill introduced in the Ohio State House of Representatives in late November, HB 413, that would outlaw abortion in almost all circumstances. Much of the pushback from the medical profession centers around Section 2904.35 of the more than 700‐​page bill. The section would exempt physicians from prosecution for “abortion murder” or “aggravated abortion murder” for actions leading to the death of a fetus if they:

(A) Using reasonable medical judgment, believe[] it is highly probable that the pregnant woman will die from a certain fatal condition before her unborn child is viable;
(B) Perform[] a surgery, before the unborn child is viable, for the sole purpose of treating the pregnant woman’s fatal condition;
© Take[] all possible steps to preserve the life of the unborn child, while preserving the life of the woman. Such steps include, if applicable, attempting to reimplant an ectopic pregnancy into the woman’s uterus.

Many doctors are particularly incensed over subsection ©, which discusses reimplanting the ectopic pregnancy into the uterus. Medical experts have vigorously complained that there is no such procedure. Ob/​Gyn specialist Daniel Grossman of the University of California San Francisco went so far as to call the treatment, initially mentioned in an earlier version of the bill, as “science fiction.” A twitter storm has erupted over this section of the bill. Dr. David Hackney, a Cleveland obstetrician, tweeted:

The new Ohio HB413, p.184: To avoid criminal charges, including murder, for abortion, a physician must “…[attempt to] reimplant an ectopic pregnancy into the women’s uterus” I don’t believe I’m typing this again but, that’s impossible. We’ll all be going to jail.

To be fair, Dr. Hackney is not accurately quoting the legislation. The bill does not state a “physician must attempt to reimplant” the ectopic pregnancy (my emphasis added). Rather, the language states that physicians are exempt from prosecution if they attempt to reimplant the pregnancy “if applicable.” Because medical science has not yet figured out how to reimplant the pregnancy, it is not applicable. At least not yet.

Physicians rightly object when uninformed or misinformed legislators intrude on the practice of medicine and the patient‐​doctor relationship. But legislation such as this also creates medical ethics and medicolegal dilemmas, regardless of where one stands on the abortion issue.

The doctrine of informed consent has been a pillar of medical ethics for almost 100 years, spurred by Mary Schloendorff, who won her case against New York Hospital in 1914 after having a hysterectomy performed on her without her consent. Judge Benjamin Cardozo stated in his ruling on that case:

Every human being of adult years and sound mind has a right to determine what shall be done with his own body; and a surgeon who performs an operation without his patient’s consent, commits an assault, for which he is liable in damages.

Under the doctrine of informed consent, as a general surgeon, it is unethical — and in almost all states it is illegal — for me to treat or perform a procedure on a patient to which they do not give consent. For example, I cannot perform a lifesaving operation or give a lifesaving blood transfusion to a patient against their will. I can’t even remove a normal appendix from a patient after successfully removing a diseased gallbladder without that patient’s informed consent. An Ob/​Gyn doctor cannot perform a lifesaving operation for ectopic pregnancy if the woman does not grant permission.

For the sake of argument, assume medical science develops a means of reimplanting an ectopic pregnancy into the uterus. And assume all doctors who treat ectopic pregnancy feel competent in performing reimplantation and believe it to be a safe and effective procedure. As with any procedure, it would not be risk‐​free. If a doctor must obtain informed consent to operate for the life‐​threatening ectopic pregnancy, must consent also be obtained for the second operation — the reimplantation? Beyond medical ethics concerns, does a law requiring reimplantation in this situation conflict with existing informed consent law?

One can argue that the law only pertains to the punishment of doctors who fail to perform reimplantation, and that a doctor can refuse to perform the lifesaving ectopic pregnancy operation unless the patient consents to reimplantation. If the patient refuses reimplantation, the doctor is faced with letting the patient die or violating the law and risking a murder charge. And the patient must either consent to reimplantation or risk exsanguinating from a ruptured ectopic pregnancy.

Patient and doctor both have a Hobson’s choice here. The autonomy of both comes under attack.

This is just one of many unforeseen issues that arise when lawmakers try to micromanage the practice of medicine and the patient‐​doctor relationship.

December 18, 2019 5:30PM

It’s Not True That Impeachment Paralyzes Government (Unfortunately)

It’s a “solemn” and “sad” affair, impeachment: there are so many reasons to wear black. That’s what the pols and pundits tell us, anyway. Tonight’s House vote will unleash a host of plagues: stoking partisan furies, rattling the markets, and— worst of all from this town’s perspective — distracting Congress and the president from doing “the people’s business.” We’re in for a period of “squandered months during which official Washington is pulled apart,” U.S. News’s Kenneth Walsh warned in late September: brace yourself for “The Coming Impeachment Paralysis”


Some of us don’t find that prospect particularly terrifying, but your mileage may vary. In any case, after last week’s legislative onslaught, can we finally put this particular hobgoblin out to pasture — or wherever it is that worn‐​out hobgoblins go? For better or worse, it’s just not true that “nothing gets done” during an impeachment.

“Hidden by impeachment: ‘One of Trump’s best weeks yet,’” the Washington Examiner’s Paul Bedard crowed on Friday. In the midst of the impeachment drive, the president just keeps putting points on the board, including “a new U.S.-Mexico-Canada trade deal,” confirmation of his 50th appellate judge, “government family leave,” and — cue “Also Sprach Zarathustra”—Space Force! The New York Times hailed the $738 billion “defense” bill, which includes paid parental leave for over 2 million federal workers, as “part of a year‐​end burst of bipartisan legislating that has broken out this week, even as the Democratic‐​led House moves toward impeaching Mr. Trump.”

That impeachment paralyzes the government isn’t true now, and it wasn’t true in past impeachment struggles either. The 93rd Congress passed, and Richard Nixon signed, four major bills in between the House’s formal approval of the inquiry in February 1974 and the president’s resignation six months later. One of those laws, the Impoundment Control Act, you may have heard about in recent weeks: President Trump may have broken it when he held up military aid to Ukraine this summer. Of course, Watergate became all‐​consuming before the House voted for an impeachment inquiry. If you start the clock closer to when Nixon’s troubles really took off — say with the Saturday Night Massacre in late October ’73 — you can add another half‐​dozen, including the War Powers Resolution (passed over Nixon’s veto) and the Endangered Species Act.

More recently, President Clinton signed four major bills during his impeachment “journey,” even while soul‐​searching for “the rock‐​bottom truth of where I am and where we all are,” after his fling with an intern. In October 1998, the “people’s business” included the Children’s Online Privacy Protection Act, the Digital Millennium Copyright Act, and the Iraq Liberation Act. For my money, the people would’ve been better off without most of those, particularly the latter, which became a vital talking point for Iraq hawks in the run up to George W. Bush’s disastrous war. But if, like House Minority Leader Kevin McCarthy, you measure legislative “productivity” in terms of big bills passed, that was a fairly productive session.

It’s true, nothing much is likely to get done for a month or so after the holidays, while the Senate holds President Trump’s impeachment trial. “The legislative and executive business of the Senate shall be suspended” while it’s ongoing, per the Senate Rules. But maybe we could use a break.

December 18, 2019 5:28PM

Immigrant Neighborhoods Correlated with Fewer Trash Complaints in San Francisco

Last week, we published a short blog post looking at whether immigrants litter more than native‐​born Americans. That post was motivated by a segment on Tucker Carlson Tonight where he and Seth Barron, associate editor of City Journal, talked about how a neighborhood in New York City was filthy and full of trash because immigrants who live there dump trash on the ground. Besides showing scary‐​looking photos and videos of trash on the ground, Barron and Carlson offered no evidence that immigrants litter more. They weren’t the first to make such claims without evidence.

The responses to our post, which was a simple regression between the share of a city’s population that was foreign‐​born and complaints about trash in the American Housing Survey (AHS), ranged from confusion to thoughtful parsing of the available evidence to links to a 2001 survey that didn’t ask about immigrant littering behavior. Many commentators weren’t happy and some had good reason because our simple regression didn’t test whether immigrants had a higher tolerance for trash, the quality of the data and the survey question weren’t ideal, there are vast endogeneity concerns, the sample size was small, and the size of the geographic unit was vast. All fair points.

The burden of providing evidence for anti‐​immigration claims (or any claim) rests on those who make them, but they rarely do so. As a result, we looked around for additional ways to measure littering and trash patterns in American cities. We found geocoded records of nearly 4 million 311 calls that request city cleanup services in San Francisco during 2008 – 2019. We compared the density of 311 complaints with local Census tract demographics. In most specifications, we find no statistically significant relationship between the share of the population that is foreign‐​born and reports of litter. However, some specifications show a negative relationship, meaning that some neighborhoods with more foreign‐​born, particularly noncitizen, residents produce fewer 311 trash complaints. Focusing on the Hispanic foreign‐​born resident population as the independent variable reveals no statistically significant relationship with 311 trash complaints.

This blog post explains our methodology, findings, brief discusses them, and then concludes in that order. As always, our dataset is available upon email request to one or both of us.

Data and Methodology

Our first data source is the 311 call record for the City of San Francisco for 2008 – 2019. The 311 phone line can be used by people in San Francisco to request city services, information, file complaints, or report various issues anywhere in the city such as littering, property damage, graffiti, homeless encampments, and other issues. Through its open data initiative, the San Francisco city government makes data on these calls available with information regarding the call’s date, type of request, details on the request, location by latitude and longitude, the outcome of the complaint, and other data that are all compiled into a case.

The initial 311 calls dataset contained 4 million cases and required a bit of data cleaning. We narrowed down the dataset to 311 call requests for street cleaning and litter removal, property damage, homeless issues, and homeless encampment removal. We then filtered out duplicate cases and those that did not contain valid latitude and longitude coordinates. With these selected cases, we match each case to a Census tract using the provided latitude and longitude coordinates and the 2017 Tiger/​LINE shapefiles from the Census Bureau. We could not use this method to assign a geographic location to the 311 calls for 16 cases. Fortunately, each case has an address assigned to it and we were able to use a geocoding tool developed by the Federal Financial Institutions Examination Council (FFIEC) to match these cases to their proper Census tract. This step revealed 212 cases that were not reported in San Francisco county that we then removed. After applying those filters and cleaning the data as we described, we were left with 1,701,499 cases.

Our second data source is the American Community Survey (ACS) 2013 – 2017 5‑year estimate. The ACS is our source for the demographic and economic data for each Census tract in San Francisco that we match up with the geocoded 311 calls. A Census tract is a small geographic region with an average population of about 4,000. San Francisco has a total of 196 Census Tracts, but six of them are located in areas that are either underwater or in park areas. Thus, we only have 190 populated tracts in our main analyses. Due to data disclosure policies and the small population of Census tracts, the Census Bureau only releases data for areas with fewer than 65,000 residents in its 5‑year estimates. From these data, we compute population shares by nativity in each Census tract, including the share that is native, foreign‐​born, naturalized, and noncitizen. We further collect data on population shares for Hispanic foreign‐​born residents.

We then map Census tracts into official San Francisco neighborhoods using a crosswalk available from the city’s open data platform.

To test whether immigrant neighborhoods receive more litter complaints, we look at a cross‐​section of San Francisco Census tracts. We run a set of basic regressions to test the correlation between 311 cases and Census tracts’ share of foreign‐​born residents. In each regression, we regress the cumulative number of 311 cases over 2008 – 2019, expressed as a log rate per 1,000 residents, on the share of native and foreign‐​born residents from the ACS, using a neighborhood fixed effect. Neighborhood fixed effects are important because they allow us to control for common, unobserved factors that affect Census tracts within the same neighborhood, such as neighborhood attitudes towards cleanliness and their propensity to report trash or litter.


Our first regression has the various measures of the immigrant populations as the independent variables and litter reports as the dependent variables, controlling for neighborhood fixed effects (Table 1). We find no significant correlation between average litter reports and the native, foreign‐​born, and naturalized shares of the population. However, we find that a percentage point increase in a Census tract’s noncitizen share is correlated with an 8 percent decline in the litter reporting rate that is significant at the 5 percent level (Table 1, column 4).


Next, we regress street cleaning requests and the foreign‐​born population (Table 2). We find no evidence that either higher native or foreign‐​born shares correlate with more street cleaning requests in San Francisco Census tracts. Again, we find a negative correlation between the rate of street cleaning requests and a tract’s noncitizen share. We estimate that a percentage increase in a tract’s noncitizen share is correlated with 8 percent fewer street cleaning requests per 1,000 residents, on average.


We next test the correlation between immigrant shares and homeless concern reports (Table 3). According to the San Francisco 311 website, “homeless concern” reports include aggressive behavior or panhandling, leaving hazardous waste, trespassing on private property, and public intoxication. Similarly, we find a negative, significant association between homeless concern reporting rates and a Census tracts’ noncitizen population share of around 10 percent, although it is only significant at the 10 percent level.


Next, we look specifically at foreign‐​born Hispanic shares by Census tract to see whether higher proportions of foreign‐​born Hispanics correlate with 311 reporting rates. Perhaps Hispanic immigrants litter more, according to many comments we received on twitter, so we thought to test those concerns. Each of these regressions is shown in Tables 4, 5, and 6 and fail to find a statistically significant relationship between the foreign‐​born Hispanic share of the population and type of 311 case.




The geographic locations of homeless people, as measured by 311 calls reporting homeless concerns, are significantly correlated with complaints for litter, street cleaning requests, and all incidents combined at the 10 percent level. Most readers won’t be surprised that the location of the homeless population in San Francisco is correlated with litter and street cleaning complaints, but controlling for the foreign‐​born population has virtually no effect on the regression results in Table 7. Like our previous results, the coefficients on the foreign‐​born share remain insignificant.



There are numerous reasons why the foreign‐​born share of a Census tract is not related to the number of 311 cases. The first possibility is that immigrant Census tracts have less litter and fewer homeless concerns. The second possibility is that immigrants have lower standards of cleanliness, so they are less likely than native‐​born Americans to call 311 ceteris paribus.

Our second concern is greater for our first blog post, which analyzed AHS response data about the person’s neighborhood of residence. Since anybody can make a 311 call from anywhere in San Francisco about trash in any other section of the city, native‐​born Americans could call 311 if they are traveling through San Francisco city Census tracts where immigrants are more likely to live. Although this doesn’t resolve the concern about differing cleanliness standards, it should increase confidence in our results.

The third possibility is that endogeneity issues are extreme here. We cannot make causal statements about immigrants littering less, we can merely show that there are fewer 311 calls about trash in San Francisco Census tracts where they live. There are other variables that influence whether a neighborhood is dirty enough to receive 311 complaints. We included controls for a few of them like housing value and median family income, but the regression results were nearly identical to the tables we reported above. Neighborhood fixed effects will have to suffice.

The fourth possibility is that trash pickup in San Francisco is excellent and cleans up neighborhoods before people have a chance to call 311. Thus, immigrants might be greater litterers but the super‐​efficient city government (don’t laugh, we’re trying to be serious) cleans up their mess before other city residents report the trouble.


This second blog post in the Great Litter Debate of 2019 is an attempt to provide better evidence in this difficult to resolve disagreement. In San Francisco, a city fiercely criticized by immigration restrictionists and conservatives for its very real sanitation problems, there is no association between immigrant resident populations by Census tract and 311 complaints about garbage. Proponents of the “immigrants litter” theory have supplied zero evidence to support their claims. If they don’t like these analyses, we invite them to conduct their own. After all, numerous cities make these data readily available, such as New York, Los Angeles, Chicago, and the District of Columbia to name a few.

December 18, 2019 12:41PM

Top Wealth Is Business Assets

Anti‐​wealth fever grips the Democratic Party and seems sure to carry into the election year. Bernie Sanders and Elizabeth Warren are leading the billionaire bashing binge, but even rising star Pete Buttigieg says that he is “all for a wealth tax.”

Leftist politicians dish out lots of rhetoric about wealth, but they seem ignorant of how it is created and used. They assume that top wealth is just expensive toys such as luxury yachts.

Actually, most wealth of the wealthy is business assets, not personal assets, as discussed in my op‐​ed in The Hill today. The chart below shows the components of wealth of the richest 0.1 percent of Americans. Forty‐​two percent is equity in private businesses and 31 percent is equity in publicly traded businesses. Another 22 percent is bank deposits, debt, pensions, and other assets. Just 5 percent of this group’s wealth are their homes.

A rough guess is that one quarter of the deposits, debt, pensions, and other assets are holdings of government debt. That means almost 90 percent of the wealth of the top 0.1 percent of Americans consists ultimately of equity and debt in businesses, which in turn funds the capital investments that create jobs and spur economic growth.

Leftists often claim or imply that wealth at the top comes at our expense, but the reality is the opposite. Wealth at the top supports jobs, opportunities, and incomes for millions of other Americans.

My Hill piece is here. A full discussion of wealth inequality is here and wealth taxation here.


December 18, 2019 11:13AM

Upon Further Review, the Spending Stands as Called

Last week I wrote about an op‐​ed in the Washington Post claiming that “public funding for schools has actually decreased since the late 1980s, adjusting for constant dollars.” I furnished the graph below illustrating how completely that flew in the face of available evidence, and folks like Reason’s Corey DeAngelis and Heritage’s Lindsey Burke did the same, and much more.

K-12 spending since 1979-80, inflation-adjusted

Well all the scrutiny to the claim (and some dogged prodding by Corey) paid off: the Post issued a 180‐​degree correction this morning. (The picture below is courtesy of Corey’s incredibly energetic tweeting.) Hopefully word will quickly reach any readers who simply accepted the spending‐​cuts assertion:

WaPo Spending Correction

There is lots of room for interpretation in many public policy debates, including assertions of fact. But the idea that public funding for K‑12 education has fallen since the 1980s simply does not reside in that generous space.