Secure America's Future Economy
SAFE’s “hit nail on head” blogs: 2009
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12/21/09 – Two crises and a partridge in a pear tree Read Replies
Crisis I: After posting last week’s entry, an update on the battle over GovCare, SAFE wrote the Delaware members of Congress. Our message: it was time to push the reset button on healthcare, scrap the energy bill (cap and trade, etc.), and adjourn for the holidays.
Good advice, but action in the Senate continued to grind along, and as of this writing it appears that some sort of a healthcare bill will be passed before Christmas setting up a reconciliation conference between the House and Senate bills next year.
All 40 Senate Republicans are opposing the bill, which means cloture cannot be invoked without the support of each and every member of the Democratic caucus. The efforts to bring all 60 on board were not pretty.
Senator Joe Lieberman (I-CT) was won over by an agreement to drop all vestiges of a public option from the bill including a proposal for increased access to Medicare. Dems recraft health[care] bill to win passage, Jennifer Haberkorn, Washington Times, 12/17/09.
Recent moves to strip the bill of its public insurance plan and Medicare expansion moved Sens. Joe Lieberman, Connecticut independent, and Mary L. Landrieu, Louisiana Democrat, to support the bill, unless major changes are made.
Senator Ben Nelson (D-NE) held out for additional restrictions on the use of government funds for abortions, but he was under heavy pressure. Whether the threat was credible or not, the linkage of a Strategic Air Command base in Nebraska to the healthcare vote was undoubtedly intimidating. White House threatens Sen. Nelson with military base closures in Neb., Michael Goldfarb, Washington Examiner, 12/15/09.
Offutt Air Force Base employs some 10,000 military and federal employees in Southeastern Nebraska. As our source put it, this is a "naked effort by Rahm Emanuel and the White House to extort Nelson's vote." They are "threatening to close a base vital to national security for what?" asked the Senate staffer.
It was subsequently announced that Nelson would vote for cloture, apparently putting the Senate bill on track for a final vote by Christmas. Sen. Ben Nelson to announce support for healthcare bill, Shailagh Murray and Lori Montgomery, Washington Post, 12/19/09.
Democratic leaders spent days trying to hammer out a deal with Nelson, and worked late Friday night with Nelson on abortion coverage language that had proved the major stumbling block. But Nelson also secured other favors [an air base?] for his home state. Asked if he was prepared to support the bill, Nelson said, "Yeah."
Might the Senate bill yet be derailed? It seems unlikely, but public opinion has swung strongly against the GovCare proposal and some of those who vote “aye” may lose their jobs as a result. Democrats on Healthcare Precipice, Kimberly Strassel, Wall Street Journal, 12/17/09.
Public opinion on ObamaCare is at a low ebb. This week's NBC-WSJ poll: A mere 32% of Americans think it a "good" idea. The Washington Post: Only 35% of independents support it—down 10 points in a month. Resurgent Republic recently queried Americans over the age of 55, aka Those Most Likely to Vote In a Midterm Election. Sixty-one percent believe ObamaCare will increase their health costs; 68% believe it will increase the deficit; 76% believe it will raise their taxes.
On the merits, we believe tbe GovCare plan is poorly conceived, has been dishonestly presented, and could have seriously adverse consequences. Perhaps there will a way to undo some of the damage in the future.
Despite the president’s warning that if his healthcare plans fail the nation will go “bankrupt,” for example, the shoe is actually on the other foot. It is also untrue that one can “talk to every healthcare economist out there and they will tell you that ... whatever ideas exist in terms of bending the cost curve and starting to reduce costs for families, businesses and government, those elements are in this bill." All the President’s Mendacity, David Harsanyi, Townhall.com, 12/18/09.
What about balancing tax codes so that those with employee-provided health insurance and those with individual health insurance can benefit from the same benefits? Does that idea exist? You don't even need a staff of researchers to find economists who say it does.
What about opening up health insurance markets beyond state lines to create competition and more access? What about tort reform to end frivolous lawsuits? What about expanding health savings and flex accounts instead of killing them?
Crisis II: The House did adjourn last week, but there was no rest for 20 members. House Speaker Nancy Pelosi (D-CA) and the others, including six Republicans, flew to Copenhagen and joined the UN climate summit. Why are Republicans in Copenhagen, Byron York, Washington Examiner, 12/17/09.
Let’s start with some basics to put this event in context.
NAME: 15th Session of the Conference of the Parties to the UN Framework on Climate Change (COP 15)
PLACE: Bella Center, Copenhagen, Denmark
DATES: December 7-18 [11 days!]
PARTICIPANTS: 15,000 delegates and invitees from some 193 countries, including numerous heads of state for the final two days. Many would-be attendees were turned away. COP15 Observation: So these are the people we’re going to let run the world economy. NCPPR (National Center of Public Policy Research), 12/14/09.
It seems the geniuses at the United Nations selected a building site for the conference that holds 15,000 people, and then gave credentials to 45,000 people. So, naturally, at any given time, two-thirds of the people (almost all of whom used carbon-intensive energy to travel to Copenhagen) are unable to participate.
OBJECTIVE: In theory, the goal was an international agreement to combat the threat of manmade global warming (aka climate change). All that was actually expected, however, was a formula to keep the conversation going. The Haze of Copenhagen, Michael Reagan, Townhall.com, 12/17/09.
Thousands are now gathered in Copenhagen to embark on an aggressive plan to reach a framework for reducing carbon emissions, with the goal of instituting a more formalized, binding agreement within six months.
OTHER ISSUES: Air grievances, demand money, and embarrass “rich” developed countries (especially the United States). For some participants, including leaders from Bolivia, Iran, Venezuela and Zimbabwe, these issues seemed more important than the official objective. Consider the warm reception for Venezuelan President Hugo Chavez. Putting our economy in the hands of Chavez fans, Andrew Bolt, HeraldSun, 12/17/09.
But then he wound up to his grand conclusion – 20 minutes after his 5 minute speaking time was supposed to have ended and after quoting everyone from Karl Marx to Jesus Christ - “our revolution seeks to help all people…socialism, the other ghost that is probably wandering around this room, that’s the way to save the planet, capitalism is the road to hell....let’s fight against capitalism and make it obey us.” He won a standing ovation.
A sampling of the conference action follows – including items big and small. Clippings with red headers are from SAFE founder Bill Morris’s microblog tracking coverage of global warming and energy issues in the [Wilmington] News Journal.
12/7/09, A1, Climate treaty in reach, U.N. says [AP] - Hopes are rising for a CO2 deal at Copenhagen. However, China and India are not prepared to accept legally binding targets. Also, Congress has not approved emissions cut (17% from 2005 level) the U.S. president is expected to offer. Overall, based on all pledges for carbon dioxide reduction offered to date, "emissions will total some 46 billion tons annually in 2020. Emissions today are about 47 billion tons." U.N. Environment Program Achim Steiner is quoted that “we are within a few gigatons of having a deal.”
12/8/09, Copenhagen Climate Scam Conference, Washington Examiner – The conference began with a propaganda film about the perils of manmade global warming.
The planet will be ravaged and millions of people will die horrifying deaths as increasing temperatures in the Earth's atmosphere result in a monumentally devastating deluge of man-made floods, droughts, storms, and rising seas. At the end of the terrifying film, a sweet little girl plaintively begs the conference attendees to "please help save the world."
12/9/09, A6, Rich, poor nations argue over climate economics: Weather officials report evidence this may be the hottest decade ever recorded (AP) –Data were presented at Copenhagen by the World Meteorological Organization (aka the U.N.’s weather agency) “showing this decade is on track to be the hottest since records began in 1850, with 2009 [despite ‘cooler than average conditions in the U.S. and Canada’] the fifth warmest year ever.” WMO Secretary-General Michel Michel Jarraud characterized the data as evidence that “this is indeed globally the warmest period for more than 2,000 years.”
[Highly accurate measurements from orbiting satellites show that global warming has stalled in recent years. See, e.g., What happened to global warming? BBC News, 10/8/09, which reports 1998 (not 2007 or 2008) is the warmest year globally and “for the last 11 years we have not observed any increase in global temperatures.” As for the “more than 2,000 years” claim, it is based on an analysis that has been thoroughly discredited.]
12/10/09, A10, Tuvalu says without an aggressive climate pact, it’s sunk (AP) –
Tuvalu, consisting of mid-Pacific low-lying islands, and others requested even more drastic limitation of CO2 emissions. Saudi Arabia, China and India were opposed. Per the article, the IPCC predicts a sea level rise of one foot per century (two feet in its worst case scenario), a change that could seemingly be coped with over a period of three generations. [Tuvalu’s situation was discussed in Singer & Avery's book, "Unstoppable global warming". Authors said Tuvaluans may be looking for cash "reparations" for global warming.]
12/10/09, Copenhagen: George Soros says leaders are mining the wrong places for climate cash, Rowena Mason, UK Telegraph – Concerned that an impasse was developing over where the money demanded by the developing countries would come from, Soros hopped on a jet for Copenhagen to suggest some financial sleight of hand to raise it without apparent sacrifice by anyone. [Watch your wallets, everyone!]
12/12/09, A2, “At climate talks, the tough part just started” (AP) –The article refers to a draft proposal that would provide, among other things, that "all countries together should reduce emissions by a range of 50% to 95% by 2050, and rich countries should cut emissions by 25% to 40% by 2020, in both cases using 1990 as the baseline year."
[This is not to be taken seriously. If these people were serious, they would be pushing hard for installation of nuclear power. They might also demand evaluation of Edward Teller's suggestion for reflecting heat away from the Earth by injection of appropriate particles into the stratosphere - Wall Street Journal, 10/17/97.]
12/12/09, Naked Copenhagen, Richard Muller, Wall Street Journal, 12/12/09 –
Realistically, says Muller, carbon emissions will continue rising rapidly due to increases by the developing countries. Cuts by developed countries could have only a marginal effect on the situation.
China's carbon intensity is now five times that of the U.S.; it is extremely carbon inefficient. By the time the Chinese cut emissions intensity by 45%, its yearly total will be over twice that of the U.S. And in the proposed Copenhagen dream scenario, by 2025 China's emissions will actually surpass those of the U.S. per capita.
12/13/09, A3, Protestors descend on summit (AP) – Tens of thousands marched in Copenhagen yesterday for “an ambitious global climate pact.” A picture shows protestors carrying signs such as "climate justice, now" and “_____ politics, not the climate.” The police moved in when some protestors began throwing cobblestones through windows. [Evidently, there are plenty of "true believers" willing to spend on a trip to Copenhagen.]
12/13/09, F6, "China casts big shadow over U.S. in solar race" [USA Today] – China leads the world in making solar cells, many of which are exported to the U.S. [There go those “green jobs” U.S. politicians have been talking about.] In addition, China reportedly plans to invest in solar power domestically as it "attempts to battle its greenhouse gas emissions, electrify its nation of 1.3 billion people and curb its massive pollution problem." The government is aiming for renewable energy “to account for 15 percent of its fuel by 2020.”[Whether or not the Chinese are concerned about global warming, they will play along with emission reduction measures to the extent compatible with their economic interests. Thus, coal power plants will continue to be built.]
12/15/09, A5, Developing countries stall climate talks for hours (AP) reports on a walkout that was started by African countries and joined by China and India. The apparent intent was to focus attention on the alleged obligations of developed countries vs. binding requirements for developing countries [which account for most of the projected growth in CO2 emissions], continuing the precedent set by the 1997 Kyoto Protocol [which was rejected by the United States].
12/16/09, The Copenhagen Shakedown, Wall Street Journal – The temporary walkout of the developing countries was ascribed to a demand for more money.
More than anything else, Monday's walkout [of the so-called G-77] revealed the real reason that the developing world is in Copenhagen in the first place: They see climate change as a potential foreign-aid bonanza, and they are at the table to leverage the West's environmental angst into massive transfers of wealth. *** The G-77 scoffed at a European offer of €7.2 billion ($10 billion) over three years. Instead, the Sudanese chairman of the group, Lumumba Stanislaus Di-Aping, suggested in an interview with Mother Jones magazine that something on the order of a trillion dollars, or more, would be appropriate.
12/16/09, A3, “Verifying Chinese cuts a sticking point (AP) reports continued jockeying between the delegates as they await the arrival of world leaders later in the week. The crucial point is said to be “whether Beijing will allow the world to check its books and verity promised cuts in greenhouse gas emissions.” [China has not committed to emission “cuts,” but only to a reduction in “carbon intensity.”]
12/16/09, America Wins Climate Award Three Days Straight, NCPPR – Video (4:58) taken by David Ridenour [bless him and his colleagues for their tenacity] shows the U.S. being honored with the “fossil award” by environmentalist critics.
Forget Climategate; all you need to know to be skeptical of the global warming theory is that the people starring in this ghastly Climate Action Network production believe in it.
They even have an anthem, which you can hear on the video if you can stand to watch it to the end
12/17/09, Blizzard dumps snow on Copenhagen as leaders battle warming, Christian Wienberg, Blomberg.com – We get it that a snowstorm is weather, not climate, but the timing was ironic nevertheless.
12/17/09, A11, "Obama won't take new offer to Copenhagen" (AP) predicts the president will not “cave in to pressure and deepen U.S. efforts to curb greenhouse gases” because he is “constrained by tough politics at home.” U.S. officials said he would stick to the previously announced goal of 17% reduction of greenhouse gases in 2020 from the 2005 level, although developing countries are reportedly seeking a 34% reduction. The planned commitment is said to mirror “legislation already before Congress, calling for 17 percent reduction in pollution by 2020 and 80 percent by mid-century.”
A recent AP-Stanford University poll indicates three-quarters of respondents “support action to address climate change.” However, “opinion polls have shown people have limits on how much they want to pay to solve the problem,” e.g., 59 percent “wouldn’t support any action if it meant electricity [on their monthly bills] would cost $10 more.” [The proposed energy bill would increase energy costs MUCH MORE than that.]
12/17/09, Copenhagen climate conference: Hillary Clinton backs idea for $100bn global fund, Louise Gray, UK Telegraph – Calling the manmade global warming theory “undeniable,” the U.S. secretary of state announced that this country would be willing to pay (along with other countries) into a global fund of $100 billion per year – a concept suggested in June by UK Prime Minister Gordon Brown – to be established by 2020 to help the “most vulnerable” of the developing countries. However, “transparent” actions on cutting emissions would be expected from China, India, et al. and there were no details as to where exactly the $100B per year would come from. [Perhaps the Soros plan would come into play?]
12/18/09, “Hypocrisy Offsets” offered to carbon-spewing climate conference attendees, NCPPR – Continuing its pattern of mockery, the NCPPR offered conscience-clearing “hypocrisy offsets to attendees, many of whom had “used substantial amounts of carbon-emitting jet fuel just to get to the conference.”
12/19/09, A1, "Summit falls far short of goals" –The U.S. president helped broker a deal with China, India et al. that "provides for monitoring emission cuts, but sets no overall global target for cutting greenhouse gases and no deadline for reaching a formal international treaty." [No deadline - we love it. The farther into the future, the greater the odds that skeptics will prevail and end this whole bizarre episode before the government does something really stupid.]
12/19/09, D.C. area hit by massive winter storm: most regions to see more than a foot of snow, Washington Times – More inclement weather awaited the president and others on their return to Washington, another reminder that the manmade global warming theory may be somewhat exaggerated.
A partridge – Policies and politics are not everything, especially this time of year, as we rather think some folks in Washington should realize. It is time to renew ties of family and friends, enjoy a bit of holiday cheer, and reflect on the finer things in life.
Tune in on January 4, 2010, when the next entry to this blog will be posted. In the meantime, happy holidays to all of you!
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12/14/09 – Healthcare: down to the wire.
The last four entries were devoted to a review of the U.S. political system, ending with a discussion of the pros and cons of calling for a Constitutional convention. There were several thoughtful comments on this subject (see “read replies” to 12/7 entry), and it appears that the nays have it.
Turning to matters of more immediate concern, this entry will focus on the healthcare plan now being considered in Washington, which would expand government control of the healthcare system.
House: When we last wrote about GovCare (11/9 entry), the House of Representatives had just passed a 1,990-page bill (HR-3962) entitled the Affordable Health Care for America Act.
Shortly before midnight on Saturday, November 7, the House bill passed by a 220-215 vote. This underscores the need to take a hard look at GovCare now, lest it become the law of the land before the public fully appreciates the consequences.
Senate: Currently, the Senate is debating a 2,074-page bill (HR-3590) entitled the Patient Protection and Affordable Care Act. The Senate bill was taken up on the floor following a 60-40 vote (just enough!) to clear the way.
The 60th vote was paid for with a special break on Medicaid cost sharing for Louisiana (Senator Mary Landrieu, D-LA, said it was worth $300M), aka “the Louisiana Purchase.” After the motion carried, some observers felt the Senate bill was headed for inevitable passage. Deep into Saturday Night’s Healthcare Vote, Jillian Bandes, 11/21/09.
Several weeks have since been consumed in considering amendments to the Senate bill, most of which do not go to the basic substance of the bill. Here are some of them.
• Could federal funds be used to cover the expenses of abortions? Such a use of funds was blocked in the House bill by the Stupak amendment, but this contentious issue could resurface in conference unless a comparable provision is added to the Senate bill.
An amendment to restrict abortion funding was narrowly rejected, but Senator Ben Nelson (D-NE) has threatened to withhold support of the bill unless this result is reversed. Senate rejects Nelson amendment on abortion, Shailagh Murray, Washington Post, 12/8/09.
• The Republicans lack the votes to force any unwanted changes, but have offered various amendments. One was a proposal to reverse cuts in Medicare funding (whether or not these cuts would actually be made, they make the fiscal numbers look better). Senate Votes to Keep Medicare Cuts, Lori Montgomery, Washington Post, 12/3/09.
On a vote of 58 to 42, the Senate rejected a proposal by Sen. John McCain (R-Ariz.) to send the bill back to committee with orders to strip out the cuts, a move that would effectively have killed the measure. Two Democrats -- Ben Nelson of Nebraska and Jim Webb of Virginia -- voted with all 40 Republicans on the amendment.
• There have been amendments assuring coverage of various medical procedures, e.g., mammograms for women under 50 (cast into question by recent recommendations of a government panel appointed during the prior administration). Senate votes to safeguard mammograms, Ricardo Alson-Zaldivan, Washington Times, 12/3/09.
End game – To stop the seemingly endless flow of proposed amendments and force a vote on the Senate bill, the Democrats may seek to invoke cloture (requires 60 votes). Their leaders apparently want to act soon.
The president came to the Senate on Sunday, December 6. He addressed the 60 Democrat and independent members in a closed-door session (45 minutes, no questions taken), reportedly urging them to resolve smoldering disagreements and get the job done. Not everyone was persuaded by his “pep talk,” but they definitely heard it. Obama to Senate Dems: After fixing Bush “disasters,” healthcare is next step, Susan Ferrechio, Washington Examiner, 12/6/09.
"It would be very hard to listen to the president's speech and not be persuaded of the historic importance of what is being done here," Senate Budget Committee Chairman Kent Conrad, D-N.D., said. "It was a powerful speech."
On December 7, Senate Majority Leader Harry Reid (D-NV) decried the delaying tactics of Republican members of the Senate, comparing them to senators of yore who stalled action on slavery before the Civil War, female suffrage, and civil rights legislation.
Republican senators expressed shock and anger at these comments, and Saxby Chambliss (R-GA) suggested that Reid was starting to “crack” under the pressure of the healthcare debate. Reid Compares Opponents of Healthcare Reform to Supporters of Slavery, FoxNews.com, 12/7/09.
On the evening of December 8, a deal was announced to replace the controversial “public option” in the Senate bill with some new provisions (details to be provided after they have been “scored” by the Congressional Budget Office). Democrats choose alternatives to “public option,” Jennifer Haberkorn, Washington Times, 12/9/09.
• Americans lacking healthcare insurance (HCI) would be permitted to obtain it through a program administered by the Office of Personnel Management, which currently runs the federal employees healthcare program. Some see the OPM’s involvement as inconsistent with the professed intent of offering a “private option.” Through a looking glass on the Hill, Washington Examiner, 12/10/09.
Only in the nation's capitol could people pushing Obamacare keep a straight face while claiming that a new health insurance operation to be run by the same government agency that manages the federal bureaucracy is actually a private program.
• Some people in the 55-64 age bracket would be allowed to “buy into” Medicare. Given that Americans are living longer and may need to start retiring later in order to help put Social Security and Medicare on a sustainable fiscal basis, this strikes us as a move in the wrong direction or, to be blunt about it, a dumb idea.
It seems likely that the Democrats will try to force action on the Senate bill this week. If they cannot line up 60 votes, however, the matter may be held over until after the holidays.
Either way, the time has come for a decision. Consider the circumstances: two long and complex healthcare bills – same general thrust but with many differences in specifics – major changes could be made in conference if the Senate bill passes – little time likely to study the bill that would emerge from conference. In effect, people know about as much about GovCare as they ever will. That goes for the members of Congress, by the way, as well as John & Jane Q. Public.
Assessment – How to frame the issue without getting bogged down in the details? Our approach will be to focus on the major effects of GovCare, one plus and several minuses, and then make an overall judgment.
Congressional Budget Office (CBO) estimates cited are from: (a) 11/20/09 letter (revising 11/6/09 estimates) from CBO Director Douglas Elmendorf to Representative John Dingell (D-MI) for the House bill; and (b) 11/18/09 letter from Mr. Elmendorf to Senator Harry Reid (D-NV) for the Senate bill.
• Fewer Americans without healthcare insurance (HCI) - According to CBO estimates, the House and Senate bills would have the following effects on HCI coverage of nonelderly people:
Medicaid & CHIP
Nongroup & other
Under either bill, the number of Americans without HCI would be reduced by over 30 million. About half of this gain would represent expanded enrollment in Medicaid and CHIP, with the remainder accounted for by gains in insurance issued through exchanges, i.e., the “public option” (or whatever might wind up replacing it in the Senate bill?).
The number of people with private sector HCI is projected as holding steady with the House bill or declining marginally with the Senate bill. Employer-provided HCI coverage might be lower than projected, however, with a corresponding increase in government-sponsored coverage. See Déjà vu: Scoring a healthcare bill [the Baucus bill], 10/12/09.
• Spending increases for new programs – According to CBO estimates, either the House or Senate bill would have a gross cost of roundly $1 trillion over the 10-year projection period. This understates the long-term impact of spending increases, however, because the new outlays would not begin for several years.
GROSS OUTLAYS - $B
2019 x 10
2019 x 10
Medicaid & Chip
Exchange Subsidies & Related
Small employer tax credits
• Tax increases – On a net basis, both bills are scored as modestly reducing projected government deficits. It is projected that government spending increases would be outweighed by tax increases and spending cuts (see next heading).
Thus, the Senate bill provides an excise tax on high-premium (aka Cadillac) HCI plans, fees on various healthcare providers and insurers, and penalty payments for employers and individuals that opt out of applicable HCI mandates.
• Spending cuts for existing programs – In the main, projected spending cuts are not based on verifiable opportunities for efficiency gains – which could be considered a plus – but rather are arbitrary and perhaps illusory.
Under the House bill, for example, $396B is projected as being cut from Medicare, CHIP and Medicaid outlays over the 10-year period, primarily by reducing annual updates to fee for service rates applicable for Medicare ($228B) and Medicare Advantage ($170B).
The Medicare cuts are not seriously intended, apparently, but they would be reversed in separate legislation to avoid impacting the healthcare bill numbers. Dem’s slick fix: $210 billion of fiscal restraint, Byron York, Washington Examiner, 11/13/09.
As for Medicare Advantage, the indicated cuts would compromise the level of service currently being provided to seniors who participate in these plans – quite possibly resulting in higher overall costs to the government. Baucus Bludgeons Humana, Wall Street Journal, 9/23/09.
A new study from America's Health Insurance Plans, the industry trade group, finds that seniors on Advantage in California spent 30% fewer days in hospitals over fee-for-service patients, based on federal data. Democrats say that insurers are "overpaid," but the cuts—as Humana correctly noted—mean that seniors may lose this coverage.
• Skyrocketing healthcare costs – This prediction is based on several considerations, which we will cover briefly with references.
# Since the 1960s when Medicare and Medicaid were launched, healthcare spending has grown substantially faster than the economy as a whole. The healthcare sector now represents about 1/6 of the total U.S. economy, and the trend is projected to continue.
Some observers have inferred a cause and effect between government intervention in the healthcare sector and rising consumption/ prices, and we believe they are quite right.
In a nutshell, government policies have created the perception that healthcare (with the exception of HCI premiums and co-pays) is something that someone else pays for. Consumers are not price conscious, as a result, and some healthcare providers have taken advantage of the situation. A substantial amount of overconsumption in the healthcare system results. A “ready, aim, fire” approach to healthcare reform, 3/30/09.
# Healthcare costs on a per capita basis are considerably lower in other countries, yet average life expectancies are equivalent or higher. This suggests that the amount of money Americans spend on healthcare may be excessive, and that we would do well to adopt more healthy lifestyles. It might also be thought to bolster the case for a government-run system (which is what most of the comparison countries have).
With regard to the latter point, however, the cost of government-run healthcare is typically contained by limiting access to healthcare system, aka rationing. For 100 real life examples, taken from the UK, Canada, and elsewhere, see Shattered Lives, Amy Ridenour and Ryan Balis, The National Center for Public Policy Research, 2009 (PDF downloadable for free).
There’s no such thing as a free lunch, but the government keeps trying to sell us one anyway. And so it is with government-run health care. Sold to the public in the guise of “free,” it is in fact more costly than any private alternative, for its price tag is more than ﬁnancial. Those who chose to rely on government health care frequently pay not just in taxes, but in a more costly currency: pain, fear, suffering and death.
# To make the U.S. healthcare system more cost efficient, experts suggest eliminating barriers to innovation, encouraging more competition, and giving patients more meaningful choices. See the following books, both written by professors of the Harvard Business School.
The Innovator’s Prescription: A Disruptive Solution for Health Care, Clayton Christensen et al., McGraw Hill (2008).
Who Killed Health Care? Regina Herzlinger, McGraw-Hill (2007).
The authors see government as part of the problem rather than the solution, and they single out the fee for service reimbursement model administered by Medicare/Medicaid for criticism. Indeed, Christensen suggests (p. 398) “we need to initiate changes in portions of the industry that are beyond Medicare’s reach rather than trying to change Medicare directly.”
Would GovCare further the recommendations of either author? To the contrary, GovCare would impose rigid standards for HCI coverage, require people to obtain HCI, expand Medicaid, and possibly even lower the eligibility age for Medicare. All of which would diminish the possibility for (a) disruptive change of the type Christensen advocates, or (b) the patient-driven healthcare system Herzlinger envisions.
• Undue complexity – Finally, there is plenty of room for error in attempting to ram through a once in a generation fix like this. Why not forget about GovCare and start on discrete healthcare issues, perhaps starting with an obvious problem like tort reform? Kill the bills, Charles Krauthammer, Townhall.com, 11/27/09.
The bill is irredeemable. It should not only be defeated. It should be immolated, its ashes scattered over the Senate swimming pool. Then do healthcare the right way -- one reform at a time, each simple and simplifying, aimed at reducing complexity, arbitrariness and inefficiency.
* * * *
It is hard to know how this national debate on healthcare will end, but the outcome is not preordained.
We are not saying read the bills, who has time for that, but give some thought to the GovCare proposal. Then let your family, friends, and representatives in Congress know what you think.
If all of us do this, the odds of making the right decision will improve a lot.
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12/7/09 – RX, part two – a Constitutional convention? Read Replies
|Symptoms: crucial issues ignored, bad ideas entertained, proposals presented deceptively, dissent dismissed|
How can the GRA disease be cured? We reviewed some ideas for reining in Congress last week, e.g., term limits and a balanced budget amendment. They seem promising, but would require Constitutional amendments – via one of the routes specified by Article V.
The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that . . . no State, without its Consent, shall be deprived of its equal Suffrage in the Senate.
“Good luck with that,” wrote one reader, but it is not in our intellectual DNA to assume that the American people are incapable of demanding action that is needed to save the country. Also, for all the approvals required, a dozen amendments have been proposed and ratified in the past 100 years – including the Twenty-Second Amendment (1952) that established term limits for presidents.
All of these amendments were proposed by Congress and ratified by the states, but, as discussed last week, the members of Congress would predictably be unenthusiastic about curbing their own powers and prerogatives. To get balanced budget and term limits amendments, therefore, it might be necessary to convene (or at least threaten to convene) a Constitutional convention. Here are the steps prescribed by Article V:
2/3 of states ask Congress to “call a convention to propose amendments”
Congress (by 2/3 vote of both houses) calls a convention
The convention proposes amendments
The amendments are ratified by 3/4 of the states
By one account, there are standing calls from 29 states (including Delaware and Pennsylvania) for a Constitutional convention. It would supposedly take only 5 more states (or 2 if the rescission of prior calls by Alabama, Florida and Louisiana were challenged in court) to reach the 2/3 level and start the ball rolling.
The forgoing is stale news, it turns out. There have been two campaigns in living memory that fell short, the first seeking to overturn controversial Supreme Court decisions on voting districts and apportionment (1960s) and the second seeking a balanced budget amendment (late 1970s and 1980s). Although the state calls may not have been formally rescinded, they probably do not have continuing vitality.
Still, the idea of an Article V convention worries many conservatives. They suggest that Congress would pick the delegates (by who knows what process), and that the delegates could do whatever they wanted at the convention. The Battle to Stop the Constitutional Convention, Tom DeWeese, American Policy Center, 1/16/09.
The fact is, once 34 states petition Congress to convene a Constitutional Convention, the matter is completely out of the States' hands. There is absolutely no ability to control what the delegates do in the convention..
These points carry some weight, but on balance the fear of a runaway convention seems overblown. Suppose the convention decided to gut the Bill of Rights, for example, as foreseen by the American Policy Center. Bob Unruh, WorldNetDaily, 12/12/08.
Don't for one second doubt that delegates to a Con Con wouldn't revise the First Amendment into a government-controlled privilege, replace the 2nd Amendment with a “collective” right to self-defense, and abolish the 4th, 5th, and 10th Amendments, and the rest of the Bill of Rights. Additions could include the non-existent separation of church and state, the “right” to abortion and euthanasia, and much, much more.
We suspect the public reaction would be quite negative if such things happened, and that few state legislatures would ratify the convention’s handiwork.
Most Americans are currently satisfied with the Constitution, or at least do not favor tampering with it. The most common criticism of the Constitution is that it does not place enough limits on government power. 59% of voters say Constitution is just fine; 39% say it doesn’t restrict government enough, Rasmussen Reports, 7/3/08.
In the latest survey, only 14% of voters think the Constitution places too many restrictions on what government can do, while 39% say it is not restrictive enough and 38% say it’s about right as is.
If an Article V convention would involve risks for conservatives, moreover, it might also create opportunities. The Case for a Federalism Amendment: How the Tea Partiers can make Washington pay attention, Randy Barnett (professor of Constitutional law at Georgetown University), Wall Street Journal, 4/23/09.
As Professor Barnett notes, conservatives are not the only ones who would fear an Article V convention. If a growing number of states were calling for a convention, Congress might be stampeded into acting preemptively – as it has done before.
It was the looming threat of state petitions calling for a convention to provide for the direct election of U.S. senators that induced a reluctant Congress to propose the 17th Amendment [ratified in 1913], which did just that.
As for Barnett’s “federalism amendment,” it smacks too much of attempting to turn back the clock. Considering all that has changed since 1789, we doubt it would be feasible (or perhaps even desirable) to restore the original line of demarcation between federal and state powers.
The founders visualized that the activities of the federal government would be carried out pursuant to the powers given to Congress and the president by the Constitution, e.g., raising armies and fighting wars, regulation of commerce among the several states and with foreign nations, making treaties, coining money, borrowing money, raising taxes, etc., with all other functions of government reserved to the states. See Federalist Paper 45 on centralization or decentralization, authored by James Madison.
The powers delegated by the proposed constitution to the federal government, are few and defined. Those which are to remain in the state governments, are numerous and indefinite. The former will be exercised primarily on external objects, as war, peace, negotiation, and foreign commerce, with which last the power of taxation will, for the most part, be connected. The powers reserved to the several states will extend to all the objects, which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the state.
Then came the Tenth Amendment. “The powers not delegated to the United States by the Constitution, nor prohibited to it by the States, are reserved to the States respectively, or to the people.”
Years later, President Madison vetoed a bill providing for a federal public works program on grounds that – irrespective of the economic merits – “such a power is not expressly given by the Constitution.” His conclusion is elegantly expressed, and the logic seems impeccable. Veto message to the House of Representatives, March 3, 1817.
Fast-forward to today, when the federal government is involved in a great many public works and social programs that have little if anything to do with its enumerated powers (the Constitution does not mention social security, healthcare, agriculture, education, etc.). Under the Constitution as it is now interpreted, any legislation by Congress will be upheld unless a specific prohibition can be pointed to in the Constitution.
There are a few dissenters, such as Representative John Shadegg (R-AZ) and Senator Tom Coburn (R-OK), but they make their case as a matter of principle and do not expect to undo what has been done. Enumerated Powers Act Brings Constitution to Capitol Hill, Andrew Grossman, Heritage Foundation, 7/30/08.
In short, the enumerated powers doctrine is dead. Instead of trying to bring it back to life, fiscal visionaries should focus on opposing wasteful or ill-conceived programs at either the federal or state level using arguments such as does more harm than good, costs exceeds benefits, overlaps with programs of other agencies or governmental units, or could be better addressed by the private sector. See the Budget Discipline page of this Website, “where to cut” section, for some examples.
Another consideration that may point to an Article V convention is that the U.S. political system has been operating for 220 years with only modest changes (at least formally) to its governing document (the Constitution). Now, like an aging motor vehicle, the system may require a general overhaul as opposed to routine maintenance.
We have already talked about Congressional term limits and balanced budget amendments, which we favor, and a “federalism” amendment that seems dubious. Here are some other ideas that might be considered at an Article V convention?
• Repeal of the Sixteenth Amendment (authorizing a federal income tax) – Although Professor Barnett presented this proposal as part of his federalism amendment, it stands on a somewhat different footing. The idea would not be eliminating federal tax revenues, but collecting them in a different way. The Case for a Federalism Amendment, Randy Barnett, Wall Street Journal, 4/23/09.
Congress could then replace the income tax with a "uniform" national sales or "excise" tax (as stated in Article I, section 8) that would be paid by everyone residing in the country as they consumed, and would automatically render savings and capital appreciation free of tax.
As readers may recognize, such a switch would be consistent with the FairTax, which is a proposal to replace all federal income and payroll taxes with a national sales tax. An essential step in implementing the FairTax is said to be repealing the Sixteenth Amendment, so as to preclude any backtracking on elimination of the income tax.
SAFE believes the federal income tax system is inequitable and unduly complex. We view the FairTax as one of three ways to fix the system, the others being a flat tax or radical overhaul. See the Taxes page of this Website for discussion. Accordingly, the repeal of the Sixteenth Amendment seems like an appropriate agenda item for an Article V convention, but its approval does not seem essential.
• Reining in the executive branch – Many of our examples of Government Run Amok disease relate to the executive branch. Is this any way to govern a country? 11/16/09. Ergo, action may be required beyond shaping up Congress.
If the U.S. system of government was likened to a motor vehicle, Congress might be seen as the brakes. It can block proposed programs by declining to provide the required funding. It can also kill established programs by withdrawing funding, although this power has been exercised all too infrequently.
When it comes to new undertakings or changes in policy, on the other hand, Congress is not equipped to provide effective leadership. With 500+ principals and an unwieldy structure, it has great difficulty making and implementing decisions. No wonder cynics say there are two things one should never watch, making sausage and making legislation.
The executive branch can act as the motor of government because its members all report to the president. Thus, when David Walker (CEO of the Peterson Foundation, formerly U.S. Comptroller General) talks of the need for “committed and inspired leadership” to address the government’s long-term fiscal problems, he says such leadership could only come from the president. If you want good answers on healthcare, ask good questions! 2/11/08.
Fine, except that presidents do not invariably provide good leadership – as has been demonstrated time and again – and someone needs to hold them accountable. As we said in last week’s entry, after reviewing what happened after the Republican Party electoral comeback in 1994, “never place too much trust in any leader, group of leaders, or political party.”
We appreciate the advice of Alexander Hamilton in Federalist Paper 70 that “energy in the executive” is a hallmark of good government, and also that it is better to vest the executive power in one person (the president) than in a council. As Hamilton also says, however, the legislature plays a key role in setting as opposed to executing policy.
In the legislature, promptitude of decision is oftener an evil than a benefit. The differences of opinion, and the jarrings of parties in that department of the government, though they may sometimes obstruct salutary plans, yet often promote deliberation and circumspection; and serve to check excesses in the majority.
Who is in a better position to hold the president accountable on a regular basis than the members of Congress? True, the ultimate arbiters are the American people, but they only get to decide who will be president every four years.
Yet the current relationship between Congress and the president is not conducive to such a role for Congress, perhaps because of undue emphasis on the separation of powers.
# Presidential appearances before Congress are infrequent (State of the Union address, budget message, other subjects at the president’s initiative) and one-way (the president speaks, members of Congress listen).
In a September 9 address to Congress, for example, the president offered a litany of arguments in support of his healthcare plan. Most of the points had been made before, and some may not have been 100% accurate – including a statement that illegal immigrants could not get coverage under the plan. Obama’s speech was full of chronic deceptions, David Freddoso, Washington Examiner, 9/10/09.
As usual, the members of Congress had no opportunity to comment or ask questions. We have no wish to condone the outburst by Representative Joe Wilson (R-SC), who has quite properly apologized for the incident, but can appreciate the sense of frustration that may have triggered it. Here is how things went according to the transcript.
[President Obama] Now, there are also those who claim that our reform efforts would insure illegal immigrants. This, too, is false. The reforms -- the reforms I'm proposing would not apply to those who are here illegally.
[Mr. Wilson]: That's a lie. [Elsewhere reported as “you lie,” we do not know which was actually said.]
[President Obama] That's not true.
And one more misunderstanding I want to clear up: under our plan, no federal dollars will be used to fund abortions, and federal conscience laws will remain in place.
# Presidents and key advisers can claim “executive privilege” to withhold information from Congress or other bodies on many matters, including policy discussions and state secrets. While the privilege is not absolute, the courts have generally upheld it. Background on Executive Privilege, Aziz Huq, NYU School of Law, 3/23/07.
# Presidents retain advisers (aka “czars”) who not only provide advice but also perform administrative functions. Most of them are not approved with the advice and consent of the Senate. This approach sometimes creates confusion about who is in charge of a given functions, and it also undermines the effectiveness of Congressional oversight. Examining the History and Legality of Executive Branch Czars, Matthew Spaulding, Senate Judiciary Committee testimony, 10/6/09.
As the number of czars expands, and the President's policy staff grows, and there are more and more individuals acting more and more as administrative heads rather than advisors, Congress should raise questions as to whether those individuals should be subject to executive privilege or can be compelled to testify before Congress. The President cannot have it both ways.
Now granted, Congress and the president communicate in many ways. The president and/or advisers go to Capitol Hill for discussions, or stay in touch by telephone or electronic devices with legislators, and Congressional leaders may be invited to the White House. But the president can set the ground rules and limit participation as desired, so such communications are of limited help in testing the president’s thinking or holding him/her accountable.
One way to publicly test the president’s thinking – which is certainly not accomplished by the screened, if not scripted, questions at town hall meetings and press conferences – would be to adopt a parliamentary system of government like the one used in the United Kingdom.
But a parliamentary system has problems too; perhaps a less sweeping change should be considered. How about a Constitutional amendment providing for monthly sessions in Congress at which the president would respond to questions from members? Such sessions would be informative, and they might result in better decision-making as well. Bipartisanship or Groupthink? David Stokes, Townhall.com, 2/1/09.
I think we would have better leaders, if they had to actual[ly] debate their stuff directly with Congress – at least on occasion. Photo-ops and handshakes aside, I wonder how much better a good, heated, executive-legislative argument might be for our national political health.
Consideration might also be given to a Constitutional amendment limiting “executive privilege” to state secrets. So long as national security is not jeopardized, why shouldn’t the president et al. have to explain how policy decisions were arrived at, who was involved, and any issues that arose in implementation?
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An Article V convention would entail risks as well as opportunities. It is not clear that one should be called for, nor what the results would be.
Nevertheless, as discussed in the four-part series that concludes with this entry, (a) there are serious problems with the U.S. system of government, (b) it is hard to see them being addressed without Constitutional amendments, and (c) the amendments would be hard to get via the Congress proposes/state legislatures ratify route.
Sometimes it is necessary to take chances in life, e.g., to break a completed side of a Rubik’s Cube in order to solve the overall puzzle.
We would love to know your views on calling for an Article V convention. Please respond to email@example.com.
* * * This Blog's Replies * * *
I'm not in favor of having a Constitutional Convention. My biggest concern is that it would afford the opportunity for mischief to those who wish to turn the Constitution into a wish list. The "Writers" provided a wherewithal for amending the Constitution that has served us well these many years. – Alex F. Wysocki, Conservative Caucus of Delaware
I fully support the idea of Congressional term limits, but can see no hope for making it happen unless the members voluntarily limit themselves or the voters limit them. A Cons. Conv. with the present Congressional make-up could be a real disaster! - SAFE director
Given who holds the reins of the power structure at the moment, we could be in a lot of trouble calling a Constitutional convention. It could be re-written in a manner that we would not like. - SAFE director
Let the revolution begin, again...no more taxation, without representation...throw the bums out. - SAFE member, Arizona
OK, OK, it was just a thought. But remember the adage, “nothing ventured, nothing gained.” Publius
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11/30/09 – RX, part one – Reform Congress
Lest SAFE be viewed as a bunch of alarmists, here is one more analysis suggesting the disease could be life threatening. The general theme: opportunities to avert or minimize problems in the pipeline, such as surging energy prices, sharply higher interest rates, and massive tax hikes, are being ignored in favor of secondary issues – and it will not be pretty when the problems hit in full force. We ain’t seen nothing yet, Victor Hanson [Hoover Institution], Washington Times, 11/28/09.
As these storm clouds gather, Congress bickers on Saturday nights about borrowing even more money for health care reform, yet another federal entitlement.
Now on to this week’s topic, suggesting a cure for GRA. We will begin with Congress.
Throw the rascals out – A mid-term election is coming up next November, and the voters can send some new legislators to Washington if they have a mind to do so.
Judging from a recent Rasmussen poll, there could be some big changes. Indeed, the poll indicated that 57% of the voters would be disposed to fire all the members of Congress and start over. A 2008 poll (taken at the time of the financial bailout bill, aka TARP) yielded similar results, as shown in the following table.
But these results are fanciful, because voters do not vote for Congress as a body – they vote for the representative from their Congressional district and the senators from their state. Regardless of what people around the country may think of House Speaker Nancy Pelosi, for example, voters of the ultraliberal 8th District of California (most of San Francisco) have kept her in office since 1987 and will likely continue to do so. Many other members of Congress will not be at risk in 2010 due to occupying safe seats or, in the case of 2/3 of the senators, not having to run at all.
Still, the stakes will be high in 2010, with the parties fighting to maintain or improve their position. The Republicans, in particular, will be hoping to replicate their mid-term victory in 1994 when their House candidates subscribed to a Contract with America that was supposed to bring about “the end of government that is too big, too intrusive, and too easy with the public's money.”
The Contract with American commitments were clearly and fully expressed, and if all of them had been implemented the impact could have been tremendous. Take the proposed Fiscal Responsibility Act:
A balanced budget/tax limitation [3/5 vote in each house for a tax increase] amendment and a legislative line-item veto to restore fiscal responsibility to an out- of-control Congress, requiring them to live under the same budget constraints as families and businesses. (Bill Text) (Description)
The House of Representatives passed the balanced budget/tax limitation amendment after the 1994 election, but it fell one vote short of the 2/3 vote required in the Senate.
A legislative line-item veto (exercisable by the president, subject to override by both houses of Congress) was enacted later, but to no avail because the U.S. Supreme Court held it violated the Separation of Powers doctrine. High Court Strikes Down Line-Item Veto, Richard Carelli, Washington Post, 6/25/98.
Not that this effort was unproductive, because with all the talk about balancing the budget – plus the dynamic of competition between the parties and a booming economy – the job actually got done during the closing years of the Clinton Administration.
Without structural support for a balanced budget, however, the tide of red ink soon resumed. Some people blame the tax cuts after the Republicans regained the White House in 2001; others (including us) would place more stress on the failure to control spending. Either way, it is hard to square the Republicans’ approach during these years with their traditional advocacy of limited government and fiscal discipline. Could it be the “Grand Old Party” was seduced by the lure of using big government for its own purposes? Leviathan on the Right, Michael Tanner, Cato Institute (2007), p. vii.
. . . no factor has been bigger than the rise of a new brand of conservatism – one that believes big government can be used for conservative ends. It is a conservatism that ridicules F. A. Hayek and Barry Goldwater while embracing Teddy and even Franklin Roosevelt. It has more in common with Ted Kennedy than with Ronald Reagan.
Will there be a Contract with America 2.0 in 2010? Former House Speaker Newt Gingrich has been discussing the subject with Michael Steele, Director of the Republican National Committee, and he shared some of their thinking at C-SPAN’s Cable Center Class, 11/13/09. Video (3:32)
Whatever the name (Steele favors a First Principles label), there would be a series of proposals on jobs, energy, healthcare, education, etc. intended to help the Republicans make the transition from opposition party to alternative party.
The actual “contract” would be announced around September 2010, close enough to the election to reflect the circumstances then applicable, but with enough time for voters to reflect on the Republican commitments and make a reasoned decision.
Maybe Contract with America 2.0 (or First Principles) is a great idea, maybe not, time will tell. It would help to know what circumstances will exist next September, e.g., will GovCare have gone through or been turned back, what will the jobless rate be, etc. Also, one would want to study the specific Republican proposals (and any Democrat responses).
But one point was amply demonstrated after the Republican comeback in 1994. Never place too much trust in any leader, group of leaders, or political party.
Gains achieved through a spirited campaign and purging of some of the less effective/reliable/honest incumbents in 2010 and 2012 (when the presidency will also be at stake) could prove temporary. Durable progress requires structural changes.
Term limits – The longer politicians stay in Washington, the more likely they are to fall under the spell of promoters of this, that or the other government program. Campaign cash is one inducement; another is the delight of being courted and praised. The only requirement is a willingness to spend other people’s money for arguably good causes. Potomac Fever, Chris Edwards, Cato Institute, 12/12/05.
The spending impulse of [legislators] is reinforced at every turn in Washington. Congressmen are bombarded with funding requests during visits from constituents, at receptions, in phone calls to campaign contributors, in meetings with lobbyists, in discussions with other members, and in news articles.
Congressional hearings add to the pro-spending climate. Rather than being like court proceedings, where a balance of views is heard, hearings are dominated by witnesses who favor more spending. Witnesses skillfully flatter members for their wise support of supposedly vital programs.
OK, ban the lobbyists, some people may say, but we doubt this is feasible. The United States is a free country, after all, and the First Amendment guarantees the right to “petition the government.”
A more practical answer might be to limit the time that members of Congress can spend in office, with the hope that they will leave before Potomac Fever sets in. To this end, a Citizen Legislature Act (limiting senators to two terms, and limiting representatives to either three or six terms) was included in the Contract with America.
Packaged as a Constitutional amendment, the CLA did not receive the required 2/3 vote in the House and lacked sufficient support in the Senate as well. Term Limits: The Fight Dies Hard, Time, 6/5/95.
To win the two-thirds of both Houses needed to send a constitutional amendment to the states for approval, backers would have to replace or win over 63 House members and, at last count, at least 24 Senators.
Having taken office expecting the Contract with America promises to be taken seriously, freshman Congressman Joe Scarborough (R-Florida) became disillusioned when GOP leaders developed “collective political amnesia” about the promises that had been made. Rome Wasn’t Burnt in a Day, Joe Scarborough, HarperCollins (2004), page 21.
Weeks after his stunning ascension to majority leader in November 1994, Dick Armey suggested that since Republicans were now running Congress, term limits were no longer necessary. As columnist Bob Novak noted, “The House roll call votes on term limits were rigged so that every Republican had a change to vote for one version of term limits while no version actually received enough votes to pass. Hypocrisy was the watchword.”
Would another run at term limits make sense now? The scourge of Potomac Fever remains alive and well, and other arguments carry weight as well. Here are several from Cato Institute’s Handbook for Policymakers, 7th edition.
• In a June 2008 poll by Gallup, only 12% of respondents expressed confidence in Congress. [This was unusually low; the current approval rating is in the mid twenties.]
• Nearly half of the states have term limits for their legislatures, and attempts to eliminate such limits (e.g., a California ballot initiative in 2002) have generally been rebuffed.
• National polls have shown strong national support for term limits, e.g., 67% per an NBC/Wall Street Journal poll in 2003.
• Term limits might encourage leaders from the private sector to take time out from their careers to serve as citizen legislators, especially if (as Cato advocates) a three-term limit was set for members of the House.
http://www.cato.org/pubs/handbook/hb111/index.html (section 8)
Term limits would also have some potential drawbacks, in our opinion, which should be taken into account.
• Some Congressional functions are complex and require specialized knowledge, e.g., oversight over national intelligence or tax policy. And while many “old timers” in Congress deserve to be retired, there are some whose leadership and expertise would be missed.
To appreciate the potential impact of term limits, check out the House and Senate seniority lists on Wikipedia.com. They show that (1) many members of the current Congress have served far longer than would be possible with the proposed term limits, and (2) a mass retirement would result unless current officeholders were exempted (defeating the purpose of the exercise).
House of Representatives: With a 6-term limit, over half the membership would be barred from seeking reelection in 2010 – including 60+ members with 20 years in office or more. Anyone elected in 2004 or earlier would be excluded with a 3-term limit, raising the attrition rate to over 70%.
Senate: Nearly two-thirds of the members would be ineligible to seek reelection when their current terms expire.
• By reducing the level of Congressional experience (and in some cases competence), term limits would tend to weaken the influence of Congress vis-à-vis the executive branch. Other changes in the system might be needed to preserve a proper balance.
• Term limits would not necessarily upset the cozy way in which business is done inside the Beltway. Many members of Congress remain active after leaving office, often continuing to participate in the legislative process as high-paid lobbyists. National Suicide, Martin Gross, Berkley Books (2009), pp. 198 et seq.
In all, there are now 68 former members of the House who, from 1998 to 2005, moved just a mile away to K Street in Washington as lobbyists, with a raise in pay from $165,000 to upwards of $500,000 or even a million a year. A study by Public Citizen of the swift movement from Congress to Lobby-land shows that 43% of the eligible Congressmen who left Congress have become registered lobbyists. The percentage in the Senate was even higher, some 50%, or 18 out of 36 senators, a statistic that should shock sleepy citizens.
On balance, we believe term limits would be a good thing. But they would not be an unmixed blessing, and we would be inclined to favor a six-term (not three-term) limit for the House. It is also unclear how such limits would be imposed.
• Obtaining 2/3 approval of both houses of Congress for a Constitutional amendment could prove difficult. Indeed, the Cato Handbook (page 92) flatly states that “a Congress controlled by career politicians will never pass a term limits amendment.”
• Establishing Congressional term limits under state law has been tried. No dice; such an approach was disapproved by a 1997 decision of the U.S. Supreme Court.
• Another approach would be asking Congressional candidates to pledge they will not run for more than a specified number of terms. No Constitutional amendment or even legislation would be required, and the Cato Handbook (page 93) says “self-limiters” have served their constituents well and felt free to vote in a fiscally responsible manner.
Maybe, but the voluntary pledge approach seems perversely selective. Why should citizen legislators limit their time in office, e.g., Joe Scarborough who chose to resign and return to private life in September 2001, while political hacks serve term after term? If term limits are to be, we think they should apply to all members.
* * * *
There is one approach left that might serve to get term limits, and perhaps a balanced budget amendment and other constructive changes as well, namely a Constitutional convention. But no such a convention has taken place since 1787, and convening one now would entail risks as well as opportunities.
Tune in next week as the discussion continues.
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11/23/09 – What is causing GRA? Read Replies
It was previously suggested that the U.S. political system is faltering due to crucial issues ignored, bad ideas entertained, proposals presented deceptively, and dissent dismissed. Is this any way to govern a country? 11/16/09.
Now we will review some possible causes of the disease, call it “government run amok,” which in our view threatens this country’s prosperity and standing in the world.
Partisan gridlock – One explanation that has been offered for the mediocre results of the political system is a lack of bipartisan cooperation, which more often than not is blamed on the opposition party.
Thus, Democratic leaders had some suggestions to offer after the party switch of Senator Arlen Specter (now D-PA) in April. Pelosi’s advice to Republicans, San Francisco Chronicle, 4/30/09.
"I say to Republicans in America, take back your party," said House Speaker Nancy Pelosi, D-San Francisco. "The party of protecting the environment, the party of individual rights, the party of fairness."
Picking up the refrain, former Secretary of State Colin Powell opined that Republicans should stop “repeating mantras of the far right” and develop a more positive message. Powell Says Shrinking GOP Should Return to the Center, Chris Strohm, National Journal.com, 5/5/09.
As for what the general public thinks, the growing number of Americans who identify themselves as “independents” or “unaffiliated” may indicate a desire for politicians to take a middle of the road approach.
According to a Pew Research poll, independents represented 39% of the electorate in April versus 33% Democrats and 22% Republicans (“the lowest level of professed affiliation with the GOP in at least a quarter century”). [These numbers leave 6% of respondents unaccounted for.] Independents Take Center Stage in Obama Era, 5/21/09.
Other polls report somewhat more support for the established parties, especially on the Republican side, but confirm a surge in independents. Thus, Rasmussen reported the following split in October: Democrats 38%; Republicans 32%; unaffiliated 30%. Democrats Inch Up in Partisan ID in October, GOP Slips, 11/2/09.
It is commonly perceived that the parties are not working together on key issues (e.g. healthcare), and understandably so. After all, Democrats have stoutly resisted inputs on such issues, while Republicans have voted overwhelmingly against the Democrats’ proposals. Few Perceive Sincere Bipartisan Efforts in Congress, Gallup, 9/18/09.
Nevertheless, we are not prepared to attribute the malfunctions of the political system to excessive partisanship.
For one thing, partisan rivalry has existed from the start of this nation. For an insightful analysis of “factions,” see Federalist Paper No. 10 by James Madison:
• Factions are inevitable
As long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed. As long as the connection subsists between his reason and his self-love, his opinions and his passions will have a reciprocal influence on each other, and the former will be objects to which the latter will attach themselves.
• the most important reason for factions is “the various and unequal distribution of property”
Those who hold, and those who are without property, have ever formed distinct interests in society. Those who are creditors, and those who are debtors, fall under a like discrimination. A landed interest, a manufacturing interest, a mercantilist interest, with many lesser interest, grow up of necessity in civilized nations, and divide them into different classes actuated by different sentiments and views.
• and instead of trying to brush the existence of factions under the rug, an enlightened government should strive to mitigate their effects.
The regulation of these various and interfering interests forms the principal task of modern [as of 1787] legislation, and involves the necessary and ordinary operations of government.
Moreover, bipartisan cooperation can morph into the blind acceptance of ideas that deserve to be vigorously debated. Notice how quick the advocates of an ever-expanding role for government are to class dissenting views as of no consequence. Hey, they might even be talking about us!
Thus in September, a White House official characterized participants in the March on Washington as a “fringe element” that did not understand the president’s healthcare proposal. “Tea Party” protestors “wrong,” Sean Lengell, Washington Times, 9/13/09.
"I don't think it's indicative of the nation's mood," David Axelrod, the president's top adviser, said on CBS' "Face the Nation." "My message to them is, they're wrong."
True, the president lauded political free speech during a talk to a student group in China, but he has exhibited a rather different view in other contexts. Obama’s Doubletalk on Political Dissent, Michelle Malkin, Townhall.com, 11/18/09.
While [his] press shop feeds paeans to free speech into Obama's globetrotting teleprompter, the White House is still waging war on vocal foes at home. Obama has lectured his critics in Washington to stop talking and "get out of the way." He has stacked his carefully staged town halls with partisan stooges and campaign plants throughout the year. The president recently derided limited-government activists ***
So while there is much to be said for decorum and civility, we see no reason why the parties should be of the same mind on everything – or pretend to agree if they don’t. If anything, it seems to us, the causes of the government run amok disease lie at the other end of the spectrum.
Groupthink – David Stokes, an educator and talk show host, observes that complaints about partisanship tend to be in the eye of the beholder. “It’s bipartisan if you agree with me. It’s partisan if you don’t.” And in the long run, he suggests, vigorous political debate is healthy, while artificial subordination of differences of opinion (or groupthink) can have unfortunate, sometimes even catastrophic consequences.
What causes groupthink? Watch out for illusions of invulnerability, the presumed morality or superiority of certain segments of society, and the devaluation of dissenting opinions. Also, remember that no one is immune. Bipartisanship or Groupthink? David Stokes, Townhall.com, 2/1/09.
Groupthink is an equal opportunity problem. It is not reserved solely for democrats, republicans, or independents. It rears its ugly head any time a group takes over, or gets comfortable in power, and loses the capacity for objectivity. And when there is a “we won/it’s our turn” mindset, groupthink is usually in the air. It is a most subtle and self-deceptive toxin.
The nation’s founders seem to have been well aware of such problems, for the Constitution was painstakingly crafted to balance political power.
• The federal government was given certain enumerated powers, notably national defense, international diplomacy, and the regulation of interstate commerce, but it was visualized that the state governments would continue to call the shots in all other areas. Overall, Madison predicted in Federalist Paper No. 45, the states would hold their own.
The powers delegated by the proposed constitution to the federal government are few and defined. Those which are to remain in the state governments, are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several states will extend to all the objects, which, in the ordinary course of affairs, concern the life, liberties and properties of the people; and the internal order, improvement, and prosperity of the state.
• The power of the federal government was vested in three co-equal branches, with built-in “checks and balances.” Moreover, the legislative branch, which alone had access to “the pockets of the people,” was comprised of two houses, one elected based on population and the other on the basis of giving each state an equal say.
Sounds like an effective design to discourage groupthink, but modern day observers note that there have been concerted efforts to reinterpret the Constitution. The objective, or at least result, has been expansion of the federal government’s power.
Thus, Thomas Sowell of the Hoover Institute deplores the appointment of judges on the basis of their political leanings. “Empathy” versus Law: Part IV, Townhall.com, 5/8/09.
For more than a century, believers in bigger government have also been believers in having judges "interpret" the restraints of the Constitution out of existence. They called this "a living Constitution." But it has in fact been a dying Constitution, as its restraining provisions have been interpreted to mean less and less, so that the federal government can do more and more.
To which, U.S. Supreme Court Justice Clarence Thomas adds that there are basically two ways to interpret the Constitution – “try to discern as best we can what the framers intended or make it up.” How to Read the Constitution, Wall Street Journal, 10/20/08.
On the legislative side, Chris Edwards of the Cato Institute criticizes the members of Congress for assuming that the federal government has carte blanche to expand into any area it chooses. Downsizing the Federal Government, 2005, p. 25.
Members of Congress should start taking seriously their oaths to uphold the Constitution. Too often Congress ignores the Constitution or inserts boilerplate language into legislation to claim authority. Instead, when a questionable program comes before them, members of Congress should ask whether there is Constitutional authority for it and vote against it if they believe it violates the fundamental law of the land.
To use a current example, consider the proposal that people be required to obtain government-approved healthcare insurance [HCI]. Would such a mandate be Constitutional? Beware the health[care] insurance police, Donald Lambro, Washington Times, 11/2/09.
Congress has never before required Americans to buy a product or service under penalty of law. Yet that's precisely what the healthcare bills pending in the House and Senate would do in the age of Obama, despite compelling arguments that the Constitution gives lawmakers no power to do so.
House Speaker Nancy Pelosi’s “not a serious question” response was noted last week.
Senator Jack Reed (D-RI) suggests that requiring HCI would be akin to imposing a draft as an incident to raising an army. Fine, except the Constitution empowers Congress “to raise and support armies,” while saying nothing about healthcare. History.com, 11/12/09.
Others cite mandatory auto insurance as a precedent for an HCI mandate, overlooking the fact that it is the states, not the federal government, which mandates auto insurance. Is Obamacare Like Mandatory Auto Insurance? Andrew Tallman, Townhall.com, 11/17/09.
Now, obviously, if we were debating whether individual states could mandate health coverage, at least the levels of government being analogized would be the same. But the leap from what states do to what Congress can do betrays vistas of ignorance concerning our system of government. A college freshman would be embarrassed to make such a weak argument, yet members of Congress have said precisely this.
All things considered, the phenomenon of groupthink seems rather descriptive of the problems with the U.S. system of governance with which we began. Furthermore, there is much evidence of the Constitution being reinterpreted in a manner that expands the ambit of the federal government.
So perhaps we have found the cause of the problem, or at least one of them, but there is another point that needs to be considered.
Limited attention span – Remember Pogo’s quip that “We have met the enemy and he is us.” Before placing the blame for a malfunctioning political system on conniving politicians, activist judges who have misinterpreted the Constitution or whoever, perhaps everyone should look in the mirror.
Many Americans are poorly informed about policy issues, proposed legislation, and the like, and this is surely not due to a lack of information.
There was a time when the printing press was a revolutionary development, leveling the playfield between the upper classes and ordinary people. Then came telegraph, the telephone, radio and television. Now we are in the Internet age, with Web pages, e-mails, blogs, micro blogs (e.g., Twitter), and social networking sites, all increasingly accessed by cell phones and other handheld devices.
The following video (4 minutes) provides a hard-hitting series of observations about the revolution that is in process, including these. By 2010, Gen Y [aka Millennials] will outnumber Baby Boomers. There are over 200 million blogs on the Internet. It took 38 years for radio to build an audience of 50 million people; Facebook acquired 100 million users in 9 months. And we no longer search for the news, it finds us.
But with so much content available, people quickly reach the overload point. Most videos that are over 2 minutes long will not be watched. A message must be boiled down to 140 keystrokes or less for posting on Twitter. If viewers do not like what someone is saying on television, they will simply change the channel.
Perhaps an analogue of Gresham’s Law (cheap money drives dear money out of circulation) is at work, whereby breaking news and trivia trump important information. Or to paraphrase an old joke, people may wind up knowing more and more about less and less until they know everything about nothing.
We get it that the public is hungry for political leadership, but there is a dismaying lack of clarity about the specifics. The Permanent Tea Party, Daniel Heninger, Wall Street Journal, 11/5/09.
Independent voters across the U.S. have become like the massive cattle herd John Wayne drove from Texas to Kansas in "Red River." These voters are spooked and on the run, a political stampede that veered left in November 2008 and now right a mere year later. They will keep running—crushing incumbents, candidates and political models of the left and right—through November 2010 and onto 2012 until they find a person or party capable of leadership appropriate to our unsettled times. And yes, Virginia, the possibility of a man on a white horse in 2012 is not out of the question.
But wait a second, didn’t these same voters elect the leaders who are currently in office? Seems to us that they should accept some of the blame. Also, why in the world should the country be looking for a “man on a white horse” (or dictator)?
So let’s chalk up a short public attention span as another source of the government run amok disease.
Next week – We know the U.S. political system is malfunctioning, and at least some of the causes. The final entry in this series will evaluate some potential solutions.
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Concerning Gen. Powell's comment about "repeating mantras of the far right," it should be pointed out that Conservatism IS the center. As I told some of the leadership at the Republican State convention in May, to the right there are the libertarians and the anarchists. To the left are the liberals, socialists, fascists and communists. And liberal & socialist are probably synonymous. Conservatives ARE in the center. Too many have bought into the myth that conservatives are the far right. – SAFE director
I think one of the biggest problems is payoffs like we saw to Sen. Landrieu [D-LA] on Saturday. You should not be able to put, for example, highway money in a defense appropriations bill or defense funding in a health care bill. I don't know how to phrase this, but I'm sure you get my meaning. – Donna Gordon, Delaware Tea Party
I rarely get time to review everything that comes in but I did read this entry and have to say you have put a lot of ideas on the table and most are very informative. Also good to see you are on top of my favorite think tank, Cato. – SAFE member, Maryland
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11/16/09 – Is this any way to govern a country?
Underlying the disputes in Washington about healthcare “reform” and other proposed initiatives, one senses that something is amiss with the body politic. However the malady may be perceived (e.g., government run amok), it has fueled the Tea Party movement and the surging popularity of conservative commentators like Rush Limbaugh and Glenn Beck. Tea Party leaders are wasting chance to replace Congress, Mark Tapscott, Washington Examiner, 9/3/09.
Most Americans are fed up with business-as-usual in Washington and they want real change, not more of the Democrats' power-grabbing slogans, or the "Me-Too" timidity of Republicans who talk the reform talk, but love the perks of power too much to actually walk it.
This week’s entry will illustrate four aspects of the current political landscape with examples drawn from various policy areas.
1. Crucial issues ignored – Like an ostrich that sticks its head in the sand, a country that fails to address its most pressing problems is asking for trouble – particularly when these problems reflect the failings of its governing institutions.
• Consider the federal government’s chronic budget deficit, which after decades of poor fiscal management is spiraling out of control. In past entries, this issue has been much discussed. See, e.g., Two cheers for the Fiscal Wake-Up Tour, 11/5/07; State of the budget: a 40-year slump, 1/28/08; Plot thickens, as the Peterson Foundation cranks up, 7/14/08; Fiscal Wake-Up Tour message goes nationwide [release of I.O.U.S.A.], 8/25/08; First things first: time to clean up the fiscal mess, 11/24/08; A tale of two summits [on fiscal responsibility and healthcare, respectively], 3/16/09.
Yet for all the efforts of fiscal visionaries, there has been no corrective action. And although the president may be considering a bipartisan commission to review the situation, look for lots of bickering about the shape of the conference table. Democrats Push for Plan to Cut Deficit, Jackie Calmes and Carl Hulse, New York Times, 10/31/09.
But even the idea of a panel to bridge the partisan divide has run into partisan objections. Many Democrats, including in the White House, are loath to cede such far-reaching decisions to a commission and doubt Republicans’ willingness to compromise. And most Republicans remain adamantly opposed to tax increases, leaving the prospects for any bipartisan approach limited at best.
• Government restrictions on the development of U.S. petroleum reserves have been tolerated for too long, resulting in higher than necessary fuel prices and a dangerous degree of dependency on imported oil. To drill or not to drill; that is the question, 7/7/08.
No one is about to tell American motorists that they should stop driving their vehicles, gasoline will be the predominant motor fuel for the next 20 years or so, and that gasoline will be refined from oil produced somewhere around the globe. ***The real issue is not drilling vs. not drilling; it is who will do the drilling and how much the resulting oil will cost. Clearly, there is no reason for the United States to pay any more money to import oil than it has to, particularly when much of the money goes to regimes that are disposed to create problems for us.
The bans on drilling in vast offshore areas were rescinded or allowed to lapse in 2008 due to public angst about a $4+ per gallon price for gasoline, but the new Administration has ordered further studies. Bush-era offshore drilling plan is set aside, MSNBC, 2/10/09.
Jack Gerard, president of the American Petroleum Institute, which represents the large oil companies, said [Energy Secretary Ken] Salazar's announcement "means that development of our offshore resources could be stalled indefinitely."
Subsequent steps can be expected to delay and burden domestic petroleum production. Five Things Congress and the President Are Doing to Bring Back Sky-High Gas Prices, Ben Lieberman, Heritage Foundation, 8/13/09.
Discouraging domestic oil supplies with access restrictions, regulations, fees, and taxes will add to the future price at the pump, while streamlining these impediments to increased production will do the opposite. Congress and the President should be enacting measures that allow oil and gasoline to be as plentiful and affordable as possible to meet the nation's energy needs. Instead, they are doing the opposite.
• Other long neglected problems include illegal immigration, a gold-plated school system that achieves mediocre results, a failed “war on drugs,” overlapping programs (e.g., 160 job training programs costing a total of some $20 billion per year), inefficient government operations (attributable among other things to the great difficulty in discharging poor employees), and pork barrel spending (aka earmarks).
For discussion, see National Suicide: How Washington Is Destroying the American Dream from A to Z, Martin Gross, Berkley Books (2009).
2. Bad ideas entertained – There is no such thing as a perfect defense. If enough bad ideas are proposed, some will survive the screening process and get implemented. And although many of the bad ideas are not new, we cannot remember ever seeing so many in play at the same time. They fall into two basic categories.
• One type of bad idea is a poor solution to a real problem, such as the theory popularized by economist John Maynard Keynes in the 1930s that deficit spending can be helpful in combating an economic recession.
Deficit spending did not get America out of the Great Depression, and this technique for stimulating the economy has failed in other countries as well. Nevertheless, it was a key element of the economic stimulus bill pushed through in February. Steve Forbes, 2/2/09, Forbes Magazine.
The blunt truth is that government spending is a poor substitute for private business and consumer investing and spending. Were it otherwise, the Soviet Union would have won the Cold War, and Japan, which had numerous Obamaesque stimulus packages in the 1990s, would have boomed instead of remaining dead in the water in what was a 12-year recession.
Given the rise in unemployment since February and a sluggish uptick in private sector demand, it would be a stretch to consider the stimulus bill a success. The only thing this legislation clearly accomplished was to run up the deficit. Washington and the Job Market, Wall Street Journal, 11/7/09.
It's hard to imagine a more complete repudiation of Keynesian stimulus than the evidence of the last year's job market. We've now had two examples of such stimulus—President Bush's $160 billion effort in February 2008 and President Obama's mega-version [$787 billion] a year later—and neither has made even the smallest dent in employment. As the nearby chart shows, Mr. Obama's economic advisers sold the stimulus by saying it would keep the jobless rate below 8%. Actual results may differ [jobless rate hit 10.2% in October], as they say.
• Equally bad is a proposed solution for a problem that does not exist or has been greatly exaggerated. Take the manmade global warming scare. It is uncertain that a warming trend will continue (it has been in remission for the last 10 years), the contribution of human activities to global temperatures has not been clearly established, and an abrupt switch to renewable energy sources would be immensely expensive and disruptive. See the Energy page of this Website and the blog entries listed thereon.
Global warming alarmists have traditionally advocated reducing the volume of carbon emissions (CO2, etc.) so that CO2 would stop building up in the Earth’s atmosphere (it is currently some 390 parts per million, versus 280 parts per million in 1800).
Now some environmentalists have upped the ante, saying the level of atmospheric CO2 must be reduced to no more than 350 parts per million. Cost and/or technical feasibility are beside the point in their view.
Two years ago, after leading climatologists observed rapid ice melt in the Arctic and other frightening signs of climate change, they issued a series of studies showing that the planet faced both human and natural disaster if atmospheric concentrations of CO2 remained above 350 parts per million.
Everyone from Al Gore to the U.N.’s top climate scientist has now embraced this goal as necessary for stabilizing the planet and preventing complete disaster. Now the trick is getting our leaders to pay attention and craft policies that will put the world on track to get to 350.
3. Proposals presented deceptively – In selling a product or service, there is a natural tendency to emphasize the expected benefits while saying as little as possible about uncertainties, cost, etc. Not for nothing does the law require “truth in advertising” from business firms.
There are no comparable safeguards, however, when it comes to government policies or programs. Consider the deceptive sales pitches for the economic stimulus bill, the president’s healthcare plan, and proposed energy legislation (cap and trade plus). “Happytalk” blossoms in the nation’s capital, 7/6/09.
There has been a willingness to shade the truth at the highest levels, as for example when the president suggests that his healthcare proposal could be implemented without adding to the government’s fiscal woes or raising costs/degrading coverage for people who currently have healthcare insurance. Providing HCI coverage for, say, 30 million more people would be costly, and it is unclear how offsetting savings could be achieved without government-imposed rationing (which has not been talked about). Trick or treating with healthcare reform, Kristine Iverson, Washington Examiner, 11/8/09.
The President asserts that we spend so much money on healthcare "that doesn't make us any healthier" that he can finance most of the reform plan with the savings, but he never says what he believes is wasteful. People going to the doctor too much? Doctors doing too many tests? The only way his health reform proposal can achieve these savings is by telling people when they can go to the doctor and telling doctors how to treat patients.
Surrogates and advocacy groups also contribute to the confusion. Consider the claim of the International Energy Administration that global energy prices will double unless a deal to limit carbon emissions is reached at the December meeting in Copenhagen. IEA says no emissions deal will double bills, Rowena Mason, UK Telegraph, 11/10/09.
The independent body said the huge price of tackling climate change will eventually be overtaken by the cost of remaining dependent on fossil fuels, which are becoming more difficult and expensive to extract. It estimates that Europe's annual energy bill will more than double to $500bn (£300bn) by 2030, as the oil price is likely to reach $100 per barrel by 2015 and $190 by 2030.
Actually, as this article seems to acknowledge, government-dictated constraints on the use of fossil fuels would drive up energy prices versus the status quo.
As for the world being fated to run out of petroleum reserves fairly soon, this view is belied by, among other things, new techniques for extracting natural gas from shale deposits. Interestingly, the shale gas breakthroughs occurred in this country, and they represent a triumph for the private sector. America’s Natural Gas Revolution, Daniel Yergin and Robert Ineson, Wall Street Journal, 11/2/09.
Preliminary estimates suggest that shale gas resources around the world could be equivalent to or even greater than current proven natural gas reserves. Perhaps much greater. But here in the U.S., our independent oil and gas sector, open markets and private ownership of mineral rights facilitated development.
4. Dissent dismissed – The purposeful avoidance of meaningful discussion is not conducive to developing the best government policies. It is also infuriating to the people who feel they are being ignored. Here are some recent examples.
The opposition party has had a very limited opportunity to influence important legislation this year, starting with the economic stimulus bill. Although the president invited Congressional leaders of both parties to the White House in January, he was reportedly unreceptive to suggestions about the size or makeup of the stimulus package. Obama to GOP: “I won,” Jonathan Martin and Carol Lee, politico.com, 1/24/09.
President Obama listened to Republican gripes about his stimulus package during a meeting with congressional leaders Friday morning - but he also left no doubt about who's in charge of these negotiations. "I won," Obama noted matter-of-factly, according to sources familiar with the conversation.
We do not recall reading of participation by opposition party leaders in subsequent White House meetings of this nature, i.e., the president typically confers with the Congressional leadership of his own party only.
In Congress, opposition party members have been excluded from bill drafting sessions and asked to vote on major bills without adequate time to read them. To be complete, their party is said to have used similar tactics when the shoe was on the other foot. The Death of Deliberative Democracy, Michelle Malkin, Townhall.com, 11/6/09.
In June, Pelosi's Imperial Congress severely curtailed debate on the House cap-and-tax bill and rammed a 309-page manager's amendment through the legislative grinder at 3 a.m., which no one read before the vote just hours later. As GOP Rep. Mike Pence pointed out on the House floor, the "debate" was a "travesty." So much for procedural fairness: 224 GOP amendments were denied by the majority.
At the same time and somewhat inconsistently, the opposition party has been accused of lacking ideas and failing to offer alternatives. See, e.g., GOP takes “targeted” healthcare approach, Jennifer Haberkorn, Washington Times, 9/29/09.
"All the amendments today are not [a] health reform plan, but rather they're attacking this, attacking that, something here, something there," said Finance Chairman Max Baucus, Montana Democrat, during the committee's markup session last week. "I don't know what the Republican alternative is. ... I don't see a massive or a big, large proposal on the other side for an alternative. I don't see one."
Actually, the opposition party has offered its own healthcare reform bill. They even got it scored by the Congressional Budget Office. But no matter, as the party in power was not of a mind to discuss it. CBO: Republican health[care] plan would reduce premiums, cut deficit, Susan Ferrechio, Washington Examiner, 11/5/09.
"Here's the Bottom line - Americans lose and Insurance companies win under the Republican plan," Pelosi spokesman Nadeam Elshami said.
Criticism or questions have not been welcomed from sources outside the political establishment either. For example:
• Tea party participants have been dismissed as an angry mob, organized by the opposition party. Check out this video, which was sponsored by the Democratic National Committee in August.
The charge was well wide of the mark. Apparently, roughly 60% of the country is part of an “extremist mob,” Mary Katharine Ham, Washington Examiner, 8/5/09.
It's utterly probable that some—even many— of the concerned folks showing up at health-care town halls are the kind of older, white, Middle America Democrats Obama went to great pains to woo. The rows of VFW ballcaps and suspiciously well-dressed protesters bespeak a contingent of Hillary Democrats and even the ballyhooed Obamacans, convinced by Obama's moderate shtick and now left wondering what they got themselves into. And, if such folks are not in those crowds, they are in the 60 percent of voters who identify with them, as are the all-important Independents.
• Unfavorable media coverage has been dismissed as obstructionist rant and/or attributed to the opposition party. White House Escalates War of Words With Fox News, FoxNews.com, 10/12/09.
"What I think is fair to say about Fox -- and certainly it's the way we view it -- is that it really is more a wing of the Republican Party," said Anita Dunn, White House communications director [since departed], on CNN. "They take their talking points, put them on the air; take their opposition research, put them on the air. And that's fine. But let's not pretend they're a news network the way CNN is."
• Industry groups expressing contrary opinions have been dismissed as motivated by self-interest. W.H. makes “enemies” of Bush allies, Jon Ward, 10/22/09.
"When you're on their side, it's all OK, but if you're not, they rain hell down on you," said R. Bruce Josten, executive vice president of the U.S. Chamber of Commerce, bemoaning the administration's bellicose response to differing opinions on health care and financial regulatory reform proposals.
• Meanwhile, there has been little apparent willingness to engage in substantive discussion. Consider the Speaker of the House’s response to a question that seems entirely legitimate to us (in fact, we asked it rhetorically in last week’s entry): What provision of the Constitution empowers Congress to require people to buy healthcare insurance? A Minority View: Constitutional Contempt, Walter E. Williams, Townhall.com, 11/11/09.
At Speaker Nancy Pelosi's Oct. 29th press conference, a CNS News reporter asked, "Madam Speaker, where specifically does the Constitution grant Congress the authority to enact an individual health[care] insurance mandate?" Speaker Pelosi responded, "Are you serious? Are you serious?" The reporter said, "Yes, yes, I am." Not responding further, Pelosi shook her head and took a question from another reporter. Later on, Pelosi's press spokesman Nadeam Elshami told CNSNews.com . . . "You can put this on the record. That is not a serious question. That is not a serious question."
Really? Don’t try telling that to veteran newspaperman Seth Lipsky, who has studied the Constitution over the years and is fond of asking “Where does the Congress get the power to do that?” or the equivalent. Our “Constitutional” Moment, James Taranto, Wall Street Journal, 11/14/09.
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Crucial issues ignored, bad ideas entertained, proposals presented deceptively, dissent dismissed. Somehow, this does not sound like the way to arrive at good answers.
As we said at the beginning, “is this any way to run a country?”
If not, what needs to be done about it? Tune in next week for further discussion.
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11/9/09 – GovCare: good intentions are not enough. Read Replies
Before trying to fix a machine, one needs to understand how it works. The same goes for complex systems like healthcare, and it behooves all of us to look into the “reforms” being proposed rather than accepting them at face value.
The facts are complicated, but the basic difference of opinion between the supporters and opponents of government-run healthcare (GovCare) turns out to be simple.
Some observers see healthcare as an economic commodity, with prices and availability determined by supply and demand. We would call them realists.
Others see healthcare as a human right, which can be provided without regard to ability to pay because everyone wants to help. Call them idealists.
And then there is Regina Herzlinger of the Harvard Business School, who seems to want to have it both ways. The resulting tension is palpable in her book, Who Killed Health Care, McGraw-Hill (2007), which demonstrates that government-run healthcare will not work but does not necessarily identify a viable alternative.
Present top-down system – Many observers of the healthcare system use a story to express their conclusions in human terms; Professor Herzlinger is no exception. She tells of Jack Morgan’s premature death from kidney disease, which is a composite based on elements from various actual situations. And when it happened, that “was the day I knew our healthcare system had died along with him.”
Jack Morgan was a self-employed restaurateur, middle-aged, with healthcare insurance (HCI) of the managed care type. He developed kidney disease and underwent years of dialysis. A transplant became necessary, and a daughter wanted to provide a healthy kidney, but Jack did not get the surgery in time. He contracted an infection and died, a victim of “an inept, malfunctioning, costly healthcare system.” Herzlinger, pp. 17-26.
Everyone involved was to blame, as the author tells the story, other than doctors and the patient.
• The HCI provider’s approval procedures for a kidney transplant were bureaucratic and slow – reflecting a bias against covering major expenditures.
Such a situation is far from unique. California-based healthcare insurer/provider Kaiser Permanente (a pioneer in providing integrated healthcare on a long-term basis) had more than 100 people die while waiting for kidney transplants in 2005. The problem developed after Kaiser decided to treat kidney transplant patients in its own hospitals rather than referring them out, without providing the staffing necessary to make the program function properly. Kaiser was forced to shut down the in-house transplant program. Herzlinger, pp. 32-36.
• Hospitals had become so inefficient and expensive that Jack Morgan did not have the option of giving up on the HCI provider and paying for the transplant operation himself. Herzlinger, p. 88.
U.S. hospitals hide their prices, so Jack was not sure how much it would cost; but he knew it would be a hundred thousand dollars or more. Jack also knew that if he went to the hospital as a self-paying uninsured patient, they would likely charge him their very highest price, and if he could not pay, they would hound him, taking everything he had worked so hard to acquire and bankrupting him in the process. It did not matter if the hospital was nonprofit or carried a religious name.
• Although Jack Morgan was self-employed, U.S. employers fostered a mindset that contributed to his death by providing HCI coverage for their employees and turning the plans over to human resources to manage. Herzlinger, pp. 111-112.
Faced with rising healthcare costs and with federal requirements and subsidies, encouraged by the academics about Kaiser, and influenced by the HR crowd, companies began to restrict those policies to ones that managed care. But the new version of managed care that they selected bore scant resemblance to the early incarnation of Kaiser. Those new versions were managed by tough businesspeople who understood that a good way to make a buck was to tightly manage the use of healthcare services for the sick and disabled.
• Congress passed 1972 legislation providing public funding for the victims of kidney disease, which was accompanied by rigid rules as to how the money should be spent. As a result, Jack Morgan underwent a course of treatment that was far from ideal for his case. Herzlinger, pp. 115-129.
. . . many experts disagree with the Congressional remedy. A number of nephrologists believe the victims of kidney disease need more dialysis, perhaps daily. Nevertheless, Congress, with its relentless eye on the Epogen meter [ a gold mine for Amgen], instead chose to continuously increase those expenditures, despite mounting evidence that the higher doses of epo are bad for your health. *** Suppose Jack Morgan [had been] given the $65,000 or so [per year] that Congress spent on his dialysis. Do you think that some entrepreneurs would have offered him kidney care bundled into one package of doctors, dialysis, and drugs? Do you think he might have opted for less epo and more dialysis? Less epo and more physician visits? Less epo and more preventive care?
• Academics contributed by pushing for government-run healthcare, or failing that managed care or pay for performance (anything but patient choice and competition), thus providing intellectual cover for the mistakes others have made. Herzlinger, pp. 131-137.
Motive: “Academics favor the single-payer solution for many reasons; but surely one of them, acknowledged or not, is that it puts them, as advisors to the government, in charge of spending $2 trillion.”
Mistakes: (1) Excessive reliance on statistical analysis, which “can cause a smart person to believe that she can detect things that the experienced practitioner in the field misses.
(2) Unjustified stress on “the shortcomings of business as opposed to nonprofits, governments, and nongovernment organizations (NGOs).”
Lack of vision: Dr. Joe Murray and associates performed the first successful kidney transplant, an accomplishment for which he received a Nobel prize in 1990, but this procedure was much criticized initially and took decades to be widely replicated. Will others emulate Murray’s example “in today’s environment, in which an Ivory Tower academic establishment continually denigrates the professional judgment and economic ethics of the doctors who actually practice medicine”?
Proposed consumer-driven system – Herzlinger recommends that the healthcare system be reorganized to place the resources currently spent on group coverage at the disposal of patients acting on the advice of their doctors. Then HCI providers, hospitals, clinics, drug companies, etc. should be freed to compete for the available business.
The prospective payoff: innovative new services, greater efficiency, lower prices, and greater consumer satisfaction. Maybe it would no longer be necessary to go to Thailand for a hospital that looks like a Four Seasons hotel, has an efficient and attentive staff, and provides first class medical care at a fraction of the U.S. price.
Absent such adjustments, more and more consumers may decide to go abroad for major medical procedures. Herzlinger, pp. 85-88.
If U.S. hospitals are not radically restructured, future Jack Morgans may simply hop a jet to avoid the expense, the wait, and the horrible possibility that their illnesses may kill them before they obtain the care they need. Already, insurers like the brilliantly managed Blue Cross Blue Shield of South Carolina are investigating this option for their members. Our big, greedy hospitals and their overpaid, politically manipulative executives may find themselves with big empty waiting rooms and depleted bank accounts.
Albeit market-based, the new healthcare system would hardly be government-lite. Here is the basic framework (Herzlinger, pp. 247-258):
• Individuals required to obtain individual/family HCI. Employers who currently provide HCI coverage turn over the cash to their employees; the cash is tax-free so long as it is used to buy HCI. Self-employed individuals receive a tax deduction for money used to buy HCI. The government subsidizes HCI coverage or provides a government plan for individuals who otherwise could not afford HCI. (The Massachusetts healthcare system, which was being implemented as the book was being written, is cited with approval.)
• Sick people pay the same price for HCI as healthy people, with coverage quoted on a risk-adjusted basis. This means that insurers with relatively healthy clients (on average) must divert a portion of their revenues to insurers that have taken on more health risk. (The Swiss healthcare system uses such a procedure.)
• Healthcare providers bundle care as they see fit and quote their own prices, thereby facilitating market-based pricing. The government requires publication of accurate data on the prices and performance of all healthcare providers so the market will function efficiently.
Discussion – Consider the case being made for GovCare. Nearly everyone will get HCI – only way to bring healthcare costs under control – waste and abuse will be curbed – more money invested in preventive care – if you like your HCI, you can keep it – crack down on insurance company abuses – a public option (if included) will compete with the private insurers and keep them honest.
According to Herzlinger, however, healthcare providers (including doctors, in our opinion, although she exempts them from scrutiny) operate inefficiently and provide unnecessary services due to economic incentives spawned, to a large extent, by government policies. Piling rules on top of the existing rules and increasing the size of government spending programs (e.g., Medicaid) would be more likely to inflate costs than to lower them. Real cost reduction can only be achieved by putting consumers in charge. Herzlinger, p. 1.
A system controlled by the insurance companies or hospitals or government will kill us financially and medically – it will ruin our economy, deny us the healthcare services we need, and undermine the important genomic research that can fundamentally improve the practice of medicine and control its costs.
We agree. People should be empowered to make their own healthcare decisions – with input from doctors and family members – rather than viewing these matters as mysteries that only managed care administrators (whether employed by insurance companies or the government) should address. And experience with Medicare and Medicaid over the past 40+ years has amply demonstrated that government-run healthcare does not work well.
But if one believes in a free market, there is no good reason to provide a tax incentive for the consumption of healthcare. Accordingly, SAFE would cure the current inequity in the tax law by taxing employer-provided healthcare benefits, not by creating a tax benefit for those who buy HCI on an individual basis.
Requiring people to obtain HCI raises questions as well? What provision of the Constitution justifies such an infringement of personal liberty? Wouldn’t this necessarily get the government involved in defining “acceptable” HCI coverage? Kiss Your Money and Freedom Goodbye, Mark Hillman, Townhall.com, 10/16/09.
From a practical standpoint, the requirement to purchase health insurance will start badly and grow even worse. That's because the choice of what kind of insurance to purchase will no longer belong to consumers but to politicians and bureaucrats, relentlessly pressured by lobbyists to add to every conceivable screening or procedure in the nanny-state's wish list to your mandatory policy.
Also, some people might flout the HCI mandate. What would happen to them? In Massachusetts, a couple is being fined $1,000 per year because, for perfectly rational reasons, they prefer a higher deductible policy than the state wants them to have. Paying the Health[care] Tax in Massachusetts, Wendy Williams, Wall Street Journal, 10/15/09.
The state requires that health plans cap out-of-pocket expenses for individuals (not including monthly premiums) at $2,000 a year. Our plan's cap is $2,500. Today, we pay about $300 a month for catastrophic care. If we went with the next step up in plans offered to us by IBM (a former employer), our monthly premium would increase to $800. We simply don't need to pay that kind of money for the amount of health care we actually consume.
Under the House bill, it is said, someone who refused to get the required HCI coverage or pay the prescribed fine might be sent to prison. Pelosi: Buy a $15,000 Policy or Go to Jail, Press release: Representative Dave Camp (R-MI), 11/6/09.
While it is easy to agree in principle that the government has some degree of responsibility to ensure healthcare for the poor, there are obvious problems in deciding where to draw the lines. Who should be considered poor, what is the minimum acceptable level of healthcare, and how much should the government spend in total?
Tough questions, and there is little reason to think that mandated HCI coverage would help to answer them. The Price of RomneyCare, Wall Street Journal, 7/29/08.
. . . only about 18,000 people -- or 5% of the newly insured -- have taken advantage of the "connector," which was supposed to be the plan's free-market innovation linking individuals to private insurers. Most of [the] growth in coverage has instead come via a new state entitlement called Commonwealth Care. This provides subsidized insurance to those under 300% of the poverty level, or about $63,000 for a family of four.
In summary, SAFE believes GovCare would represent a step in the wrong direction, and we are far from alone. Several conservative publications have made the point admirably in their editorial columns. See, e.g., The Worst Bill Ever, Wall Street Journal, 11/1/09.
In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.
Even the [Wilmington] News Journal rejected the House bill in an 11/7/09 editorial.
It will bring health insurance to more people, and that is a good thing. But the bill, as it is written, will not reform how healthcare is done in the country and it most certainly will not lower the system's costs. In fact, many of the savings the bill supposedly will bring are chimerical.
With unemployment now standing at over 10% and still headed up, it would be hard to imagine a less appropriate time to try and ram through a new government entitlement program that would add to the economic pressures on employers that must decide whether to start rehiring on not.
Moreover, the case that has been made for GovCare is exceedingly thin. At bottom, the proposal is based on faux logic and wishful thinking – not reasoned analysis about how the healthcare system actually works and can be made to function better.
If you do not believe us, read “Who Killed Healthcare” or one or more of the other excellent books that are available on this topic.
• The Innovator’s Prescription: A Disruptive Solution for Health Care, Christensen, Grossman and Hwang, Harper-Collins (2008) – Innovator’s Prescription
• Who Killed Health Care? Regina Herzlinger, McGraw-Hill (2007). – Who Killed Healthcare
• The Cure: How Capitalism Can Save American Health Care, David Gratzer, M.D., Encounter Books (2006) – http://tiny.cc/ZhHs1
• The End of Medicine: How Silicon Valley (and Naked Mice) Will Reboot Your Doctor, Andy Kessler, Harper-Collins (2006) - http://tiny.cc/4gvFE
• The Last Well Person: How To Stay Well Despite the Health-Care System, Nortin M. Hadler, M.D., McGill-Queen’s University Press (2004) – Last Well Person
In closing, remember this. Just as war is said to be too important to leave to the generals, healthcare is too important to be left to the politicians!
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Machiavelli in his own inimitable way said it best: "When it is absolutely a question of the safety of one's own country, there must be no consideration of what is just or unjust, of merciful or cruel, of praiseworthy or disgraceful." We should not prefer being humbled to being pertinacious when our country's honor is at stake. - Alex Wysocki, The Conservative Caucus of Delaware
Sorry, I got totally lost on this one. – SAFE member
I am speechless! Every “I” is “dotted” and every “T” crossed. I had never heard about Jack Morgan. I am praying believe me. This is the death or life of our Republic. – Steel supply firm executive, Texas
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11/2/09 – Healthcare insurers: imperfect yes, demons no.
As previously reported (10/26/09 entry), one of the primary arguments for creating a government-backed entity to offer healthcare insurance has been the alleged shortcomings of private HCI providers – callous behavior to maximize profits, inefficiency, and limited competition.
This week, we will review some of these claims. But first, a quick update on Congressional maneuvering over whether there should be a “public option.”
Update – Support for a public option is strong in the House of Representatives, ostensibly in order to foster competition in the HCI market and provide consumers with more choice. Indeed, why not call it a “consumer option” or “competitive option”? “Public Option” Needs New Name, Pelosi Says, cb5.com, 10/26/09.
Sure enough, there was a public option in the House bill unveiled on October 29 – but it had been toned down to defuse criticism about paying healthcare providers based on the niggardly Medicare reimbursement rate schedule. Battles over cost, taxes, Medicare loom for House health[care] plan, Jennifer Haberkorn and Kara Rowland, Washington Times, 10/30/09.
The final House draft -- a merging of three committees' work over the past months -- does not have the so-called robust public option, which was favored by liberal Democrats and would have reimbursed doctors based on Medicare rates plus a 5 percent premium. The more moderate version would allow the Department of Health and Human Services to negotiate rates with providers, as private insurers do.
According to a preliminary analysis of the Congressional Budget Office, utilization of the public plan would not drive out private HCI coverage. Of the 30 million people enrolled in insurance exchange plans (21M on an individual basis, 9M through employer plans) by 2019, only about 20% (or 6M) would be in the public plan.
Maybe, but the underlying assumptions sound rather speculative, and they could easily be invalidated by adjusting the details of the proposal. CBO letter to Representative Charles Rangel et al., 10/29/09, page 6. (Letter is accessible through the CBO blog link below.)
That estimate of enrollment reflects CBO’s assessment that a public plan paying negotiated rates would attract a broad network of providers but would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges. The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers participating in the exchanges. The public plan would have lower administrative costs than those private plans but would probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees. (The effects of that “adverse selection” on the public plan’s premiums would be only partially offset by the “risk adjustment” procedures that would apply to all plans operating in the exchanges.)
Meanwhile, Senate Majority Leader Harry Reid (D-NV) has announced that the healthcare bill to be introduced on the Senate floor will, unlike the bill cleared by the Finance Committee, contain a public option – albeit one states could “opt out” of.
Details are yet to be provided, but the opt-out provision would apparently only apply to the benefits involved and not to the duty of paying for them. I’ll Pass on “Opting Out,” Ann Coulter, Townhall.com, 10/28/09.
It's like a movie theater offering a "money back guarantee" and then explaining, you don't get your money back, but you don't have to stay and watch the movie if you don't like it.
Several senators who oppose a public option are underwhelmed, and 60 votes may not be available. If the Senate bill stalls, adjustments will be considered – including an approach favored by the senior senator from Delaware. No momentum in Senate for Reid’s public option plan, Susan Ferrechio, Washington Examiner, 10/28/09.
Sen. Tom Carper, D-Del., is waiting in the wings with a plan that would create a national insurance program, operated by a nonprofit board, that would be put in place with a trigger but would also allow states to both opt in and opt out under certain circumstances. * * * "I call this the 60-vote option," he said.
The controversy about the public option seems overdone, perhaps by design. As political strategist Dick Morris notes, an extended debate about this feature of the Senate bill could divert attention from other issues. Reid’s Bait and Switch Tactics, Dick Morris and Eileen McGann, Townhall.com, 10/28/09.
By making such a fuss over the public option, with the connivance of the liberals, [Senator Reid] keeps the spotlight away from the Medicare cuts, the end of Medicare Advantage, the inevitable rationing of health care, the taxes on the uninsured and the sick, and the cuts in medical reimbursement. A bill with all these provisions -- even without a public option -- is pernicious enough!
And even if a public option was stripped out of the Senate bill, it could readily be reinstated in the conference to reconcile differences with the House bill.
Greedy insurers – There are many stories of HCI providers denying healthcare to patients who desperately needed it, thereby causing serious harm or death. Here is one that former trial lawyer John Edwards used on the campaign trail.
Just 17 years old, afflicted with leukemia, [Nataline Sarkisyan] needed a liver transplant, but the insurance company Cigna refused to cover the surgery. After being picketed by nurses and the family, the insurer relented, but too late: She died that same day.
It is implied that Cigna’s decision to deny a liver transplant was made simply to safeguard its bottom line, but the situation was more complicated.
Dr. Goran Klintmalm, head of the Baylor Regional Transplant Institute in Dallas, told The Los Angeles Times the surgery was "very high-risk" and "on the margins." Even on the best prognosis, [Nataline] stood a one-in-three chance of dying -- after undergoing a very expensive operation and taking a liver that might otherwise have gone to someone with a better chance of survival.
Perhaps Cigna erred in this case, but the same decision might well have been made in a government-run healthcare system. Consider that Americans currently get far more liver transplants per capita than residents of Canada, France and the UK. Creators Healthcare Delusions, Left and Right, Steve Chapman, Townhall.com, 10/25/09.
To bolster the impression that HCI providers are miserly, it has been claimed that their profits have skyrocketed, they earn “obscene profits” while “the bodies pile up,” etc. Actually, their profits are pedestrian in comparison to those earned in other industries. Health[care] insurer profits not so fat, Calvin Woodward, myway.com, 10/25/09.
Health insurers posted a 2.2 percent profit margin last year, placing them 35th on the Fortune 500 list of top industries. As is typical, other health sectors did much better - drugs and medical products and services were both in the top 10.
HCI providers do seek to earn a profit, however, and young, relatively healthy individuals are cheaper to cover than people who are older or have serious health problems. To the extent that HCI coverage is provided on the basis of individual health risk, it will invariably be more expensive for people in the latter category – just as automobile insurance costs a lot for young, male drivers.
Inefficiency – Some observers claim HCI companies have excessive overhead, e.g., 30% versus 3% for Medicare. The reasons are said to include a “practice of encouraging their employees to revoke sick people’s health[care] coverage.” Real people for real health[care] reform, JoAnne Cabry [Democracy for America], News Journal, 10/17/09.
Were this 10:1 overhead ratio valid, it would be hard to oppose a public option, but the claim seems dubious for reasons on both sides of the equation.
• The 30% overhead factor for private HCI providers is overstated. Thus, Selling, General and Administrative Expense is running about 15% of revenues at WellPoint, one of the industry leaders.
Some HCI provider CEO’s may be overcompensated, but not to an extent that would have a material impact on overall costs. Thus, Ronald Williams of Aetna had a $24 million compensation package in 2008 per the company’s proxy statement, versus total selling, general and administrative expense of $5.8 billion.
• The 3% overhead factor for Medicare is understated. Medicare’s Hidden Administrative Costs: A Comparison of Medicare and the Private Sector, Council for Affordable Health[care] Insurance, Merrill Matthews, 1/10/06.
. . . private sector insurers must track and divulge their administrative costs, while most of Medicare’s administrative costs are hidden or completely ignored by the complex and bureaucratic reporting and tracking systems used by the government. This study, based in part on a technical paper by Mark Litow of Milliman, Inc., finds that Medicare’s actual administrative costs are 5.2 percent, when the hidden costs are included.
Furthermore, the government is reportedly paying some $60 billion per year in bogus Medicare claims, apparently due to lax review and verification of claims. Fraud plagues government healthcare, Washington Examiner, 10/27/09.
One of the criminals explained [in a 60 Minutes broadcast] that Medicare management was so lax that he got $150,000 by claiming reimbursement 10 times for a "gas-powered prosthetic arm." The same criminal said there are "thousands" of companies in the Miami area being paid for such fraudulent claims every day. A lawyer with extensive experience defending those accused of Medicare scams told "60 Minutes" that Medicare fraud is bigger than the drug trade in South Florida.
What could be done to make things better? Perhaps more checking is needed.
Attorney General Eric Holder told "60 Minutes" the government needs a bigger budget and more employees before it can stop the fraud. But HHS has worked for more than two decades to clean up Medicare fraud and currently has more than 63,000 employees. If, after working all those years -- with the Justice Department, FBI and state authorities -- HHS still can't stop Medicare fraud, why is hiring more people and fattening up the department's budget going to do the trick?
Lack of competition – It is said that HCI providers are not subject to enough competition in the state markets they serve. Here is the situation in Delaware, for example, according to the “Real people for real health[care] reform” column.
We reminded Sen. Carper that insurance companies are not subject to federal anti-trust laws, and consequently 47 of our states have three or fewer insurance companies. We used Dover as an illustration, showing that Blue Cross has 55 percent of the market and Coventry has 25 percent. When we asked the senator to explain how any entity other than a publicly managed insurance plan could compete in Dover when 80 percent of the market is controlled by two companies, he had no answer.
The long-standing exemption of insurance companies from the federal anti-trust laws is based on their activities being subject to state regulation. Notwithstanding recent statements to the contrary, said exemption has had little effect on the competitiveness of the HCI markets. Competition and Health[care] Insurance, Wall Street Journal, 10/21/09.
Also, the quoted statistics are inconsistent with information (2006 data) posted by the Delaware Insurance Commissioner, which indicate that three (not two) companies dominate the HCI market in this state.
5 largest HCI providers
Blue Cross Blue Shield of Delaware Inc.
Coventry Healthcare of Delaware
Total for the 5 companies
*Apparently does not include revenues from administering the DuPont Company healthcare plans for thousands of employees and retirees who live in Delaware, else Aetna’s market share would be higher than 4%.
All things considered, it is not apparent to us that the HCI market in Delaware is excessively concentrated. Perhaps the lack of competition in other states is also less serious than has been claimed.
But there is inadequate competition in another sense, namely products offered versus the number of competitors. To foster lower prices and innovation in the healthcare industry, HCI providers need to diverge from the traditional HCI model. The reason is simple – and has been borne out repeatedly in other industries. Who Killed Health Care, Regina Herzlinger, McGraw-Hill (2007), p. 53.
Productivity gains arise primarily from innovations driven by entrepreneurs. Productivity arises organically, not technocratically. We celebrate Thomas Edison, Henry Ford, and Sam Walton because they transformed how energy was used, cars were manufactured, and goods were sold. We do not celebrate them because they muscled down their suppliers’ prices and barred consumers from needed goods. Entrepreneurs, not bureaucrats, create the innovations that increase productivity.
Traditional HCI covers essentially all healthcare outlays (subject to a low deductible and modest co-pays), giving consumers little incentive to control demand while putting pressure on HCI providers to do so for them. The predictable result: soaring HCI premiums and continuous friction between HCI providers and their clients.
Dominance of the traditional model has resulted from several factors, including the tax subsidy for employer-provided HCI plans, state-imposed requirements as to what healthcare services must be covered by an “acceptable” HCI plan, and barriers to buying HCI from out of state. But still, there have been some success stories, such as this one. Who Killed Health Care, p. 217.
Definity Health, a venture-capital-backed business, designed a new policy that offered insurance only for catastrophically expensive healthcare, usually coupled with tax-supported health savings or reimbursement accounts whose funds can be used to pay for uninsured medical needs and 100 percent of preventive care. The policy was up to 40 percent cheaper than traditional ones. The results? Only a few years after the policies were first offered, by Definity and others, more than 9 million Americans had enrolled. As for Definity, it did well while it did good – the firm was purchased a few years after its founding by United Health Group for approximately $340 million in 2004.
The healthcare system desperately needs more such innovation. Do not expect it to be facilitated, however, by the provisions of the monstrous healthcare bill (House version reportedly runs 1,990 pages) that is in the making.
Also, if HCI providers are not single-handedly to blame for the shortcomings of the current healthcare system, who else may be contributing to the problem? Tune in next week for a review of some of the other suspects.
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10/26/09 – Crunch time in the healthcare debate.
As of two months ago, we concluded that none of the healthcare “reform” plans under active consideration were worthy of support – including a Senate Finance bill without a “public option.” Healthcare: deal or no deal? 8/24/09. Subsequent events have confirmed our opinion, as will be discussed in this entry.
To set the stage – Here is a brief recap of the proposed healthcare plan (referred to for convenience as “GovCare”).
• GovCare focuses on the wrong problem, namely reducing the number of people without healthcare insurance (HCI) versus reining in the soaring cost of healthcare (roundly 50% of which is paid for by the federal and state governments, or ultimately by taxpayers). A “ready, aim, fire” approach to healthcare reform, 3/30/09.
• The details are poorly defined, with several alternative bills in play and much uncertainty about several key provisions. Look for continued delays in publishing the text of draft bills down the GovCare home stretch. No, you can’t read the legislation: Democrats try to sneak through unexamined health bills, Washington Times, 9/25/09.
When major legislation is completed, it is the result of negotiations that can be years in the making, with many last-minute changes. Hundreds of pages can get jammed into bills in the middle of the night with only a few staffers knowing what's in them.
Even if the “legislative language” was made available on a timely basis, who would read and understand it? Not many, suggests one senator, who finds it more practical to work with the “plain English” version of major bills. Finance Committee Democrat Won’t Read Text of Health Bill, Nicholas Ballasy, CNSNews.com, 10/2/09.
Sen. Thomas Carper (D.-Del.), a member of the Senate Finance Committee, told CNSNews.com that he does not “expect” to read the actual legislative language of the committee’s health care bill because it is “confusing” and that anyone who claims they are going to read it and understand it is fooling people.
• GovCare would be expensive, and the cost would predictably be imposed on taxpayers and healthcare consumers. No Free Lunch: The True Cost of ObamaCare, Matt Patterson, National Center for Public Policy Research, October 2009.
. . . the main health care proposals working their way through Congress would in fact come at a painful price - higher insurance premiums, more and higher taxes, fewer jobs, lower wages, a reduced standard of living and an erosion of privacy and individual liberty.
Congressional Budget Office cost estimates for the various versions of GovCare are on the order of a trillion dollars over the next 10 years, and – despite the yeoman efforts of the CBO – these estimates are probably underestimated. Déjà vu: Scoring a healthcare bill, 10/12/09.
As an example of the budgetary games being played, consider the “Doctor Fix” – a moratorium on the “sustainable growth rate” (SGR) formula that could otherwise result in mandated cuts in Medicare payments to doctors. Congress has waived the application of the SGR provision on an annual basis, and will no doubt continue to do so, but the Senate Finance Committee (Baucus) bill numbers were sweetened by assuming a Doctor Fix only in the first year of the 10-year projection period.
When the American Medical Association lobbied for a permanent Doctor Fix, it was packaged in a separate bill to avoid raising the apparent cost of the Baucus bill. Defecting Democrats derailed the separate bill, but this outcome is not necessarily final. Temporary Beltway Sanity, Wall Street Journal, 10/22/09.
Yesterday saw some rare good news on the health-care front, with the stealth Democratic plan to move $247 billion in ObamaCare costs off the books collapsing in the Senate on a procedural vote of 47 to 53. Maybe there's more anxiety among Democrats about a huge permanent increase in government health spending than the White House is willing to let on.
• GovCare would be unaffordable. The government is already in a huge fiscal hole. While an additional $1 trillion in spending over the next 10 years could be covered by additional taxes, this would reduce the resources available to cover the deficits that are already projected. We reminded the member of Congress of this point in July.
Forget about raising taxes to pay for new spending programs, e.g., the healthcare bill. There is just so much people are willing to pay in taxes, and whatever tax increases may wind up being imposed will be needed to balance the budget. Instead, try eliminating wasteful government spending and government regulations that serve no useful purpose; there are many opportunities.
For the foregoing reasons, Congress should acknowledge error and hit the reset button on healthcare.
We are not alone, but . . . In a Rasmussen poll taken in August, 54% of voters preferred “no healthcare reform passed by Congress this year” to “passage of the bill currently working its way through Congress,” while 35% said the opposite.
The percentage of voters preferring GovCare to nothing has reportedly risen to 42% since August, with corresponding shrinkage in the undecided. The percentage of voters in opposition remains at 54%, which would hardly suggest that GovCare has gained general acceptance.
If the president and his party want to force GovCare through, however, they have the votes to do so. Presumably factoring in this political reality, 65% of voters “expect the healthcare plan that emerges from Congress to be mostly what Democrats want.” Most Voters Say They Know Healthcare Bill Much Better Than Congress, Rasmussen Reports, 10/20/09.
The cost of dissent – Most people want to be on the “winning side” rather than taking a lonely stand on principle – even though everyone may lose as a result. Or as economist John Maynard Keynes famously said, “it is better to fail conventionally than to succeed unconventionally.”
Those who oppose GovCare risk being seen as obstructionists. Thus, per the aforesaid Rasmussen poll, 42% of voters “attribute nearly unilateral Republican opposition to partisan politics rather than questions about the details of the plan.”
The sentiment is understandable, as healthcare is a highly politicized topic. But why single out only one party, when both parties are motivated by partisan considerations?
Furthermore, the opposition party has offered a good deal of feedback on GovCare that parallels SAFE’s strictly nonpartisan views. Consider a 7/15/09 press release by Senator Mitch McConnell (R-KY), which includes statements such as the following.
As Republicans and Democrats debate the best way to reform health care, Americans are increasingly concerned about the price tag, and about who gets stuck with the bill. The federal deficit suddenly stands at more than a trillion dollars for the time in history, and so far this year we’re spending about $500 million a day in interest alone on the national debt. *** And now the advocates of a government takeover of health care are talking about spending trillions more.
No emerging consensus – Some people may believe that the battle over healthcare will end in a compromise that represents the best practicable outcome, but count us as skeptical.
Currently, the president’s party seems to be moving in the direction of imposing the most extreme version of GovCare that they think the American people will stand for – namely a public option that would pave the way for a “single payer” system within a few years. “The Public Option Comeback, Wall Street Journal, 10/22/09.
The public option's renewed momentum is mostly the product of the raw ideological willfulness of the progressive left. Led by Speaker Nancy Pelosi, they're not about to let a once-in-a-generation opportunity pass without a fight, and they view the public option as a down payment on single-payer health care.
The idea of a public option is said to be gaining traction with voters – and indeed to be supported by a healthy majority. Public option gains support, Dan Balz and Jon Cohen, Washington Post, 10/20/09.
On the issue that has been perhaps the most pronounced flash point in the national debate, 57 percent of all Americans now favor a public insurance option, while 40 percent oppose it. Support has risen since mid-August, when a bare majority, 52 percent, said they favored it.
If 54% of voters would prefer no action on healthcare to GovCare, how could 57% favor GovCare with a public option (which moderates of both parties have professed to be troubled by)? We can see two possible explanations.
• Some voters may visualize a government-run entity offering HCI in competition with private insurers as simply giving consumers an additional choice. Literally, that is what “public option” suggests, which is probably why the term was selected. But as Michael Tanner of the Cato Institute observes, that is not how a subsidized public option would actually work. Cognitive Dissonance on Healthcare Reform, Townhall.com, 10/20/09.
By way of evidence., consider how government intervention has led to domination of the market for housing loans. Between Fannie Mae, Freddie Mac and the Federal Housing Administration, over 90% of all U.S. mortgages are now federally guaranteed. Fannie’s Next Big Adventure, Wall Street Journal, 10/10/09.
Fannie and Freddie's guarantees and subsidies helped to create the housing disaster, which has led the Fed directly to purchase mortgage-backed securities and mess up the market for small mortgage lenders, which in turn is leading Fan and Fred to guarantee the debt of those small lenders. Market distortion is piled on market distortion until we have a mortgage industry that can't function without taxpayers being on the hook for every transaction.
• The private entities that provide HCI are none too popular either, so GovCare supporters have found insurance companies a convenient target. Their attacks may not prove much about the desirability of a public option, but they help to wear down the opposition.
The attack starts at the top. Thus, the president made 18 references to “insurance companies” in his 9/9/09 address to Congress, castigating them for tough business practices and bemoaning the lack of competition.
. . . in 34 states, 75 percent of the insurance market is controlled by five or fewer companies. In Alabama, almost 90 percent is controlled by just one company.
And without competition, the price of insurance goes up and quality goes down. And it makes it easier for insurance companies to treat their customers badly -- by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates.
Insurance executives don't do this because they're bad people. They do it because it's profitable. As one former insurance executive testified before Congress, insurance companies are not only encouraged to find reasons to drop the seriously ill, they are rewarded for it.
Even worse was the president subsequent claim that insurance companies have been using bogus studies (e.g., a report by Price Waterhouse & Co.) to demonstrate that GovCare would drive up cost and insurance premiums. We are unaware of any “bogus” studies, and the indicated conclusions are valid in our opinion. Unhealthy smoke and mirrors, Donald Lambro, Washington Times, 10/22/09.
There have been many attacks on insurance companies from lower level GovCare supporters, as exemplified by a column published in Delaware. Real people for real health[care] reform, JoAnne Cabry [Democracy for America], News Journal, 10/17/09.
The “real people” column reported that Ms. Cabry and allies had enjoyed a one-hour private audience with Senator Tom Carper (D-DE), in the course of which they had presented “overwhelming evidence” that a “strong federal insurance plan must be part of any genuine reform.” No sale, however, as Senator Carper was apparently sticking up for the insurance industry.
Rather than complaining that Senator Carper did not agree with them, it seems to us, the writer et al. should consider themselves fortunate to have been granted a one-hour private meeting. Few Delawareans enjoyed such access, certainly not SAFE.
We are also not persuaded by most of the substantive points in the column. Limited competition in the HCI market is probably due to state-by-state regulation versus exemption from the federal anti-trust laws, a public option would destroy private HCI (for reasons noted above), and it is hard to credit the overhead rates cited for private insurers vs. Medicare.
The insurance companies are hardly above reproach, however, as is well explained in “Who Killed Healthcare,” Regina Herzlinger (Harvard Business School), McGraw-Hill (2007). And to be fair, neither are most of the other groups vying for control of the healthcare industry, including hospitals, employers, the U.S. Congress, and academics.
To be continued – Time is short and we need to win this battle. The discussion will continue next week. Please stay tuned!
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10/19/09 – For better schools: get the right people, put them in charge, and stand back Read Replies
HANOVER, MD – What drew SAFE directors Jerry Martin, Steve McClain and Bill Whipple to the Chesapeake Science Point Public Charter School (CSP)? Perhaps this trip will seem a bit out of character, as we generally focus on policy issues at a macro level rather than getting into the details of specific operations.
One factor was the infectious enthusiasm of Spear Lancaster, a fellow SAFE member, who has played a key role in getting CSP up and running over the past five years – he is a strategist, cheerleader, and lobbyist par excellence. McClain and Whipple had heard part of the story at the National Taxpayer’s Conference in June, and wanted to hear more.
Also, Martin (our resident expert on Delaware government) and McClain (formerly a Delaware teacher and administrator) have considerable background in the educational field. The opportunity to compare notes and share experiences was naturally appealing.
So here we are, sitting at a table in Principal Fatih Kandil’s office as Kandil and Lancaster paint the picture for us.
CSP occupies a fine new building in a office park area. Certificates and good wishes were received from a number of public officials for the ribbon cutting on August 18, including the governor of Maryland, the county executive of Anne Arundel County, and several state legislators. Such accolades do not come automatically, and one gathers that CSP and its backers have done some good “public relations” work.
Currently, CSP is a middle school (grades 6-8), using one of the two corridor areas in the building. The other corridor area will be for the high school, which is to be phased in starting with grades 9 and 10 next year. The physical facilities are first rate, a tangible sign of a success story in the making; we will do a walk through a bit later.
Then there are the test scores, second highest in the state – some of the 7th grade students studying algebra – voluntary (and very popular) tutoring sessions on Saturday, not just for students who need help but also for those who want to progress faster – house calls to talk with parents – a science fair that has achieved state-wide recognition and is welcomed at the main University of Maryland campus in College Park. Wow!
Could it be that CSP is “cherry picking,” i.e., outperforming other schools because it attracts elite students? That seems unlikely for several reasons. For one, the school has at least a proportionate number of minority students and an excellent special education program. For another, students are selected from among the applicants through a lottery.
The only factor that might bias the selection process, it seems to us, is that the parents involved are sufficiently concerned about their children to submit applications to CSP in the first place. But if there is one thing that most parents have in common, it is a desire to see their children get a good start in life. And children naturally want to learn, once their interest is kindled. It only remains for the schools to help achieve these goals instead of permitting them to be stifled by uninspiring instruction and bureaucracy.
So does CSP get more money than other schools? That is not the secret either; we are told that CSP costs 20% less per student than the public schools with which it competes. It is true that CSP spends money smarter, e.g., picked up a lot of the furniture for the new school through donations rather than buying it, operates the Saturday coaching programs with volunteer tutors, etc., but there is no inherent reason that other schools could not follow similar strategies.
CSP is a part of the county school district and subject to all of its requirements, including the employment of union teachers. There has been suspicion about CSP’s objectives and jealousy of its success from time to time, however, leading to administrative attacks on key personnel and intense auditing of the school’s operations to ensure compliance with all applicable legal requirements. The ground rules in Delaware give charter schools a somewhat freer hand so long as they meet state testing standards, which might suggest some desirable changes in Maryland law.
Still, success begets success. Nine new charter schools opened in Maryland this year, bringing the total to 42 (serving 11,500 students) in five counties and Baltimore City. Maryland Charter School Network press release, 9/1/09, accessible from this link.
Following the very interesting visit, our host, Spear Lancaster, takes us to Timbuktu! This nearby restaurant features an inviting décor, attentive service, and superb crab-cake (voted #1 in all of Maryland according to the Washington Post).
Over lunch, Whipple asks a question. What would it take, in terms of policy changes, to replicate the successes being achieved at CSP?
If 20% of patients at a hospital died, says Lancaster, it would be closed down. Ditto for an airline if 5% of its planes crashed every year. So why is there acceptance of a school system in which many students do not learn much (algebra in 7th grade, are you kidding?) and a significant percentage drop out without graduating?
The basic problem is not the curriculum or the testing, but the absence of anyone who is in charge and can be held accountable. To improve results, there must be site-based management. What this means, basically, is that the principal and teachers in a school should run it – focusing on the needs of the students, with the active support of the parents, following the dictates of common sense. An effective school system cannot be run by rote, following rules and regulations set on high, with compliance monitored by bureaucrats at other locations.
Charter schools may be a good vehicle to put site-based management into practice, witness what is happening at CSP, but the concept could benefit the public schools as well and it should apply across the board.
Great point, site-based management will definitely be reflected in the Education page of this Website (currently “under construction”) that SAFE is working on.
Thanking our host, we set out on the return drive to Delaware – and talked about education much of the way.
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For better schools, get the corrupt Washington politicians out of the picture, & return education to states & localities, where it belongs per the U. S. Constitution. - SAFE member, Arizona
When I read the first sentence [defining site-based management], I kind of bristled. Accountability is an over-used term and usually only refers to the accountability of the teachers and administration. With that being said, there are a few important points that you make that really appeal to me. First, that the principal and teachers at a school generally know what’s going to work best for their students. They are with them all day; they know their needs pretty well. Also, I like that the focus is on the students. Obviously, 7th grade algebra isn’t for all students, but some are just waiting to soar. It’s important to meet students where ever they are at and help them advance from there, otherwise they’ll get overwhelmed and shut down. I especially liked that you mentioned the ACTIVE SUPPORT OF PARENTS. I can’t stress how important this is. Too many parents feel like they shouldn’t have to watch over their kids in middle school when that’s one of the most crucial times. Unfortunately, I experienced many parents who weren’t involved, wouldn’t return calls, wouldn’t come in for conferences, and one that even gave a false phone number to the school. There is no accountability for these parents. If a child is suspended, they may stay home alone anyway- not much of a punishment. Finally, I get sick and tired of all these bureaucrats try to tell teachers how to do their jobs. Let them try to teach kids after making the children sit through 3-4 hours of testing every day for a week. Somehow, I don’t think they would be too productive. The bureaucrats show up for a few hours and think they know what a school is like, but it’s not until they’re in the “trenches” so to speak, that they can really make decisions that are best for all concerned. Anyway, it sounds like this is a great school. Good luck to them. – Delaware teacher
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10/12/09 – Déjà vu: Scoring a healthcare bill Read a Reply
When Medicare and Medicaid were launched in 1965, the costs of these programs were wildly underestimated. This was apparently no accident. Top Liberal [Former Labor Secretary Robert Reich] Agrees: Cost of [Healthcare] Reform Could Wreck Economy, Michael Medved, 9/30/09.
In a taped conversation with Senator Ted Kennedy, [President Lyndon Johnson] attacked his own economic advisors because the fools had to go to projecting those costs down the road five or six years. LBJ deliberately misled the public by lowballing the amount of money that taxpayers would need to spend to secure [healthcare] coverage for senior citizens, contradicting the official economic estimates and intentionally distorting the truth. [I’ll] spend the goddamned money, he indignantly (though privately) declared.
Although some may view LBJ’s role with admiration (leave it to the “bean counters” and nothing gets done), Medicare and Medicaid have contributed greatly to the deterioration in the government’s fiscal situation. One would hope for a more accurate assessment of the healthcare bills now under consideration – but don’t count on it.
This entry will discuss some of the problems, using the Congressional Budget Office (CBO) analysis of the healthcare bill that has been taking shape within the Senate Finance Committee as an example.
Background: The president has said he will only sign a healthcare bill that is deficit neutral, meaning that costs over the 10-year budget projection period would be fully covered by cost savings and/or tax increases. In other words, this is a commitment to balance the bill, not to balance the budget (which in our opinion is what is really needed).
Some members of Congress agree that the healthcare bill should be deficit neutral, notably Chairman Max Baucus (D-Montana) et al. on the Senate Finance Committee. And the healthcare bill taking shape within that committee has been described as a watered-down, less-expensive healthcare plan that should appeal to moderates and might gain some degree of bipartisan support. Granny Pulls the Plug on Obama, Chris Stirewalt, Washington Examiner, 8/13/09.
The nonpartisan Congressional Budget Office (CBO) bears primary responsibility for assessing the budget effects of proposed legislation – including the various healthcare bills currently being worked on in Congress.
Douglas Elmendorf has headed the CBO since January 2009. He has a reputation for being low key, apolitical, and yet not afraid to take a stand on controversial issues. An economist armed with a grenade, James Gerstenzang, Washington Examiner, 9/20/09.
Scorekeepers determine outcomes, even in the amorphous game of politics, as official Washington was reminded on July 16 at a Senate Budget Committee hearing. Chairman Kent Conrad, D-N.D., asked Elmendorf if bills coming out of the House would curb federal health care costs.
"On the contrary," Elmendorf said, "the legislation significantly expands the federal responsibility for health care costs." With that verdict, the mild-mannered director of the Congressional Budget Office set off a storm that helped fuel the cross-country uprising against the health plan.
Analysis: There was considerable interest last week when the CBO scored (costed out) the Baucus healthcare bill. 13-page letter (plus attachments) to Senator Baucus, 10/7/09 (best accessed from the director’s blog).
The preliminary results (to be revisited when the “legislative language” becomes available) indicate deficit neutrality, to the delight of supporters of healthcare “reform.” Here is a recap for 2010-2019 (dollars in billions), which will be fleshed out in the discussion that follows.
Gross cost of added healthcare coverage
Tax effects (principally excise tax on high premium insurance plans)
Other cost savings (principally Medicare cuts)
Tax effects from certain Medicare & Medicaid provisions
Other tax effects (per Joint Committee of Taxation)
Net Decrease in Deficit
By 2019, estimates the CBO, the number of Americans without healthcare insurance would be 29 million lower with the Baucus bill than under existing law.
Nonelderly U.S. people (millions)
Nongroup (traditional private coverage)
Other, e.g., Medicare
Uninsured (incl. “unauthorized immigrants”)
Total nonelderly people
The indicated reduction in the number of uninsured people would result from several provisions:
• Starting in July 2013, legal U.S. residents would be required to obtain healthcare insurance (HCI). In many cases, financial penalties would be imposed for failure to do so. And new insurance exchanges would be established that would subsidize the purchase of HCI for individuals and families with income between 100% and 400% of the federal poverty level (FPL).
New rules would apply for insurers providing HCI: no exclusion of coverage for preexisting medical conditions or variation in premiums based on the individual’s health. Start-up funds would be provided to encourage the formation of cooperative insurance plans (co-ops) that could be offered through the exchange; existing insurers could not be approved as co-ops.
Firms with more than 50 workers that did not offer HCI to employees would pay a fine for full-time workers who obtained subsidized coverage through insurance exchanges.
In general, full-time workers offered HCI coverage by their employer would not be eligible for subsidies via the exchanges – unless they had to pay more than a specified percentage (10% in 2013) of their income for their employer’s insurance, in which case the employer could also be penalized.
Insurance policies with relatively high total premiums (generally $8,000 for individual and $21,000 for family coverage in 2013, to be indexed for inflation thereafter) would be subject to a 40% excise tax on premiums in excess of the threshold.
• Starting in 2014, nonelderly people with income below 133% of the FPL would generally become eligible for Medicaid. States would be responsible for paying a portion (averaging about 10% of the costs of covering newly eligible enrollees). However, the states would receive higher federal reimbursement for Children’s Health Insurance Program (CHIP) enrollees.
The cost (wrapped numbers, dollars in billions) of the foregoing provisions is projected as shown below for the 10-year period, both gross and net of tax effects & penalties.
Gross cost of providing HCI
Net cost of providing HCI
Cost savings of $404B over ten years reflect Medicare “market basket cuts and productivity adjustments” ($207B), reduced subsidies for Medicare Advantage plans ($117B), improved payment accuracy ($58B), reduced Medicaid outlays ($41B), and a net spending increase of $19B for numerous other items.
Other tax effects, adding up to a $196B fiscal benefit over the 10-year period, principally consist of an $180B estimate from the Joint Committee of Taxation that is cited without supporting detail. Said amount may represent payments to be collected from drug and medical device firms, which we could not identify in the OMB schedules. The Greatest Show on Earth, Wall Street Journal, 10/9/09.
Another $180 billion will hit the likes of drug and device makers, including $29 billion because companies won’t be allowed to deduct these “fees” from their corporate income taxes.
The real bill or a decoy? – Is it likely that those who feel everyone should have HCI will be satisfied with the indicated result – 25 million people (including perhaps 8 million illegal immigrants) still uninsured in 2019? No way, and the president’s party has the votes. So whatever its fiscal merits, we doubt the Baucus bill will be the template for the final healthcare bill.
One strategy for obtaining a more sweeping bill after the Senate Finance Committee approves the Baucus bill, as it is poised to do this week, would be to introduce a “public option” amendment on the floor of the Senate – potentially circumventing the 60-vote requirement for cloture. New plan might allow Dems to slip public option through Senate, Susan Ferrechio, Washington Examiner, 10/7/09.
Majority Leader Harry Reid, D-Nev., is weighing a plan to bring the final health care bill to the floor without a public option -- making it much easier to get the 60 votes needed to prevent a Republican filibuster -- and then adding the provision later as an amendment. The public option amendment would be there waiting, but the 60-vote test would technically be on a bill without the government plan. Then moderate Democrats could drop out for the vote on the public option, which requires just 51 votes for passage.
With such a game plan, the fiscal cost of the healthcare bill might increase drastically rendering the CBO’s scoring of the Baucus bill irrelevant.
A pricey plan – It stands to reason, we think, that the gross cost of added HCI coverage should be looked at, not the “net cost” (gross cost less tax effects and fines) that is identified in the CBO analysis let alone the net decrease in the deficit.
In addition, the fiscal impact of the Baucus bill would vary substantially by year:
Insurance coverage cost (gross)
Insurance coverage cost (net)
Other tax effects
Net increase (decrease) in deficit
Do not assume, therefore, that the annual cost for extending HCI to more people would be $83B ($829B divided by 10). The annual cost would hit $180B by 2019, representing $6,200 per person for the net 29 million increase in people with HCI.
What about the long-term fiscal burden of the Baucus bill? As shown in the previous table, the CBO projects that the net fiscal effect would turn positive in 2019. It is further suggested that “the proposal, if enacted, would reduce federal budget deficits over the ensuing decade relative to those projected under current law.”
But these conclusions may be overly optimistic, for reasons to be discussed.
Employer-provided coverage – The CBO projects the number of people with employer-provided HCI as increasing from 150 million in 2010 to 162 million in 2019 under existing law (or 159 million with the Baucus bill).
Many employers are disenchanted with their HCI plans, however, which have become increasingly costly and represent an administrative headache as well. And the prevalence of these plans seems to be on the decline. Thus, the percentage of people under 65 with employer-provided HCI fell from 66.4% in 1997 to 61.6% in 2007. National Health Statistics Report, U.S. Center for Disease Control and Prevention, 7/1/09.
In the CBO analysis, 56% of people under 65 are shown as having employer-provided HCI in 2010. The sharp drop from 61.6% in 2007 may be due to the current depression, or perhaps the CBO and CDC data are on different statistical wavelengths. In any case, we suspect that the CBO’s base projection of 162 million (57%) people with employer-provided HCI in 2019 errs on the high side.
Even more questionable is the assumption that only 3 million people would shift out of employer-provided HCI plans under the Baucus bill. Bear in mind that this proposal would impose stringent new limitations on private HCI insurers (predictably driving up average cost for employers) and provide government-subsidized options (giving employees an incentive to defect from their employers’ plans).
It seems likely to us that there would be a major decline in employer-provided plans and more HCI purchased through exchanges than has been projected. If so, the CBO cost estimates could prove to be significantly understated.
See “Why Business Fears the Public Option,” Jane Sasseen and Catherine Arnst, Business Week, 10/1/09. The basic concern is said to be cost shifting from government-run or government-subsidized HCI plans that reimburse at less than market rates to private HCI coverage.
Business lobbyists don't buy the White House line that reform plans will reduce the explosive growth in health-care costs. Instead they see Obamacare shifting much of the cost of extending coverage to 45 million uninsured Americans onto the backs of major companies and private insurers.
Note also that the basic techniques for increasing the number of people with HCI in the Baucus bill, a combination of mandates and subsidies, have been tried at the state level. None of the state plans have done much to hold down healthcare costs, quite the contrary, as illustrated by the experience in Massachusetts. The Lesson of State Healthcare Reforms, Peter Suderman (Reason Magazine), Wall Street Journal, 10/6/09.
Health-insurance premiums in the Bay State have risen significantly faster than the national average, according to the Commonwealth Fund, a nonprofit health foundation. At an average of $13,788, the state's family plans are now the nation's most expensive. Meanwhile, insurance companies are planning additional double-digit hikes, "prompting many employers to reduce benefits and shift additional costs to workers" according to the Boston Globe.
Assumed cost savings – What about the $404 billion in cost savings that are projected, principally for Medicare outlays? Surely that should represent an offset to the cost of providing increased HCI coverage. Well maybe not, for several reasons.
First, Medicare is in a huge fiscal hole – so any opportunities to reduce costs without unacceptably impairing healthcare services should be implemented. This does not mean the savings should be plowed back into new healthcare programs, however, because they are urgently needed to reduce the government’s deficits.
The same logic applies to new taxes that could be imposed on high premium HCI plans or whatever else Congress might decide to tax.
Second, Congress has a track record of legislating Medicare cost cuts and waiving them later so the indicated cuts may be bogus. The Greatest Show on Earth, Wall Street Journal, 10/9/09.
Mr. Baucus spends $10.9 billion to eliminate the scheduled Medicare cuts to physician payments—but only for next year. In 2011, he assumes they'll be reduced by 25%, with even deeper cuts later. Congress has overridden this "sustainable growth rate" every year since 2003 and will continue to do so because deeper cuts in Medicare's price controls will cause many doctors to quit the program. *** The only Medicare cut that isn't made merely on paper is $117 billion in Medicare Advantage, which Democrats hate because it gives one of five seniors private insurance options.
The CBO knows about this, of course, as demonstrated by the following excerpt from their report (p. 12), but no matter because their task is to score the bill presented.
These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments.
Third, if all of the Medicare cuts embedded in the Baucus bill were implemented, e.g., establishment of a Medicare Commission charged with recommending changes to limit the rate of growth in spending, the results might be regrettable. Ultimately, when the government runs out of ways to shift healthcare costs to others, e.g., private employers and patients, it will impose and enforce cost controls instead of imposing tax increases that would be politically unacceptable or shutting all of its other operations. Medicare for Dummies, Wall Street Journal, 9/11/09.
As ever-more health costs are financed by taxpayers, something will eventually have to give on care the way it has in every other state-run system.
Opportunity cost – Last but not least, the Baucus bill would squander an opportunity to improve the operation of the healthcare system by enhancing competition and individual choice instead of empowering the government to effectively ration healthcare.
With SAFE’s proposals for real healthcare reform, we believe it would be possible to put Medicare and Medicaid on a fiscally sustainable basis. But none of these proposals have been incorporated in the Baucus bill, or any of the other major healthcare bills being worked on in Congress.
The Cato Institute has offered a free market approach to healthcare reform, which we could also support. Take at look at their plan too, which has been similarly ignored, we do not have all the good ideas.
If the losses from failing to take better ideas into account could be reflected in scoring the Baucus bill, the cost of this proposal would be astronomical.
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While the Administration mounts a big push for its version of healthcare “reform,” never mind what it would cost, the U.S. dollar is sinking and gold is soaring due to a national debt that is already high (and headed much higher).
If matters are allowed to continue on the present track, look for the cost of imports to soar. The only way to raise fresh capital will be to print it, with the well-known consequences of spiraling inflation and interest rates.
It is time for the government to start paying attention to the real problems, such as balancing the budget and keeping it that way. - SAFE member
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10/5/09 – Carbon showdown on multiple fronts. Read a Reply
In last week’s entry, we recapped energy policy failures dating back to the 1970s and suggested that enactment of the Waxman-Markey (WM) energy bill (which passed the House in June) would compound the damage.
WM is based on an unproven theory of manmade global warming. It would impose a heavy burden on the U.S. economy, with a negligible effect on global temperatures. Here is one observer’s take on the situation: Dear Senator: Why you should vote against cap-and-trade, James Manzi (Manhattan Institute), Washington Examiner, 9/30/09.
If the law works precisely as intended, in about 100 years we should expect surface temperatures to be [about] one-tenth of one degree Celsius lower than they otherwise would be. The expected costs are at least 10 times the expected benefits, even using the EPA's cost estimates and assuming achievement of the primary goal of the legislation.
Senator Barbara Boxer (D-CA) has now introduced an energy bill in the Senate. Like WM, the Senate bill would impose a cap and trade system to cut carbon emissions; it would allegedly cut emissions more deeply while costing less (how?). Senators Ready a Bill on Greenhouse Gases, Juliet Elperin, Washington Post, 9/30/09.
Many details remain outstanding, such as how emission credits would be distributed – the better to negotiate with the special interests. For present purposes, let’s assume the Senate bill is functionally equivalent to WM.
We doubt that WM (or the Senate bill) will pass this year, but believe its supporters will continue working to expand the government’s partial control of the energy sector by whatever means may be available. Here, as promised last week, is their Plan B:
International negotiations: The Earth’s atmosphere is one. So even if fears about carbon emissions were fully justified, it would be futile for the United States to address global warming unilaterally. As U.S. emissions were cut and manufacturing moved elsewhere, additional power plants would be built in China, etc. Net results: an impoverished U.S. and no overall reduction in emissions.
Much effort is being devoted to developing an international consensus to reduce carbon emissions, together with verifiable national commitments. But the developing countries have shown limited interest in hobbling their respective economies to fight global warming unless the developed countries agree to cover the cost. Consider the views reported in “India attacks British and Western ‘hypocrites’ over cutting emissions,” Dean Nelson, UK Telegraph, 8/5/09.
The Indian prime minister, Manmohan Singh, has been under pressure to curb his country's carbon emissions as its economy grows but he blamed the West for creating the climate crisis through 150 years of "dirty" industrial development and demanded a $250 billion per year fund to help developing countries.
The U.N. Secretary General and U.S. president were quoted last week about the catastrophic consequences if action is not taken to reduce carbon emissions, ideally at the December climate summit in Copenhagen. By way of support, check out this 2-minute video – complete with gee whiz graphics and a sound track by global warming guru Al Gore. Google Earth 3D map unveiled, Asher Moses, Sydney Morning Herald, 9/28/09.
The events depicted in the video are no more reliable than the IPCC projections on which they are based, and we have considerably more faith in the alternative findings of the NIPCC (discussed last week). One must admit that the video is slick, however, and uninformed viewers might assume it is factual.
How do global warming activists respond to cessation of the warming trend over the past decade? Far from rethinking their conclusions, many of them see only a temporary deviation. On Climate, Bad News Will Resume, George Will, Townhall.com, 10/1/09.
By asserting that the absence of significant warming since 1998 is a mere "plateau," not warming's apogee, the [New York] Times assures readers who are alarmed about climate change that the paper knows the future and that warming will continue: Do not despair, bad news will resume.
Assume an international agreement was struck, which required country-by-country reduction in carbon emissions and developed country contributions to a global green energy fund. It would predictably be argued that the U.S. had no choice but to go along, lest it be held responsible, in the eyes of the world, not just for U.S. carbon emissions but also for coal power plants built in China, rain forest destruction in South America, etc.
Such an agreement appears unlikely, however, because “jobs trump environment and emission restrictions might stifle economic growth.” Stubborn facts block green campaigns, Irwin Stelzer, Washington Examiner, 10/2/09.
The likelihood now is that when the world's leaders gather in Copenhagen in December -- Obama has not yet decided to attend -- they will not sign on to a legally binding international agreement. Obama will tout the steps he is taking to subsidize green energy, while China will promise only to keep the increase in its emissions below the rate of increase in its national output -- which means lots more emissions.
Voodoo economics: Claims about the scarcity of U.S. oil and inherent advantages of renewable energy sources should sound familiar; they have been used to justify the failed energy policies of the past four decades. But such arguments are convenient in talking to people who feel U.S. energy policy should be established by Congress (not the U.N.) and/or have grown weary of hearing about global warming, so they will continue to be made. Some recent examples follow.
• Secretary of Interior Ken Salazar stated in April that the U.S. has 3% of the world’s oil reserves while consuming 25% of its oil. He views U.S. dependence on foreign oil as “a national security problem, an environmental security problem and an economic security problem.” Never mind that U.S. reserves could be increased (to the benefit of the U.S. Treasury) simply by allowing oil companies to look for oil and gas in heretofore-unexplored areas. Flawed intelligence guides the Obama energy plan, Daniel Kish, Washington Examiner, 9/23/09.
Based on his department’s own estimates, Salazar could quadruple those reserves from the OCS [Outer Continental Shelf], and increase them by 50% from the Arctic National Wildlife Refuge (ANWR) alone. Salazar is landlord for almost 2.5 billion acres of onshore and offshore lands, but his department currently has only leased about 3% of them for energy production.
Ironically, the U.S. government will provide at least $2 billion in financing (loan or loan guarantee) to the Brazilian national oil company for the development of an offshore oil find in their backyard. Obama Underwrites Offshore Drilling: Too bad it’s not in U.S. waters, Wall Street Journal, 8/18/09.
• Praising the marvels of clean, inexhaustible, and (supposedly) inexpensive wind and solar power, political leaders continue to back them with mandates and subsidies. Consider what the California governor had to say, for instance, about his order requiring utilities to get a third of their power from renewable sources by 2020. Schwarzenegger signs order boosting clean power, Samantha Young, Washington Times, 9/16/09.
"This is really a great day today because we are creating major action to create more green jobs and more green energy," Schwarzenegger said while signing the order [at a field of solar panels] in the Sacramento suburb of Rancho Cordova.
We have nothing against the development of wind and solar power. So long as they are economically competitive, let the market decide. But this condition will not be met in the foreseeable future, and we do object to mandates and subsidies.
One problem with wind and solar power is intermittency, i.e., neither sunlight nor wind is constant and the power that is generated cannot readily be stored until needed. Getting real on wind and solar, former Secretary of Energy James Schlesinger and Robert Hirsch, Washington Post, 4/24/09.
Because of this need for full fossil fuel backup, the public will pay a large premium for solar and wind -- paying once for the solar and wind system (made financially feasible through substantial subsidies) and again for the fossil fuel system, which must be kept running at a low level at all times to be able to quickly ramp up in cases of sudden declines in sunshine and wind. Thus, the total cost of such a system includes the cost of the solar and wind machines, their subsidies, and the cost of the full backup power system running in "spinning reserve."
Environmentalists almost invariably support wind and solar power in principle, but they will fight projects perceived as introducing construction and power lines in pristine areas (energy sprawl), interfering with wildlife, etc. Activists’ Failure to Agree on Energy Sources Jeopardizes Economy, Heartland Institute, 8/1/09.
We all have heard the horror stories about Cape Wind, the Nantucket Bay offshore wind project capable of powering 420,000 homes, which has been embroiled in eight years of permitting delay. But you may not have heard about the Cascade Wind Project killed in Oregon, or the Tallahassee Renewable Energy Center biomass plant killed in Florida, or even small projects such as Akeena Solar in California, which was sued for trying to install solar panels on its own roof.
And nuclear power represents a lower cost, more reliable substitute for coal power plants than wind and solar power. So if the U.S. did commit to reducing carbon emissions, building more nuclear power plants would be the most effective way to go about it.
Just ask the U.S. Energy Information Administration (EIA). [WM] bill requires doubling nuke use, Stephen Dinan, Washington Times, 8/12/09.
Under the basic scenario EIA ran, consumer energy prices would rise about 15 percent by 2030. But under a scenario with less reliance on nuclear energy, international offsets and other alternatives, consumer prices could rise by more than 60 percent, and the hit to the U.S. economy would be three times as deep as the basic scenario, EIA said.
Many environmentalists dislike nuclear power, however, so it is impolitic to push it. Far from doing that, the Administration recently moved to kill a proposed national depository for nuclear waste at Yucca Mountain, Nevada, after two decades of study and $11 billion of expenditures. The decision was reportedly made at the urging of Senate Majority Leader Harry Reid (D-NV), a long-time opponent of the facility. US’s Yucca Mountain nuclear project in meltdown, Garry White, UK Telegraph, 8/22/09.
It is unclear how, or indeed whether, the nuclear waste issue will be resolved – and until it is, a new wave of nuclear power plants appears highly improbable. Nuclear power: walk first, then run, 8/11/08.
Regulatory action – Although WM may be long and involved, suggests one observer, the basic thrust of the bill is simple: “make energy so expensive to consume that Americans use less of it, and ‘greenhouse gas’ emissions are thereby curtailed.”
And given a U.S. Supreme Court decision that the Environmental Protection Agency (EPA) has authority to classify CO2, etc. as pollutants under the Clean Air Act, which the agency has since proposed to do (5/11/09 entry), the EPA could – and will if the president wishes – restrict carbon emissions by regulation. Cap-and-Trade is Dead. Long Live Cap-and-Trade. Patrick J. Michaels, Townhall.com, 9/18/09.
Now that cap-and-trade has so spectacularly failed in the legislature, it is a sure bet that Obama will direct (or has directed) EPA Administrator Lisa Jackson to issue her own cap-and-trade protocols. Look for something concrete out of EPA before the U.N.’s climate change confab in Copenhagen in early December. (That “something” may even include a new fuel economy standard of 35.5 miles-per-gallon—though it would be lower, of course, for the inefficient cars produced by government-owned General Motors.)
Actually, the EPA has already proposed new fuel economy standards under its “greenhouse gas emission program.” It acted in concert with the Department of Transportation, which is accelerating the timetable for tightening of the Corporate Average Fuel Efficiency (CAFE) standards that was enacted in 2007. Director Lisa Jackson lauded the proposed standards as “the nation’s first ever greenhouse gas emissions standards for vehicles.” EPA press release dated 9/15/09.
Unlike the members of Congress, employees of government agencies are appointed. With the exception of the top echelon, they are unknown to the general public. If they are entrusted with policy decisions, it is difficult to hold them accountable. There is no way to vote them out of office, as is sometimes done in the case of elected officials.
Accordingly, we believe that the EPA (or any other government agency) should not be entrusted with a basic policy decision like this one; Congress should deal with the matter instead. EPA regulation of CO2: a bad idea from any angle, 5/11/09.
The EPA is part of the administrative branch, of course, and as such accountable to the president. But Congress could readily take charge of the situation by removing the regulation of carbon emissions (as opposed to genuine pollutants) from the EPA’s statutory purview.
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SAFE’s campaign for global warming common sense was described in the last entry. A new phase began on September 29, when SAFE founder Bill Morris made a 2-minute video to explain why “nature, not manmade activity, controls the climate.”
Do not expect polished slickness, nor gee whiz graphics like the aforementioned Google Earth 3D map. SAFE does not have the money for that sort of thing, and a model that did not show a clear-cut, inexorable trend would not seem very dramatic anyway.
Morris’s sincerity is obvious, however, and he makes some telling points within the time allotted. Watch the video, and if you agree forward the link.
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Good writin' there. Has anyone yet answered the basic question whether the pre-plateau global warming trend was caused more by nature than by humans? I haven't seen a definitive answer on that. – Virginia attorney
SAFE response: We would say “mostly nature,” as the fluctuation of global temperatures began long before the Industrial Revolution and nothing observed since then seems out of line with past patterns. See “A Global Warming Primer,” National Center for Policy Analysis, e.g., p. 14.http://www.s-a-f-e.org/GlobalWarmingPrimer.pdf
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9/28/09 – Energy policy: time for some common sense
U.S. energy policy has been in a muddle since the oil price shocks of the 1970s, as the government promoted one far-fetched solution after another. Key results have included steadily rising oil imports (energy independence was never in the cards, but the failure to tap domestic petroleum reserves is incomprehensible), decline of the U.S.-owned auto companies (recently resulting in the forced sale of Chrysler to Fiat and government takeover of General Motors), stalled development of nuclear power (the radioactive waste issue must be addressed), and unjustifiable mandates and subsidies for alternative energy (mixing ethanol in motor fuel; generating electricity with windmills and solar cells).
The government’s basic mistake has been to single-mindedly focus on energy conservation and environmental concerns (often overstated) while blocking timely and cost-effective expansion of energy supplies. See the Energy page of this Website and the prior blog entries that are referenced.
Far from learning from experience, many political leaders seem determined to double down on past mistakes by enacting the Waxman-Markey (WM) energy bill (passed by the House in late June). This entry will provide an update on this proposed legislation, starting with the manmade global warming theory that undergirds it.
Global warming – The starting point is two facts: (1) there has been a modest warming trend in global temperatures over most of the last two centuries, and (2) the burning of fossil fuels has contributed to a rising level of CO2 in the atmosphere (now up to 380+ parts per million). By assuming a cause and effect relationship, alarmists predict catastrophic climate changes unless action is taken to cut CO2 emissions.
SAFE has attempted to stay informed about the debate over global warming (there is not an overwhelming scientific consensus about its causation or severity) and play an educational role.
• Founder Bill Morris gives talks about global warming and energy policy to civic groups, e.g., Rotary Clubs and the Retired Men’s Luncheon Club. He finds that the audiences are generally receptive to a thoughtful and balanced review of these subjects.
• In June, SAFE commented to the Environmental Protection Agency (EPA) on its proposed finding that CO2 et al. are pollutants within the meaning of the Clean Air Act. No chance the EPA will listen to us, but their finding was based on a unrepresentative sampling of the scientific literature and we suggested they should start from scratch.
• SAFE’s views on energy policy have been periodically shared with the three members of Congress from Delaware, although without any apparent benefits to date.
SAFE: Contacting Legislators
• We have also written letters and columns for the general public. Note the recent letters on energy policy by Harry Kenton (9/8/09) and Bill Morris (9/18/09).
• A common sense view of global warming was promoted on Newark Community Day (University of Delaware campus, 9/21/09). Morris was in the thick of the action, which he summarizes as follows.
Ten global warming skeptics took turns covering our spot with the "Climate Common Sense" banner for 8 hours. We handed out over 300 "Global Warming in a Nutshell" 8.5 X 3.7 inches papers [see below]. Most accepted politely with a "thank you". A few declined with apparent opposition, but more showed interest and support, [also] taking a larger handout. Even though we had issued a news release, nobody from the media showed. We didn't see a media rep anywhere. We'll have to go to them if they don't come to us.
- Talking points (front): http://www.s-a-f-e.org/nutshell.htm
- Cartoon (back): http://www.s-a-f-e.org/puppy_cartoon.htm
All of which is not to deny that global warming could occur, scientists do not know whether average temperatures will rise or fall in the future, nor to rule out human activity as a contributing factor. But we know of no solid evidence that the buildup of CO2 and other greenhouse gases in the atmosphere from the combustion of fossil fuels will necessarily result in global warming.
The real driver for climate change is probably the level of solar activity, as expressed by sunspots, which has diminished in recent years (coinciding with a lull in the warming trend) and during cool periods in the past, e.g., the Little Ice Age (which peaked about 500 years ago). Yet global warming activists seem slow to acknowledge this connection. Global Warming and the Sun, Jonah Goldberg, Townhall.com, 9/2/09.
. . . we are told, nay lectured and harangued, that if we use the wrong toilet paper or eat the wrong cereal, we are frying the planet. But the sun? Well, that's a distraction. Don't you dare forget your reusable shopping bags, but pay no attention to that burning ball of gas in the sky -- it's just the only thing that prevents the planet from being a lifeless ball of ice engulfed in darkness. Never mind that sunspot activity doubled during the 20th century, when the bulk of global warming has taken place.
For much, much more, see Climate Change Reconsidered, Fred Singer and Craig Idso, Nongovernmental International Panel of Climate Change (NIPCC), Heartland Institute, 2009. At 800+ pages, this book is hardly a light read, but all 11 of the customer reviewers on Amazon.com have awarded it a “five star” rating.
http://www.heartland.org/ (PDF file may be downloaded).
http://tinyurl.com/yel2ufd (review by William Mellberg, an amateur astronomer)
Granted, many people have other ideas – including some in high positions. Consider what UN Secretary-General Ban Ki-moon had to say, for example, when he spoke to the Global Environment Forum on August 11, 2009.
If we fail to act, climate change will intensify droughts, floods and other natural disasters. Water shortages will affect hundreds of millions of people. Malnutrition will engulf large parts of the developing world. Tensions will worsen. Social unrest – even violence – could follow. The damage to national economies will be enormous. The human suffering will be incalculable. *** We must seal the deal in Copenhagen [global warming summit in December] for the future of humanity.
The U.S. president spoke in similarly sweeping terms at a 9/22/09 meeting on global warming. Obama makes U.N. debut on global warming, LA Times, 9/22/09.
It is true that for too many years, mankind has been slow to respond or even recognize the magnitude of the climate threat. It is true of my own country, as well. We recognize that. But this is a new day. It is a new era. And I am proud to say that the United States has done more to promote clean energy and reduce carbon pollution in the last eight months than at any other time in our history.
The scientific evidence does not clearly support such pronouncements, however, and some of the studies suggesting otherwise may have been tainted by institutional bias. Climate Change Reconsidered, preface, pp. iii-vi.
Although the [United Nations–sponsored Intergovernmental Panel on Climate Change] claims to have based AR4 [a summary report issued in 2007] on the best available science, such is not the case. In many instances conclusions have been seriously exaggerated, relevant facts have been distorted, and key scientific studies have been omitted or ignored.
Proposed response - In broad outline, the WM bill would impose a “cap and trade” regime designed to raise the cost of energy (via prices and/or taxes) and thereby force progressive reduction of CO2, etc. emissions over the next several decades. An array of other provisions would foster energy conservation and subsidize renewable energy (wind and solar) power projects. The high cost of “green” energy, 5/25/09.
If the threat of manmade global warming has been grossly exaggerated, as we believe, it follows that the environmental benefits of the bill would be inconsequential. First, a warming trend is not inevitable, nor is it likely to be sudden. Second, the effects would not necessarily be adverse, e.g., warmer temperatures would offer pluses as well as minuses.
Even if the concerns about global warming were fully justified, moreover there is plenty of room to question whether reducing CO2 emissions would be the most effective way to prevent it. Technology Can Fight Global Warming, Bjorn Lomborg, Wall Street Journal, 8/28/09.
Research for the Copenhagen Consensus Center by Claudia Kemfert of German Institute for Economic Research in Berlin shows that in terms of reducing climate damage, reducing methane emissions is cheaper than reducing CO2 emissions, and—because methane is a much shorter-living gas—its mitigation could do a lot to prevent some of the worst of short-term warming. Other research papers highlight the advantages of planting more trees and protecting the forests we have to absorb CO2 and cut greenhouse gases.
On the other hand, it is crystal clear that WM would boost energy prices, thereby imposing a major, long-term burden on the U.S. economy. The Economic Consequences of Waxman-Markey, David Kreutzer et al., Heritage Foundation, 8/6/09. In summary, the Heritage study projects the following effects (in 2009 dollars):
Cumulative gross domestic product (GDP) losses are $9.4 trillion between 2012 and 2035;
Single-year GDP losses reach $400 billion by 2025 and will ultimately exceed $700 billion;
Net job losses approach 1.9 million in 2012 and could approach 2.5 million by 2035.
Manufacturing loses 1.4 million jobs in 2035;
The annual cost of emissions permits to energy users will be at least $100 billion by 2012 and could exceed $390 billion by 2035;
A typical family of four will pay, on average, an additional $829 each year for energy-based utility costs; and
Gasoline prices will rise by 58 percent ($1.38 more per gallon) and average household electric rates will increase by 90 percent.
Public support for WM has been lukewarm, especially in Midwestern states that are heavily dependent on coal-burning power plants, and it is unclear that the president’s party will have the 60 votes needed to cut off debate and force a vote in the Senate. Cap and Tax Delay, Wall Street Journal, 9/2/09.
Middle-American Senators aren't about to rush through a huge new tax on carbon energy—e.g., their constituents—that will largely flow to the wealthier coasts, even if it is done in the name of saving the planet while the here-and-now economy is still sputtering.
Which is not to say the Administration will throw in the towel. To the contrary, the so-called “green cabinet” has been working hard to line up support. White House quietly lobbies Senate as climate bill stalls, Christina Bellantoni, Washington Times, 9/20/09.
President Obama has dispatched Energy Secretary Steven Chu, Interior Secretary Ken Salazar and Environmental Protection Agency Administrator Lisa P. Jackson to Capitol Hill. White House aides said that they and other executive branch staffers, such as climate-change czar Carol Browner, have met with "dozens" of senators.
No doubt, concessions will be considered as necessary to buy support. For instance, ten senators have asked for carbon tariffs against countries that do not impose comparable restrictions on CO2 emissions. This is a terrible idea, which could spark retaliation by our global trading partners, but do not be too sure the Administration would rule it out. More Cap-and-Trade War, Wall Street Journal, 8/12/09.
What will the outcome be? All things considered, we continue to believe that WM will be defeated this year, but here is the bad news. If the bill falls short, its supporters have a Plan B that could be even trickier to defend against. Tune in next week for the details.
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9/21/09 – The march that was, and what it may mean Read Replies
This week we bring you a first hand report on the 9/12 “March on Washington,” plus some observations about its significance. Here goes.
7:15 a.m. - SAFE directors Barry Dorsch, Steve McClain, and Bill Whipple + grandson James Wiest meet at People’s Plaza in Glasgow, Delaware. After being checked against the passenger list, we board a bus that will take us and kindred spirits to the D.C. area. We are carrying smallish signs (prepared by Bill Morris) expressing some plain vanilla ideas to restore fiscal responsibility. Easy on the regulations, no more debt, cut spending instead of raising taxes, and “hands off the national piggy bank.”
7:30 – The people on board appear to be predominantly middle-aged, with a gender mix of roughly 50/50. We make them for conservatives, like us, but hardly wild-eyed extremists.
7:41 – Let’s roll. Four other buses leave about the same time.
9:25 – Our bus pulls into the parking lot at the Metro station in Greenbelt, where it and the other buses will spend the day.
9:35 – The fare is $4.70 per person, round trip. A crowd queues up at the ticket machines to buy fare cards. No human attendants are in sight, and it turns out that the machines only take one dollar and five dollar bills, coins, and maybe credit cards (at some of the machines). Confusion reigns for a while. Is this what healthcare will be like if GovCare goes through?
10:03 – Our train arrives and everyone boards, packing it, for the ride downtown.
10:30 – There had been talk about the group on the bus sticking together, but this idea evaporates after we emerge from the Archives – Navy Memorial Penn Station. There is a steady stream of people, perhaps 20 abreast, marching down Pennsylvania Avenue towards the U.S. Capitol from an assembly point at Freedom Plaza (near the White House). Team SAFE edges into the flow, four drops in a 3-hour stream of humanity.
The marchers had arrived from many starting points. Thus, Joe Hilliard reports that the Lehigh Valley (of Pennsylvania) contingent was boarding buses at 4:43 a.m. On arrival at Freedom Plaza in D.C., shortly before 10:00, they got the word to move out - never mind the notion of marching by states - so as relieve congestion in the assembly area.
About that time, the president departed by helicopter, en route to a healthcare rally in Minnesota that was scheduled to begin at 1:00 p.m. CST.
Heard a police officer repeat into his radio, "I need to speak with an official. I need an official." Marine Corps 1 does an overfly and circles. Found out later the President was on it. 10:07 a.m.
10:45 - Like the folks on our bus, the marchers appear to be sensible people in a determined but non-threatening mood – even the ones wearing “Missouri Mob” shirts and the like. A cross-section of America is on display, including young people and minorities. Everyone seems cheerful and orderly; we will not see any angry or disruptive behavior all day. And very little trash will be left on the streets when the crowd disperses at the end of the day.
Most of the marchers are carrying signs, generally larger and more elaborate than ours (and more of a chore to carry around). Fiscal responsibility is a common theme; ditto for opposition to government-run healthcare, “cap and tax,” and assaults on liberty.
Many of the signs are politically pointed; the thrust seems to be that you folks serve at our pleasure and watch out in 2010 & 2012. A few signs are over the top (more on this later), but not many in our opinion. Check these pictures (best viewed in slide show mode) and see what you think.
11:15 – Our cohort in the march nears the Capitol. Where to now? There are several options; who knows which one will work best. After a bit of indecision, Team SAFE turns right, edges its way over to the low fence around the Capitol grounds, and eventually turns in on a walkway and finds a vacant spot on the lawn. From this location we will be able to hear the speeches, albeit imperfectly, but not observe the action at the speaker’s stand.
Midday – Standing in place is more tiring than walking, and the pre-rally activity is hard to follow, but what a thrill to be here with thousands of demonstrators on the Capitol grounds. We join in periodic choruses of “USA-USA-USA” and yell when a speaker asks “Can you [the politicians] hear us now?”
Looking west, we can see huge throngs of people in the National Mall area that lies between the Capitol grounds and the Washington Monument over a mile away. There are also big crowds on Pennsylvania and Independence Avenues, which bracket the area.
How many demonstrators? Hard to say, but it is announced on the public address system that ABC News is reporting some 1.2 million. A bit later the number is upped to 1.5 million. Perhaps these estimates are overstated, how could 1.5 million people (the equivalent of 15+ Rose Bowls, filled to capacity) participate in this event anyway. Still, it seems far more people have shown up than were expected.
The weather is overcast, but no rain thank goodness. The sun breaks through at one point, only to be covered by clouds again a few minutes later.
1:00 p.m. – A female singer belts out the Star Spangled Banner, kicking off the formal program. Many short speeches and presentations will follow, with no clearly defined theme or leader.
Here is the speaker list, gleaned from the footage posted on C-Span.com after the event, plus a few lines that strike us as particularly memorable. Note that you can fast forward to selected segments of the video instead of watching the whole thing (nearly three hours).
1:07 – Film
1:11 – Jenny Beth Martin, Tea Party Patriots
1:16 – Brendan Steinhauser, Freedom Works
1:19 – Dick Armey, Freedom Works
1:29 – James Anderer, lost a Chrysler dealership in Lindenhurst, New York
The process became corrupted, I was cheated, and the only way to get the country back is to vote “them” out.
1:41 – Robert Levy, Cato Institute
1:47 – Film
1:48 – Andrew Moylan, National Taxpayers Union
Hell hath no fury like a taxpayer scorned.
1:50 – Kellen Guida – New York City Tea Party & Pushback blog
Modern pop culture has been boosting the liberal cause for the past 30+ years; it is time to turn that around!
1:58 – Hi-Caliber (conservative hip hop)
Sample line: Patriotic people, make some noise please.
[Team SAFE makes its way out of the Capitol grounds and walks west on Independence Avenue until we locate a street vendor selling food and refreshment.]
2:07 – Deneen Borelli, national black leadership network Project 21
2:13 – Bruce Webster, information technology analyst
2:17 – Matt Kibbe – Freedom Works (president and ceo)
I’ve got two points. (1) Freedom works. (2) Government goes to those who show up – and you guys showed up!
2:20 – Russ Walker, Freedom Works (Oregon director)
2:22 – Senator Jim DeMint (R-SC)
I’m not here to speak to you, but to stand with you.
[Team SAFE finds a new location on the far side of the Capitol Reflecting Pool, where we can actually see the speaker’s stand, and sits down on the low stone steps. Ah!]
2:29 – Greg Harrell, Ohio coal miner
The president said electricity rates would skyrocket with cap and trade, and he was right. There would go the rest of U.S. manufacturing jobs to China.
2:34 – Betsy McCaughey, a former lt. governor of New York who chairs the Committee to Reduce Infectious Deaths (see our 8/10/09 entry)
This healthcare bill is like asking someone to sign for a loan on the understanding that the interest rate and repayment term will be filled in later. No deal! Give us 20 pages in plan English, not 1,000+ pages of gobbledygook.
2:40 – Mason Weaver, author and motivational speaker
I’m a black man without a teleprompter, so I’ll keep it simple. We don’t need hope; we’ve got freedom. And what you folks need to do is decide today what you are going to be. Then you can rest tomorrow.
2:42 – Introductions for Representatives Ron Paul (L-TX) and Louie Gohmert (R-TX)
2:43 – Representative Mike Pence (R-IN), the GOP conference chairman
About healthcare, they say silence is consent, and I’m here to tell you that We the People do not consent. What we want is not another speech, Mr. President, it is another plan.
2:49 – John Tate, Campaign for Liberty
2:52 – Press guy at Freedom Works, with instructions on how to text My USA
2:53 – Doc Thompson, talk show host from Richmond, Virginia
2:56 – Video
2:58 – Amy Kreamer, Tea Party organizer
The Tea Party Express (bus tour) covered 7,000 miles as it made its way across the country, and people kept showing up. We have to stay energized. This is not about a person or an organization – it will take a grass roots army.
3:02 – Deborah Jones, Tea Party organizer
3:05 – Representative Marsha Blackburn (R-TN)
There has been some talk about “tough choices,” but spending more and more money is not a tough choice in Washington, D.C. Stand together, fight for liberty.
3:07 – Andrew Langley, Institute for Liberty
3:10 – Yaron Brooks, Ayn Rand Institute (president)
3:12 – Lloyd Marcus, entertainer
3:16 – Vinny Forras, a fireman who responded to the World Trade Towers on 9/11 from Westchester, New York, heard one tower collapse above him and saw the other fall later.
3:18 – Tom Graves, a state representative in Georgia
3:21 – Mario Lopez – National Heritage Leadership Fund
3:24 – Kelly Hoag, USMC (retired)
Hello, America! “United we stand” was not just a bumper sticker on 9/12/01, and three years later I joined the Marine Corps and went on to serve two tours in Iraq. We can come together again.
3:27 - Hector Barretto, Latino Coalition (chairman)
3:30 – Darla Dawald, Patriotic Resistance Network
Trust me, Congress knows we are here.
3:36 – Bruce Bellotti, Singer
3:40 – William Greene, Right March blog
3:42 – Julian Kulski, World War II freedom fighter (he was 10 in 1939, when the Nazis marched into Poland)
3:49 – Rob Jordan, Freedom Works
This doesn’t end today!
3:50 – Darla Dawald, Tea Party Patriots
Get out there and get involved. Today is the start, not the end.
3:51 – Brendan Steinhauser, Freedom Works
3:52 – Jenny Beth Martin, Tea Party Patriots
Can you hear us now? Can you hear us now? CAN YOU HEAR US NOW?
3:53 – The crowd sings God Bless America
4:45 – Back at the Greenbelt, MD metro station, Team SAFE and others relax and regroup.
5:50 – All passengers accounted for, our bus heads for home.
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Conservatives generally viewed the March on Washington as a resounding success, albeit one that would need to be followed up with more action (there are very few final victories in politics, or life itself for that matter). In a celebratory vein, see “Conservative Woodstock Rocks the Capital, lookingattheleft.com, 9/12/09.
The conservative movement, which developed in the post-WWII, Cold War environment has now fully matured into the most significant political movement of the 21st century. I believe that this day could be referred to in the not too distant future as the day that changed America. This was the day the great silent conservative majority finally found its voice.
Another historical parallel was suggested, namely the civil rights March on Washington of 1963. What next for the Middle America Rebellion of 2009, Mark Tapscott, Washington Examiner, 9/17/09.
Whatever the number of attendees, this was possibly the most significant Washington protest since the civil rights movement's epic March on Washington for Jobs and Freedom in 1963. Indeed, about all that was lacking was a charismatic leader like Dr. Martin Luther King to deliver an "I have a dream" address for the ages.
Surprise, surprise, liberals had a jaundiced view of the March on Washington, and they did their best to pick it apart afterwards.
• Numbers – It was claimed that the turnout was exaggerated, amounting to mere “tens of thousands” versus up to 2 million. Debate rages over “tea party” crowd size, Washington Times, 9/17/09.
FreedomWorks, the Washington-based conservative advocacy group that was the chief organizer of the rally's arrangements, corrected an earlier estimate of 1 million to 1.5 million that it attributed to ABC News and put the figure between 600,000 and 700,000. ABC News denied it had reported a crowd that large and said its reports put the size of the demonstration in the "tens of thousands" range.
There is no objective way to settle this question, but we think the revised Freedom Works estimate is probably sound. And as Chairman Dick Arney observed, “[whatever] the actual number, the 9/12 March on Washington was far and away the largest gathering of limited-government conservative activists in history."
Note also that the participants came on their own volition, often at considerable cost and personal inconvenience. There is no comparison to the staged rallies being organized to promote the president’s healthcare plan. Thus, according to Townhall columnist Jillian Bandes, the crowd (some 15 thousand, comfortably seated in an inside venue) at a 9/17 University of Maryland rally consisted primarily of students who had not been offered an alternative event and bused-in union members who had been given paid time off to attend.
• Awareness – It was suggested that the protestors were a fringe element, people who are resisting change because they do not understand the president’s plans for the country. WH aide: “Tea party” protestors wrong, Washington Times, 9/13/09.
"I don't think it's indicative of the nation's mood," David Axelrod, the president's top adviser, said on CBS' "Face the Nation." "My message to them is, they're wrong." *** He also denied that Mr. Obama has any intention of a government takeover of the health care system.
It seems doubtful that this kind of rhetoric will impress anyone. But for the record, we believe the 9/12 demonstrators et al. may be better informed than the president and his advisers would like. See, e.g., “Happytalk” blossoms in the nation’s capital, 7/6/09.
It is nothing new for politicians to promise more than they can deliver, especially on the campaign trail, but the practice seems to be growing worse. One reason may be the blurring of the traditional distinction between campaigning and governing, with some politicians operating in nonstop campaign mode. In any case, people had better start paying attention to what is happening, or they may be shocked by the results. *** We are not buying the Happytalk about economic stimulus, healthcare, or energy policy. Shame on the proponents; they should present their proposals honestly and be open to other viewpoints – including the dictates of fiscal responsibility. Help us hold them to a higher standard!
• Motivation – The 9/12 demonstrators have been painted in some quarters as angry people energized by racial bias, simply because they oppose the policies of a black president. Such a charge would be devastating if it could be made to stick.
The starting point is to focus on a few of the more extreme signs, or perhaps an incident, participant interview, or speech. Here is how Campbell Brown did it on CNN.
The segment begins with selective footage from the 9/12 event, including an incident in which a taunting counter-protestor’s sign is torn up, taped interviews with several participants who could perhaps have been more guarded in what they said, and an angry excerpt from an unidentified man’s speech. An interview follows with Joe Wierzbicki, Coordinator of the Tea Party Express (bus tour across the country) and two guests with a different perspective.
Joe is grilled about a sign that depicts the president as an African witchdoctor and spells “Obama Care” with a hammer and sickle instead of a C. The implication is that this sign must reflect the mindset of all the protestors, since no one apparently asked that it be put away. There are fringe elements in any broad-based and spontaneous political event, Joe maintains, but he is out-talked by the other three participants. Is the Tea Party Racism Going Too Far? MoxNews.com, 9/14/09 (8:31 video).
Moral: It is always safer to stick to the issues than attack personalities, and if protestors do a bit of the latter they should be careful not to go too far. There is nothing that politicians pushing a questionable policy like better than an excuse to change the subject and put their opponents on the defensive – do not give them this chance!
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We end with some personal reflections by Team Safe:
Dorsch – It was good to be there. We saw with our own eyes what was going on, and if the media try to underplay the attendance or mischaracterize what happened we will be able to counter them with the truth.
McClain –The president and his advisers are not going to listen, but I hope this protest will send a message to Congress.
Whipple – People need to come out of their comfort zones and get involved. Watching this event on television might have been efficient, but there is nothing like being there to build commitment. In the end, we are what we do.
Wiest – There were too many speeches; a big speech was needed. But the good thing is there were so many demonstrators, and they seemed to realize what is happening to our country.
No doubt some readers were also in Washington on 9/12, and it would be great to post your comments as well. Please send them to email@example.com.
* * * This Blog's Replies * * *
Please send this 9/12 March on Washington video to everyone you know. It is genuine. I was there and that was the woman singing the National Anthem and it was the actual crowd. The only people not participating in this march were the people at the very back near the Washington monument underneath the tents; they were there for another function. -- Donna, Delaware Tea Party
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Great description of the 9/12 events...hope it goes again next year. -- SAFE member, Arizona
I would have loved to go to Washington for the march, as I have often done with the pro-life group. Keep up your good work---lets hope the fervor continues! -- Retired dental hygienist, Delaware
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9/14/09 – Nothing ventured, nothing gained
As a general rule, asking for things is more effective than keeping quiet and hoping for the best. Framing requests helps people to focus on what they want and get organized to go after it. Also, how can others help if there is no request in play?
Which is not to say that people who speak up necessarily get what they want. It pays to ask for things that are reasonable under the circumstances, and to offer logical, factually supported arguments that fair-minded people will recognize as such. Even then, there is likely to be opposition from those with a different vision – which it may not be possible to overcome.
Consider SAFE’S advocacy of smaller, more focused, less costly government. This agenda is not based on self-interest, and we believe there are strong reasons to support it – such as consistency with the framework of the U.S. Constitution, demonstrated efficacy of free market mechanisms, and experience that government programs often make economic and social problems worse instead of solving them.
But people who look to the government for the solution to every problem (recession, healthcare, dependence on foreign oil, global warming, you name it) or their ticket on the gravy train (e.g., profits or employment from providing government-mandated services) are not shy about demanding new programs and the perpetuation of existing ones.
Just because the tide is running against fiscal visionaries at the moment does not mean the time has come to give up. Indeed, this might be a good time to redouble our efforts.
We were struck by a comment that David Walker (formerly the U.S. Comptroller General, now CEO of the Peterson Foundation) made in a recent interview with John Fund of the Wall Street Journal.
By way of background, Walker spoke at the National Taxpayer’s Conference in June. He struck a somber note (see 6/29/09 entry), saying (1) smaller government is not in the cards, and (2) taxes must go up in order to close the government’s fiscal gap.
Fund (who also spoke at the NTU event) probed Walker’s reasoning on taxes in the interview, which produced the following exchange (emphasis added). Warning: The Deficits Are Coming, Wall Street Journal, 9/4/09.
Wouldn't any "grand bargain" [to close the fiscal gap] involve significant tax increases that would only hurt the ability of the economy to grow? "Taxes are going up, for reasons of math, demographics and the fact that elements of the population that want more government are more politically active," [Walker] insists. "The key will be to have tax reform that simplifies the system and keeps marginal rates as low as possible. The longer people resist addressing both sides of the fiscal equation the deeper the hole will get."
Interesting point! Maybe if fiscal visionaries want smaller government instead of tax increases, they should make their views known (which is what being politically active amounts to) instead of knuckling under to their ideological opponents. Consider what SAFE has been doing this year:
#Sent an unprecedented number of letters to the Delaware members of Congress, and testified at Senator Tom Carper’s listening session on healthcare.
#Continued cranking out letters and columns. Take a look at this gem from SAFE member Harry Kenton on the “cap and tax” bill.
#Participated in the Delaware tea parties on April 15 and July 2, and will join in the “March on Washington” on September 12. (For a report, see next week’s entry.)
One of the major issues for the protest will be GovCare. Three days after the president delivered a prime time address to Congress, which was intended to rally flagging support for his healthcare proposal, participants will communicate that it is time to hit the reset button. (Other issues: bailouts, economic stimulus, irrational energy policies, soaring deficits, and higher taxes on the way.) A march on Washington: Protest set on Democratic healthcare plan, Washington Times, 9/10/09.
But remember that SAFE is a small organization, and much of its activity is attributable to a handful of people. To gain traction, we will need lots of help.
Why don’t some of you folks (especially younger people) pick up the phone and call the office of a member of Congress, or send them an e-mail or letter? Here is the contact information for the Delaware members, and comparable information is posted on the Websites of the members from elsewhere.
Other options might include attending a public meeting (SAFE and the Delaware Tea Party were outnumbered 2:1 at the healthcare listening session that we attended, even though polls suggest that opinion on the GovCare proposal is close to a dead heat), writing a letter to the editor, or giving a talk.
And if you approve of the things SAFE is doing, there is always the option of becoming a member. We would be delighted to have you join us!
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9/7/09 – A conversation about healthcare
Remember the story about five blind people and an elephant. Each described the animal based on the part they had touched – leg, tusk, tail, etc. – and their perceptions were quite different. A spoilsport might suggest studying the elephant more carefully, thereby figuring out how its various parts hooked together, but never mind.
The elephant analogy applies in many situations. Thus, people have different ideas about the healthcare system – where it stands currently, what is wrong with it, and how, if at all, it should be changed – based on personal or shared experiences, things they were taught long ago, etc. The point was demonstrated at a meeting that SAFE directors Jerry Martin and Bill Whipple attended on Wednesday, September 2.
Billed as a “listening session,” the event was hosted by Senator Tom Carper (D-DE). The idea was to satisfy numerous requests for a meeting with the senator and/or his staff on healthcare that otherwise could not all be met. It was the last of three such sessions that day, starting in New Castle County and working south. The venue was a meeting at the Delaware Technical and Community College campus in Georgetown, Delaware (the county seat of Sussex County).
Arriving early, we learned that there would be about 15 guests versus the 30 or so that the meeting scheduler had predicted. Good, there should be more opportunity to make our points during the 90 minutes allotted for the meeting.
The other participants, including Senator Carper and his staff, arrived, and everyone took seats around a square formed by four lines of tables. The seating arrangement placed all concerned in close proximity. No media, no signs, everyone looked comfortable. After self-introductions around the square, the discussion began.
Senator Carper delivered a monologue about what the healthcare proposal (broadly speaking, as there are several proposals in play, not the least of which is the bill being worked on by the Senate Finance Committee on which he sits) is all about, why he thinks it is needed, and where it stands.
People had often been asked whether members of Congress would agree to be covered by the healthcare plan they were proposing for everyone else, said Carper. It was a fair question – and he thought he had a good answer.
Like other government employees, members of Congress participate in a healthcare insurance (HCI) purchasing pool. A variety of coverage plans are on offer, from Chevrolet to Cadillac plans. With 8 million participants, the pool can and does negotiate attractive rates, but the insurance companies still make a reasonable profit. The government pays about 72% of the cost; employees pay about 28% of the cost, which is not out of line with many HCI plans offered by private employers.
In the process of extending HCI coverage to the roundly 46 million Americans without it, what could be more fairer than to offer the same benefit to the uninsured that government employees currently enjoy, namely the opportunity to participate in a large HCI purchasing pool at a cost they could afford?
Do not think of this arrangement as a “public option,” think of it as a “national exchange” or perhaps a number of regional exchanges. But simply relying on private insurance companies would be problematic, because in some states there are only one or two private firms offering HCI.
[The possibility of promoting more competition by allowing HCI to be purchased across state lines was not mentioned. Query: are the HCI plans offered through the government pool subject to regulation on a state-by-state basis?]
Perhaps a backup arrangement that kicked in if needed would suffice to keep the insurance companies honest. A somewhat similar provision is provided in the Medicare prescription drug bill, although thus far – due to lively private insurance company competition – there has been no need to invoke it. And by the way, polls show that 85% of Medicare participants are pleased with their prescription drug coverage.
[Note: millions of the seniors get enhanced drug coverage through Medicare Advantage plans (which the president is proposing to eliminate in order to reduce costs). Medicare Drug Plans Strong and Growing, Center for Medicare & Medicaid Services, press release, 1/30/07.]
After this opening monologue, the discussion went around the table with each guest being invited to make a statement or ask questions, however they wanted to proceed. It was requested that individuals try to keep their presentations to “about 2 minutes” but the guideline was not rigorously enforced.
Most guests spoke in favor of healthcare reform, which they equated with the president’s plan, including a public option of some sort.
One theme was personal or shared experiences of hardships resulting from being without HCI and/or satisfactory access to healthcare services. Thus, an SEIU representative said her mother had died due to not having HCI. And several healthcare workers reported that patients were either being denied proper care, or receiving it on a delayed basis due to questions as to whether their insurance covered it.
There were also requests that the healthcare bill include various features that the guest (or guest’s organization) considered especially important. Here are some examples:
• Multiple Sclerosis organization representatives (an advocate, a patient, and the patient’s aide) urged universal access to a full range of MS services.
• Healthcare worker advocated better access to behavioral therapy (e.g., substance abuse) services, which is more economical than imprisoning people or sending them to hospital emergency rooms.
• Representative of Planned Parenthood advocated that women’s reproductive healthcare be covered. The point was not that abortions should be paid for with taxpayer dollars, she said, but rather that there should be no provisions in the bill interfering with a woman’s right to have an abortion.
• Representative of the National Restaurant Association spoke in favor of national nutritional labeling requirements on menus, which could help restaurant patrons make healthier choices. Senator Carper indicated his support, commenting that he loves chocolate cake but needs to be reminded that a slice represents 1,300 calories. [Note: The NRA’s interest may reflect a desire to head off state-by-state legislation, which for a national restaurant chain would be more costly to comply with.]
• An employee of the Small Business Administration suggested that small businesses that provide HCI for their employees are being hammered by rising healthcare costs, wherefore a federal plan that incorporates the best practices of the Cleveland Clinic, etc. was absolutely essential. [No evidence was cited to show that the government needed to be involved.]
• A small business owner related that all employees had been cut to part-time status. There was no way to offer HCI, wherefore the federal government needed to step in.
SAFE’s turn came about halfway through the session (we were sitting across the square from Senator Carper).
Bill Whipple agreed that healthcare costs are out of control and said SAFE is in full agreement that reforms are needed. Indeed, our 7-point plan for real healthcare reform is set forth in a 24-page paper (held aloft) that was sent to Senator Carper and others in May 2009 and is also posted on SAFE’s Website.
The gist of our position is that Medicare and Medicaid have artificially fueled demand for healthcare over the past 40+ years, while throttling price competition. Job one is to restructure these programs so to make them fiscally sustainable and bring healthcare costs under control. And with the OMB projecting $9 trillion in deficits over the next 10 years, a costly new healthcare program is simply not affordable.
Jerry Martin cited a Wall Street Journal column (9/2/09) by Senator Tom Coburn (R-Oklahoma), which observes among other things that the way to save taxpayer dollars is not to spend more as an “investment” – it is to spend less. Given the dire fiscal outlook, this is no time for “business as usual.” Congress should therefore put the healthcare bill and other proposed initiatives like “cap and trade” on hold, Martin continued, and organize task forces to drive spending cuts throughout the government’s budget.
Senator Carper supported the need to spend taxpayer dollars carefully, citing several instances of actual or potential cost savings – such as cancelling orders for more F-22 fighters [national defense is the only area in which the president and his party have shown real interest in cutting spending], and efforts to crack down on Medicare and Medicaid fraud.
He also pointed out the president’s commitment not to sign a healthcare bill that increases the deficit, and said the Senate Finance Committee will proceed accordingly.
Whipple said the president’s criteria might be met by raising taxes, and that several new taxes have been suggested to pay for the healthcare plan – a tax on employer-provided healthcare benefits, higher income taxes for high earners, a tax on sugary drinks, maybe even a value added tax.
Senator Carper said he likes the idea of taxing healthcare benefits above a Cadillac plan threshold (which once set would be indexed for inflation), as this would not only raise revenue but encourage more cost conscious healthcare decisions.
Whipple: SAFE sees merit in taxing healthcare benefits, in fact that is one of the seven steps in our plan for real healthcare reform.
Senator Carper: Great, so you agree with me.
Whipple: Only 50%, because any revenues that might be raised should be applied to reduce deficits.
Senator Carper: Well, 50% is a start.
The Delaware Tea Party got the opportunity to speak a bit later, and like us their representatives differed with the majority view at the meeting.
They were not against healthcare reform said one – but why not start with the easy fixes, such as permitting HCI to be purchased across state lines and tort reform, instead of launching a huge new federal program?
The second cited a personal reason for not favoring the healthcare plan that is on the table. Her husband is from England, which has a government-run healthcare plan, and they know better. She held up newspaper accounts about abysmal conditions in British hospitals, long waiting times for treatment, etc. The bottom line: if the government runs the show, that does not mean things will be done better.
Interaction: There were no personal attacks during the session, but there was an undercurrent of animosity towards the obstructionists. She did not read the Wall Street Journal, commented the speaker after SAFE, but people who did should not believe everything they read. Others cited the need to ignore naysayers mouthing buzz words and talking points in an effort to block change.
To be honest, much of what the supporters of the healthcare plan said did not register with us either – even though they seemed well meaning and sincere.
Wrap-up: Senator Carper offered some closing comments, including the following:
• He is a big believer in the power of preventive medicine to cut healthcare costs, and by way of example he cited the success of Safeway in holding down its healthcare benefit costs by giving employees financial incentives to stop smoking, lose weight, etc.
[We agree, but are unclear why government intervention is needed to implement such a program. If private employers can save money while keeping their employees healthier, why wouldn’t they do it without being told?]
• He recognizes that medical malpractice has inflated healthcare costs to some degree, not only by driving up the cost of malpractice insurance for doctors but also by influencing doctors to order medical tests that may not be truly necessary.
Quite possibly the situation could be improved by new legal ground rules, e.g., cases would have to be referred to a panel of doctors for review before they could be taken to courts, or the “English rule” (the losing litigant must pay the winner’s legal costs).
In our federal system, however, tort reform should be dealt with on a state-by-state basis. Over time, successful programs will be recognized and adopted by other states. Trying to solve the problem with federal legislation would be inappropriate.
[The state rights argument should carry some weight with conservatives. After all, aren’t we the ones who are always talking about the limitation of powers and the 10th Amendment? But everyone tends to be a bit inconsistent in this area, favoring federal law when they want to get something done and opposing it when they do not. Senator Carper apparently sees nothing wrong with federal nutritional labeling requirements for restaurant menus, and a vastly expanded role of the federal government in the healthcare sector. So does it really make sense to view regulation of the increasingly interstate legal industry as a state prerogative?]
• Senator Carper cited four core values, as he sometimes does in meetings with his staff. Here they are: 1) to do what we believe is right; 2) to treat others as we would like to be treated; 3) to use common sense and be committed to excellence in everything that we do; [at the Georgetown session, we understood him to say “if it’s not perfect, make it better”]; 4) to never give up when we know that we are right.
[Fair enough, except that things done with the best of intentions sometimes have disastrous consequences. Let’s hope that Senator Carper will reflect on what the Delaware Tea Party representatives and we had to say.]
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8/31/09 – If you can’t hear what we hear, you aren’t listening Read Replies
Let it be remembered that SAFE said the following about the coming fiscal crisis in a March 1996 statement (see the first issue of our newsletter):
As senior citizens, we are very concerned about the growth of the federal government, and the huge debt being left for our children and grandchildren to pay. We believe this country is risking a financial disaster, which will hurt everyone, including senior citizens. It is as if we are floating down a river and can hear a waterfall ahead. It is time to pull for the shore now.
Sound familiar? The statement was quoted in our 9/10/07 entry (The coming fiscal storm: an historical perspective), with a comment that “the boat is still headed downstream, and the noise of the waterfall is louder.”
A healthcare expert at Pacific Research Institute gives the waterfall analogy an interesting twist. The Medicare Tsunami, Jeffrey Anderson, Washington Times, 8/26/09.
The president is absolutely right about the urgency of getting Medicare & Medicaid outlay under control, says Anderson, but his GovCare proposal would represent a “strange solution.”
Take Medicare, the bigger of the two programs, which is “drifting toward disaster” – or in navigational terms a waterfall.
In inflation-adjusted dollars, the average American spends 7 times as much on Medicare as in 1970. But it's the baby boomers' impending retirement that magnifies the roar of the falls. There are now almost four American workers for every Medicare beneficiary. Within the next two decades, that number will drop to just 2 1/2. For those still in the work force, the financial burden will rise tremendously.
But instead of trying to steer the boat to shore, the proposed “solution is to paddle harder toward the falls.”
The president is trying to expand government-run healthcare because he mistakenly believes its skyrocketing costs have been driven by the growth in private-sector health costs. However, since 1970, the costs of Medicare and Medicaid have risen one-third more each, per patient, than the combined costs of all other healthcare in America -- the vast majority of which is purchased privately. Government-run healthcare is the horse, not the cart, on the road to higher costs.
As for what needs to be done, Anderson’s view is rather similar to ours. Focus on making the existing programs sustainable, e.g., by gradually raising the Medicare entry-level age, and forget about trying to make the rest of the healthcare system operate like Medicare and Medicaid.
Stopping our drift toward disaster will require genuine leadership, and reasonable people can debate the best way to get to the shore. But we'll never get there by paddling toward the falls.
SAFE’s proposal for Medicare (point 6 of our 7-point healthcare plan) is to “phase out traditional Medicare coverage, providing capped funding for private insurance coverage of future retirees.” For discussion, see In Search of Real Healthcare Reform, page 18 et seq.
And folks, if you have questions or comments about this or any of the other points in our healthcare plan, let us hear about them. Getting healthcare costs under control after 50+ years of misguided government intervention is a huge problem, and there are no simple or obviously correct solutions.
Do the kind of changes we are proposing stand a chance of being implemented? Hard to say, but there does seem to be growing awareness that the government’s spending spree on the national credit card cannot be allowed to continue.
In a recent Wall Street Journal/NBC poll, 24% of respondents cited the deficit as the most important economic issue facing the country (11% said healthcare). And according to 58% of respondents, “the president and Congress should focus on keeping the budget deficit down, even if [it] takes longer for the economy to recover.” Public Wary of Deficit, Economic Intervention, Laura Meckler, Wall Street Journal, 6/18/09.
There was much wringing of hands after the Office of Management and Budget (OMB) issued a mid-year budget projection showing deficits totaling $9 trillion over the next 10 years (FY 2010-2019), up $2 trillion from OMB’s projection in February. White House: Budget deficit will top $1.5 trillion in ’09, ’10, Washington Times, 8/25/09.
The Congressional Budget Office (CBO) works with input from OMB, but produces its own budget projections. In March, its deficits for the 10-year period were $2 trillion higher than the OMB deficits (see 3/23/09 entry). Now the CBO is projecting deficits $2 trillion lower than the OMB number, go figure, principally due to different assumptions about taxes. The Budget and Economic Outlook: An Update, CBO, August 2009.
Even with the CBO mid-year projection (tabulated below), the projected deficits and debt are dismaying for those who, like us, believe the government should balance its budget and keep it that way.
Dollars in billions, except where noted
% of GDP
Debt Held by the Public at End of Period
% of GDP
The deficit for fiscal year 2009 (running from 10/1/08 to 9/30/09) is pretty much a given. It will be the highest deficit as a % of GDP since World War II – by a wide margin. Shame on both the previous and current Administrations!
Going forward, the CBO projection shows the government debt in public hands (unlike the National Debt figure usually reported, excludes IOUs to Social Security and other government trust funds) rising from 54% of GDP at the end of FY 2009 (or 41% at the end of FY 2008) to 68% by FY 2019. With the OMB projection, public debt in FY 2019 would be some $2 trillion higher, or say 77% of GDP. Either way, no one has offered a plausible explanation for the indicated deterioration in the government’s fiscal position.
Notice that the cost of the GovCare proposal (said to be $1 trillion+ over 10 years) is not reflected in either the OMB or CBO projections.
Also, the projections are overly optimistic in several respects, says the Wall Street Journal (The Pelosi-Obama Deficits, 8/26/09).
• Both the White House and CBO predict that Congress will hold federal spending at the rate of inflation over the next decade, [a marked change from recent practice.]
• CBO actually has overall spending falling between 2009 and 2012, which is less likely than an asteroid hitting the Earth.
• CBO assumes that some 28 million middle-class tax filers will get hit by the alternative minimum tax, something Democrats say they won't let happen. CBO also assumes that all the Bush tax cuts disappear—not merely those for the rich, but those for lower and middle income families as well.
• A burst of sustained economic growth [could potentially] boost tax revenues and reduce future debt. But there's nothing in the Obama budget that nurtures or rewards growth or small business. [The cap and trade bill, healthcare bill, and contemplated tax increases on capital gains, dividends, and upper tier income would all impede growth.]
We would add that interest expense may have been underestimated by a wide margin as a result of assuming that conditions in the financial markets will only change modestly over the next 10 years. See OMB report summary, p. xii.
• With the economy functioning well below its potential level, inflation is projected to remain very low; the consumer price index . . . is expected to increase by 1.6 percent this year, by 1.1 percent in 2010, and by 1.0 percent in 20ll . . .
• In CBO’s forecast, the interest rate on 3-month Treasury bills averages 0.2 percent in 2009 and 0.6 percent and 1.7 percent in 2010 and 20ll, respectively; the rate on 10-year Treasury notes average 3.3 percent in 2009, 4.1 percent in 2010, and 4.4 percent in 2011.
Here is the interest expense resulting from the CBO’s assumptions and debt projection (Table 1-6, p. 22 of the CBO report):
Dollars in billions, except where noted
Avg. interest rate (calculated)
But suppose that inflation and interest rates spike within a year or two, as a consequence of continuing the monetary and fiscal policies that have been employed to fight the 2008-2009 recession. Imagine what double-digit interest rates, last seen 30 years ago, would do to the interest expense shown in this table.
Federal Reserve Chairman Ben Bernanke (just reappointed by the president for a second term) says the Fed is committed to holding down inflation, but there is reason to doubt that the excess liquidity will be mopped up fast enough. Inflation’s Coming – Hide Here, David Dreman, Forbes, 9/7/09. [For investors, Dreman’s advice is to buy national resource and cyclical stocks, buy real estate and sell long bonds.]
Central banks, including our not-so-omniscient Federal Reserve, will again fail to take the punch bowl away from the party soon enough, keeping stimulative polices going far past the point when unemployment has turned a corner and the financial debacle is behind us. Treasury Secretary Geithner and Fed boss Bernanke are trapped by politics and events. They make pronouncements downplaying the inflation threat, but inflation will hit like a tsunami within three years, maybe sooner.
One answer to the projected deficits, of course, might be to drastically raise taxes. But make no mistake, the fiscal problem (which includes soaring entitlement outlays beyond the 10-year budget horizon) is far too big for Congress to tax its way out of – there is just so much in taxes that people are willing or able to pay.
Or it could turn out, for all Team GovCare’s denials, that outlays would be contained by rationing healthcare after all. This would be consistent with the experience in other countries, and it could happen whether there was a “public option” or not. Obamacare, The Only Exit Strategy, Charles Krauthammer, Townhall.com, 8/28/09.
Government-subsidized universal and virtually unlimited coverage will vastly compound already out-of-control government spending on health care. The financial and budgetary consequences will be catastrophic. However, they will not appear immediately. And when they do, the only solution will be rationing. * * *Look at Canada. Look at Britain. They got hooked; now they ration. So will we.
Or the debt could be allowed to keep climbing as projected, with the idea that the principal amount would be wiped out by inflation. Various countries have resorted to such dodges, notably Germany after World War I, and the consequences are ugly. The Ascent of Money: A Financial History of the World, Niall Ferguson, Penguin Press (2008), pp. 102-107.
• The enduring economic legacy of the hyperinflation was bad enough: weakened banks and chronically high interest rates, which now incorporated a substantial inflation risk premium. But it was the social and political consequences of the German hyperinflation that were the most grievous.
• In more recent times, a number of countries have been driven to default on their debts – either directly by suspending interest payments, or indirectly by debasing the currency in which the debts are denominated – as a result of far less serious disasters [than losing a world war].
Let’s say that a huge tax increase, healthcare rationing, and/or hyperinflation are not what you want in America’s future. Could it possibly be time to start looking at government spending programs more carefully. For some ideas on “where to cut,” see:
But more than anything else, what is needed is an attitude adjustment. For there is a common denominator in the many questionable expenditures that make it though the appropriation process, and it boils down to taking joy in spending other people’s money. Haste-and-waste deficits, Jay Ambrose, Washington Times, 8/29/09.
In the end, because it derives from the same kind of ideological hubris and political irresponsibility as the stimulus package, [GovCare] will likely do about as much to improve healthcare as the condom study at Indiana will do to lower the unemployment rate, and we simply cannot afford it.
Maybe the reckless spenders in Congress should be voted out of office. Or perhaps there should be a law that the pay and staff budgets of members of Congress cannot be increased in any year in which the federal budget is not balanced.
If you think there is something to these ideas, let us know and pass them on.
* * * This Blog's Replies * * *
The FDA has ordered three firms to stop production of a medicine (natural desiccated thyroid, or NDT, made from a product of porcine origin) that has been in use for 100+ years and is identical molecularly to a compound in the human thyroid. NDT has been an absolute lifesaver for me and for others suffering from the same condition. There are reports that the two remaining producers may be closed down, and in any case they may not be able to meet the demand for NDT. With a 6-week supply on hand, my survival is at risk. And the plan is to give the government even more power over healthcare? – Steel supply firm executive, Texas
John Adams and his crowd must be turning over in their respective graves! Oh well, for my final few years, I'm just going to concentrate on improving my golf game. – Retired financial executive, Florida
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8/24/09 – Healthcare: deal or no deal? Read Replies
The past two entries have focused on the extraordinary national ferment about the big push for near universal healthcare insurance coverage (or GovCare), which figures to continue during the August recess of Congress and peak with the 9/12 “March on Washington.”
We will have more to say about the 9/12 event in due course, and be assured that SAFE will be there, but for now let’s back away from the fray and focus on two strategic issues. First, why is there so much fuss about a “public [healthcare insurance] option”? Second, would a compromise on healthcare make sense?
Public option – Having ended the 8/17 entry (finalized on 8/15) with the president defending a public option, we were chagrined by reports that Team GovCare was signaling willingness to forego a public option in order to strike a deal. [HHS Secretary] Sebelius Says Government Insurance Plan Not Essential, Bloomberg.com, 8/16/09.
We decided to post the entry as written, however, and just as well. Following an angry reaction from the liberal wing of the president’s party, it developed that the president wants a public option after all. Prez in Double-Flip on Health[care] Option, New York Post, 8/19/09.
The Obama administration now says it remains fully behind the idea of a "public option" for government-run insurance, despite clear signals over the weekend from top officials that the public option is not a deal-breaker and is just a "sliver" of the overall reforms it seeks.
Now let’s see, what are the arguments for a public option, and why are some people so passionate about the subject?
As a starting point, and at the risk of oversimplification, here are the core elements of the GovCare proposal:
(1) Using a combination of government mandates and subsidies, dramatically reduce the number of Americans (currently about 46 million, including 10+ million illegal aliens) without healthcare insurance;
The anticipated result is not universal healthcare insurance coverage, but something close to it. The president made the following prediction at an 8/11/09 town hall meeting in Portsmouth, New Hampshire (see coverage in the 8/17 entry).
There are about 46 million people who are uninsured. And under the proposals that we have, even if you have an individual mandate, probably only about 37-38 million, so somewhere in that ballpark.
(2) Impose new federal requirements for healthcare policies of private insurance companies, e.g., coverage could not be denied due to a preexisting condition nor fees raised to levels deemed unaffordable.
By way of illustration, here is what the president said at the Portsmouth rally after being introduced by a woman who had been unable to obtain healthcare insurance.
Now, I want to thank more than anybody, Lori, for that introduction, and for sharing her story with the rest of us. (Applause.) Thank you, Lori. Lori's story is the same kind of story that I've read in letters, that I've heard in town hall meetings just like this one for the past five years. In fact, some of you were in that town hall -- those town hall meetings, as I was traveling all throughout New Hampshire. It's the story of hardworking Americans who are held hostage by health[care] insurance companies that deny them coverage, or drop their coverage, or charge fees that they can't afford for care that they desperately need.
(3) If steps 1 and 2 were implemented, it is said, there would still be an important role for private healthcare insurers. Again quoting the president at Portsmouth:
Under our proposal, the majority of Americans will still be getting their healthcare from private insurers. All we want to do is just make sure that private insurers are treating you fairly so that you are not buying something where if you failed to read the fine print, next thing you know, when you actually get sick, you have no coverage.
But some observers have different expectations. If young, relatively healthy consumers knew they (a) could not be denied healthcare insurance when they want it (guaranteed issue), and (b) could not be charged more based on their health status (community rating), it is pointed out, they would have no incentive to obtain insurance until they got sick. The result: higher insurance rates for everyone unless the government heavily subsidized the cost of obtaining coverage. See, e.g., The Truth About Health[care] Insurance, Wall Street Journal, 8/12/09.
New York, New Jersey and Massachusetts have both community rating and guaranteed issue. And, no surprise, they have the three most expensive individual insurance markets among all 50 states, with premiums roughly two to three times higher than the rest of the country. In 2007, the average annual premium in New Jersey was $5,326 for singles and in New York $12,254 for a family, versus the national average of $2,613 and $5,799, respectively. ObamaCare would impose New York-type rates nationwide.
Clearly, GovCare would be bad news for taxpayers, already being hammered by huge outlays for Medicare and Medicaid (far higher than were projected when these programs were established in 1965), but that does not mean it would be bad for private insurers.
Allured by the prospect of millions of new customers, big healthcare companies (e.g., Aetna, UnitedHealth, and WellPoint) are prepared to accept guaranteed issue and/or community rating requirements so long as the rules apply for all private insurers and their coverage can be priced high enough to make money on average. Aside from campaigning against a public option, which would presumably cut into their business, they are supporting GovCare – don’t be fooled by the anti-insurance company rhetoric of GovCare supporters, which is mainly for show. The Health[care] Insurers Have Already Won, Chad Terhune and Keith Epstein, Business Week, 8/6/09.
The carriers have succeeded in redefining the terms of the reform debate to such a degree that no matter what specifics emerge in the voluminous bill Congress may send to President Obama this fall, the insurance industry will emerge more profitable. Health reform could come with a $1 trillion price tag over the next decade, and it may complicate matters for some large employers. But insurance CEOs ought to be smiling.
Should the government compete with private insurers by issuing healthcare insurance? Such an activity might seem superfluous if the government would be regulating the healthcare coverage and terms to be offered, rather like wearing both a belt and suspenders, but the president has nevertheless suggested that a public option could “keep the insurance companies honest.” Portsmouth town hall meeting, 8/11/09.
It seems unlikely that the president would insist on a public option, however, if the rest of his healthcare plan could be pushed over the top by foregoing it. He certainly managed to suggest flexibility on this issue at another town hall meeting. In [Grand Junction,] Colorado, Obama promises “common-sense” healthcare, Maeve Reston, Los Angeles Times, 8/16/09.
The public option, whether we have it or we don't have it, is not the entirety of healthcare reform. This is just one sliver of it, one aspect of it. And by the way, it's both the right and the left that have become so fixated on this that they forget everything else.
The “one sliver” comment would seem like a realistic assessment, but for one thing: participants on both sides of the healthcare battle perceive the public option as an opening wedge to undermine private insurers and pave the way for a single payer system.
If the real objective of a public option was to foster more competition in the insurance market, conservatives point out, there would be better ways to go about it, e.g., by permitting consumers to buy the healthcare insurance coverage that they want (rather than what the government says they should have) from insurers operating anywhere in the country. Also, there is quite a bit of competition in the private insurance market already. The “Public Option” Healthcare Scam, Steve Chapman, Townhall.com, 7/16/09.
It will come as a surprise to private health[care] insurance providers that they have not had to compete up till now. Nationally, there are some 1,300 companies battling for customers. Critics say in many states, one or two insurers enjoy a dominant position. But market dominance doesn't necessarily mean insufficient competition. * * * [And] net profit margins in the business run about 3 percent, only slightly above the median for all industries.
Obviously, a government insurance entity could undercut private insurers if it received special subsidies. (That is why private companies do not sell flood insurance, for example.) But even without special subsidies, the playing field would be far from level. The Public Option Two-step, Wall Street Journal, 7/10/09.
. . . the public version Mr. Schumer favors would supposedly receive no special advantages. But this is meaningless when Democrats are planning to mandate the benefits that private insurers must provide, the patients they must accept, and how much they can charge. Oh, and a government plan would still have an implicit taxpayer guarantee a la Fannie Mae, giving it an inherent cost-of-capital advantage.
People on the other side of the issue, e.g., Representative Lynn Woolsey (D-Calif.), who heads the 84-member House Progressive Caucus, perceive the public option as having much the same potential – and they love the idea. Progressive, Black, Hispanic caucuses pledge more than 120 “no” votes on health[care] co-op plan, Susan Ferrechio, Washington Examiner, 8/18/09.
[Do not underestimate] how important competition and lowering the overhead and providing a path toward universal health care is for progressives. There must be a strong, robust public option or we will not vote for this.
Compromise – In the Senate Finance Committee, efforts are under way to craft a bipartisan compromise on healthcare. The key players, aka “the gang of six,” are Senators Max Baucus (D-Montana), Jeff Bingaman (D-New Mexico), Kent Conrad (D-North Dakota), Charles Grassley (R-Iowa), Mike Enzi (R-Wyoming), and Olympia Snowe (R-Maine). We understand that other Finance Committee members are also involved in the effort, e.g., Senator Tom Carper (D-Delaware).
In general, it is anticipated that the Senate Finance Committee bill would carry a lower price tag than HR 3200 and drop or water down some of that bill’s most controversial provisions. Although the discussions are taking place behind closed doors, and during the August recess via conference calls, a few details have been revealed of the matters under discussion.
• As noted in the 8/17 entry, it has apparently been decided to drop the provision for reimbursement of advance care planning consultations. Michael O’Brien, The Hill.com, 8/13/09.
• It is believed that the Senate Finance bill will dispense with a public option, probably substituting a non-profit co-op approach. Opposing view: Public option is no option, Senator Mike Enzi, USA Today, 8/19/09.
In the Finance Committee, six of us leading the negotiations are working from the premise that there will not be a government-run plan. One alternative we are considering is a non-profit health insurance cooperative where consumers could band together to seek better rates and coverage from health insurance companies.
I can count votes, and I know that a government-run plan will not pass in the Senate. The co-op approach has potential and should be considered, but it must not get hijacked in the House-Senate conference as a backdoor way to get a government-run program in place. A government-run option is really no option at all.
• HR 3200 would subsidize healthcare insurance for most American workers. With or without a public option, the result would be to establish a middle class entitlement program – situated between Medicare for the elderly and the newly liberalized SCHIP program for children – which would be virtually impossible to dismantle later. Welfare at $193,000? Terrence Jeffrey, Washington Times, 8/22/09.
Both the House and Senate bills would set up a new government-regulated health-insurance market -- called an "exchange" by the House -- where people could purchase approved health-insurance plans (including, as currently drafted, the public option) using credits the government would provide to all families making up to 400 percent of the poverty level.
There have reportedly been discussions behind the scenes about the mandate and subsidy provisions of HR 3200, namely whether these provisions should be adjusted so as to reduce the cost of the healthcare plan. So far there is no consensus in this area, and if agreement is not reached by September 15 it is understood that the president’s party may decide to forget about seeking bipartisan support and attempt to go it alone. New Splits Emerge in Health-Plan Talks, Jonathan Weisman and Naftali Bendavid, Wall Street Journal, 8/22/09.
Republicans are pressing to reduce the size of tax credits for families with incomes that are below three times the poverty rate. They would also like to trim back insurance coverage mandates in hopes of lowering premiums that would have to be subsidized. But the three Democrats believe savings can be found without going to the heart of the bill. *** A conference call went until nearly midnight Thursday [August 20] with no major breakthroughs.
If a bipartisan Senate Finance Committee [SFC] bill results from these efforts, insiders predict that it will supplant HR 3200. And many liberals, e.g., former Labor Secretary Robert Reich, are not very happy about this prospect. Why the Gang of Six Is Deciding Healthcare for Three Hundred Million of Us, Huffington Post, 8/21/09.
Why has it come down to these six? Who anointed them? Apparently, the White House. At least that's what I'm repeatedly being told by sources both on the Hill and in the administration. "The Finance Committee is where the action is. They'll tee-up the final bill," says someone who should know.
The SFC bill would presumably be more attractive from our standpoint than HR 3200, thereby creating a dilemma. Should fiscal visionaries accept the SFC bill as an acceptable compromise, or should they hold out for total victory and possibly contribute to a less favorable outcome. In other words, to pose the question popularized by a TV game show, “Deal or no deal?”
We appreciate that legislating is an imperfect process, and that some give and take is often necessary. Also, the healthcare system has serious problems that need to be addressed – for which reason a simple “no” response would be inappropriate.
But SAFE is not simply attempting to block change. To the contrary, we have proposed a 7-step program for real healthcare reform. See the following page, and the linked blog entries (especially 4/6/09).
As best we can determine, the SFC bill would not address any of our 7 steps – from (1) focusing on healthcare costs rather than near universal coverage, to (7) tort reform. And we doubt this situation will change unless the proposed healthcare plan is rejected.
So from our standpoint, the answer seems pretty clear – “No deal!” And a recent poll suggests that we are not alone in this opinion. 54% Say Passing No Healthcare Reform Better Than Passing Congressional Plan, Rasmussen Reports, 8/15/09.
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We must stop this major healthcare overall – those on Medicare will take a big hit on what services will be covered. – SAFE Member
Good article. Hits the nail on the head. – Steve McClain
I believe GovCare would provide free medical care for illegal aliens (the exception clause is meaningless as no mechanism has been provided for enforcement) and abortions at taxpayer expense, and that it would constrict medical care for older folks nearing the end. Following the historical path of government, the plan would be expensive and inefficient. The substantial cost involved would be shifted to the private sector by imposing unfunded mandates on employers/workers and raising taxes. The government is in a huge fiscal hole already, which is rapidly growing due to reckless spending and promises. GovCare would make the situation that much worse. Bury businesses in costs and taxes and they will flee the country as they are now leaving California. Let government debt soar and we can expect double-digit inflation or worse and a rating downgrade on U.S. government securities to junk bond status. – SAFE member
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8/17/09 – Healthcare: the empire strikes back Read Replies
As previously related (8/10/09 entry), the surging opposition to government-run healthcare seemed to surprise the politicians leading the charge for GovCare.
And make no mistake; the confusion went all the way to the top. Obama’s Tone-Deaf Health[care] Campaign, Dorothy Rabinowitz, Wall Street Journal, 8/10/09.
The president has a problem. For, despite a great election victory, Mr. Obama, it becomes ever clearer, knows little about Americans. He knows the crowds—he is at home with those. He is a stranger to the country's heart and character.
He seems unable to grasp what runs counter to its nature. That Americans don't take well, for instance, to bullying, especially of the moralizing kind, implicit in those speeches on healthcare for everybody. Neither do they wish to be taken where they don't know they want to go and being told it's good for them.
The president and his allies still have the votes to pass a big healthcare bill, however, and they are not about to back down. Their strategies and tactics are already being adjusted, using what might be called the three Rs:
Retaliation – In addition to complaining about protestors at town hall meetings, Team GovCare quickly deployed its own foot soldiers – who were just as energized as the protestors and physically more intimidating. “Brown Shirts” vs. Purple Shirts, Michelle Malkin, Townhall.com, 8/12/09.
At town hall meetings in St. Louis and Tampa, Fla. [see video in the 8/10/09 entry], last week, purple-shirted SEIU members engaged in physical confrontations with critics of the Democrats' health care takeover plans. Assault victim Kenneth Gladney, beaten while passing out "Don't Tread on Me" flags, is turning the tables on his SEIU assailants. The black conservative activist announced Tuesday that he's filing hate crime charges against the union goons in Missouri.
These were the first outbreaks of violence since the summer recess began. And that's no coincidence. SEIU President Andy Stern, the militant social worker turned union heavy, boasts of his organizing philosophy: "(W)e prefer to use the power of persuasion, but if that doesn't work, we use the persuasion of power."
No strong arm tactics were on display at the president’s 8/11/09 town hall meeting in Portsmouth, New Hampshire, of course, but the audience was stacked in the president’s favor and the questions were tame. Potemkin town halls: Obama’s healthcare forums are staged pep rallies, Washington Times, 8/12/09.
The Portsmouth rally was the first of three such events planned for this week. If nothing else, it was well-choreographed, if not completely scripted. The questions posed to the president were all softballs; his answers were mostly platitudes. Mr. Obama said that he wanted to hear from people who disagree with him because "they need to be heard, too," but it was hard to discern opposing viewpoints through the chants of "Yes, we can."
Outside the school gym where the meeting took place, the atmosphere was quite different. Obama appeals for calm in health[care] debate, Washington Times, 8/12/09.
Under overcast skies, heavy crowds lined the campus driveway, with hundreds of protesters chanting and waving signs in opposition to the health care proposals. Another group, equally large, rallied in support of the president's plan. Many of the protesters who came to voice their opposition said they remained deeply concerned about the cost of the overhaul and personally hurt by the characterization that they were part of an orchestrated mob.
According to New Hampshire resident Kevin Fritton, the crowd was “equally split for and against.” His eye witness account follows.
The pro side (for the bill) was made up mainly of visible union members clearly identified by t-shirts with SIEU, NEA, AFL-CIO, and Massachusetts Nurses Association. There was also a contingent of global warming supporters and even people with signs saying defeat Bush.
The con side was mainly made up of ordinary people that were not organized. There were Veterans carrying flags, families and senior citizens. There was a group passing out Do Not Tread On Me bumper stickers. In speaking to many individuals it was [their] first time at such a gathering.
Watching the line of 2,500 people going into the gym, Fritton saw “that over 80% were supporters of the bill and or the President. Most were well dressed and had stickers or shirts supporting the bill. The Union guys were clearly identifiable by [their] shirts.”
Comment posted on FreedomWorks.org , 8/11/09.
Rebranding – Team GovCare has been talking less about overhauling the healthcare system of late, and more about reforming healthcare insurance. Columnist Charles Krauthammer interpreted the shift as a bow to fiscal reality. Obamacare: Not Waterloo, Just a Tactical Retreat, Townhall.com, 7/31/09.
To win back the vast constituency that has insurance, is happy with it, and is mightily resisting the fatal lures of Obamacare, the president will in the end simply impose heavy regulations on the insurance companies that will make what you already have secure, portable and imperishable: no policy cancellations, no pre-existing condition requirements, perhaps even a cap on out-of-pocket expenses.
[How to do this without bankrupting the insurance companies?] Force the 18 million Americans between 18 and 34 who (often quite rationally) forgo health[care] insurance to buy it. This will create a huge new pool of customers who rarely get sick but will be paying premiums every month. And those premiums will subsidize nirvana health[care] insurance for older folks.
Other observers perceive no change in objective, just a shift in strategy designed to bolster support for a “public option” (government-provided healthcare insurance) by vilifying healthcare insurance companies (already unpopular). Certainly, Speaker of the House Nancy Pelosi (D-CA) holds this view. Democrats’ Healthcare Strategy: Attack Insurance Industry to Push Public Option, David Patten, Newsmax.com, 7/30/09.
[The private insurers] have been part of the problem in a major way. They are doing everything in their power to stop a public option from happening. And the public has to know that. They can disguise their arguments any way they want, but the fact is that they don't want the competition.
The president’s rhetoric has been subtler, but he is continuing to tout a public option as well as attacking the insurance companies. Thus, at the Portsmouth event, he said:
Under the reform we're proposing, insurance companies will be prohibited from denying coverage because of a person's medical history. Period. (Applause.) They will not be able to drop your coverage if you get sick. (Applause.) They will not be able to water down your coverage when you need it. (Applause.) Your health[care] insurance should be there for you when it counts -- not just when you're paying premiums, but when you actually get sick. And it will be when we pass this plan. (Applause.)
Now, when we pass health[care] insurance reform, insurance companies will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime. And we will place a limit on how much you can be charged for out-of-pocket expenses, because no one in America should go broke because they get sick. (Applause.)
* * *And I do think that having a public option as part of that would keep the insurance companies honest, because if they've got a public plan out there that they've got to compete against, as long as it's not being subsidized by taxpayers, then that will give you some sense of what - sort of a good bargain for what basic health care would be. (Applause.)
Rebuttal – Supporters developed slick answers to complaints about GovCare, which were designed to marginalize critics and limit the damage. Consider these comments by the president at the Portsmouth meeting.
1. Re advance care planning consultation, which some critics labeled “death panels.”
It turns out that I guess this arose out of a provision in one of the House bills [HR 3200] that allowed Medicare to reimburse people for consultations about end-of-life care, setting up living wills, the availability of hospice, et cetera. So the intention of the members of Congress was to give people more information so that they could handle issues of end-of-life care when they're ready, on their own terms. It wasn't forcing anybody to do anything.
Comment: The language in HR 3200 goes far beyond authorizing Medicare reimbursement for end-of-life care consultations. In addition to defining what is involved in advance care planning (ACP) counseling at great length, the applicable section (p. 424-434) specifies who is to be involved (family members are not mentioned), provides for the development of criteria to be used in physician’s quality reporting re ACP and end of life care, and prescribes new content for the Medicare and You booklet.
This issue has since been dropped by the Senate Finance Committee, which is working on a “bipartisan” healthcare bill that may well supplant HR 3200, as was announced in a statement by the ranking minority member, Sen. Chuck Grassley (R-Iowa). Michael O’Brien, The Hill.com, 8/13/09.
"We dropped end-of-life provisions from consideration entirely because of the way they could be misinterpreted and implemented incorrectly."
2. Medicare cuts.
The president outlined some possible Medicare cost savings, but avoided any suggestion that sacrifices might be involved for seniors – “the AARP would not be endorsing a bill if it was undermining Medicare, okay?” (Oops, the AARP has not officially endorsed any of the healthcare bills being worked on, as it would be quick to point out.)
Cost cuts would come from insurance companies and healthcare providers, no reason they should be permitted to earn excess profits or deliver shoddy service. For example:
• Termination of the Medicare Advantage program would eliminate a $177 billion windfall (over 10 years) for insurance companies “to provide services that Medicare already provides. And it’s no better – it doesn’t result in better healthcare for seniors.”
Comment: Medicare Advantage plans do provide enhanced coverage and they are quite popular with the seniors who have signed up for them. Medicare Advantage cuts: Not the type of change we need, Warren Throckmorton, Townhall.com, 8/3/09.
Basic Medicare covers outpatient, inpatient and some prescription costs, but there are significant gaps. Using federal funds, Medicare Advantage allows private insurers to manage the basic Medicare benefits plus provide additional services that Medicare does not cover, such as wellness services, dental care, hearing and vision screening. Most Medicare Advantage plans also provide prescription drug options which are often easier to use and understand than the basic Medicare, Part D coverage.
• Hospitals would be penalized for frequent readmissions, because “too often we're not seeing the best practices in some of these hospitals to prevent people from being readmitted. That costs a lot of money.”
Comment: Hospitals are already being less than fully reimbursed for the cost of Medicare services, with the shortfall being shifted to other hospital bills. Why make a bad situation worse? Medicare for All Isn’t the Answer, Alan Miller, Wall Street Journal, 8/12/09.
Medicare reimbursements to hospitals fail to cover the actual cost of providing services. The Medicare Payment Advisory Commission (MedPAC), an independent congressional advisory agency, says hospitals received only 94.1 cents for every dollar they spent treating Medicare patients in 2007. MedPAC projects that number to decline to 93.1 cents per dollar spent in 2009, for an operating shortfall of 7%.
• Prices would be negotiated for Medicare-covered prescription drugs, thereby curbing the pharmaceutical company profits while reducing the “doughnut hole” for seniors.
Comment: Empowering Medicare to negotiate lower prices for prescription drugs would amount to imposing price controls, which never work very well.
3. White House snitch request
The request concerning healthcare disinformation on the Internet was perfectly natural, said the president at the Portsmouth meeting, just a case of “trying to be responsive to questions that are being raised out there.”
. . . this is another example of how the media ends up just [completely] distorting what's taken place. What we've said is that if somebody has -- if you get an e-mail from somebody that says, for example, "Obamacare is creating a death panel," forward us the e-mail and we will answer the question that's raised in the e-mail. Suddenly, on some of these news outlets, this is being portrayed as "Obama collecting an enemies list." (Laughter.)
Comment: Oh, please! Everyone knows that not all the information that circulates on the Internet is reliable. Why should the White House seek to compete with Snopes.com?
4. Public option would undercut insurance companies
No problem, says the president, so long as “the private insurance companies are providing a good bargain” and the public option is not subsidized. And at the Portsmouth meeting, he offered a rather odd example of how private industry can and does compete with the government.
I mean, if you think about -- if you think about it, UPS and FedEx are doing just fine, right? No, they are. It's the Post Office that's always having problems. (Laughter.)
Comment: Would people really want the healthcare system to be run like the post office? Obama’s Post Office Healthcare Disaster, Byron York, Washington Examiner, 8/12/09.
Given the huge cost to of Medicare and Medicaid, moreover, how could any thinking person expect that a government-run healthcare insurance program would break even? “Public Option”: Son of Medicaid, Daniel Henninger, Wall Street Journal, 6/18/09.
The list of [coverage] add-ons is endless, and there's little about it that is thoughtful. Why shouldn't one think that, as with Medicare and Medicaid, the Obama Public Option in time will become an impossible fog for patients to navigate? But unto eternity the program's administrative complexity will provide work for bureaucrats, Members of Congress, their staffs, lobbyist spouses and the "health-care" establishment of foundations and economists.
* * * *
The battle over GovCare is far from over. If you have a view about the proposals on the table, we urge that you reach out to the members of Congress who are supposed to be representing your interests.
Contact information for members of Congress may be found in various locations, e.g., on their respective Websites. For the convenience of Delaware residents, here is a link to contact information for our three members.
* * * This Blog's Replies * * *
# A SAFE director wishes the three members of Congress from Delaware would read and thoroughly digest the SAFE blog, but doubts it will happen. “I have been writing them with pithy examples from articles I have been collecting,” he says, and have booked a bus seat for the 9/12 “March on Washington.”
# A SAFE member in Arizona contrasts the extensive media coverage of the Bernie Madoff investment scam with the lack of recognition that Social Security, which marked its 74th birthday on August 14, is a government-run Ponzi scheme that will shortchange younger workers when they retire. In a similar vein, see “Madoff writ large,” 1/12/09.
Also, the length of a document may not correspond to its importance. The U.S. Constitution took 40 pages (in the Cato printing) to set up the national government; HR 3200 (one of several healthcare bills under consideration) takes 1,000+ pages to prescribe proposed healthcare “reforms.”
# A SAFE member in Delaware is concerned that illegal aliens could receive healthcare insurance subsidies under GovCare. He likens the situation to apparent plans to count illegal aliens in the 2010 census by not inquiring as to their citizenship.
Although HR 3200 (Section 246) does not allow for federal affordability credits “on behalf of individuals who are not lawfully present in the United States,” it is unclear whether and how illegal aliens would be identified and excluded from coverage. We plan to discuss this issue in a future entry.
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8/10/09 – A national conversation about GovCare
Not long ago, it appeared that near universal healthcare (or “GovCare”) would breeze through. The president had called on both houses of Congress to quickly pass healthcare bills, which could be melded into a final bill for his signature before yearend.
SAFE and like-minded groups were working the other side of the street, but the general public did not seem to be paying attention. In Delaware, for example, the Independence Day tea parties organized with a healthcare theme were only modestly successful. SAFE to Congress: wake up, 7/13/09.
We previously reported on the tea parties with a healthcare theme that were planned in Delaware on July 2. They have now taken place. There was a rally in Georgetown, plus sidewalk demonstrations outside the district offices of Delaware’s three members of Congress (one location in Dover, two in Wilmington).
SAFE monitored all of these events. They appeared to be well run, although the turnout was relatively modest. The biggest one was the rally in Georgetown. Check out these photos posted by the Sussex Countian.
How things have changed! The Internet, talk radio, and even the mainline media are now buzzing about GovCare, which has not been voted on by either the full House or the Senate. It appears that members of Congress will get an earful during the August recess, much of it in the vein of “not so fast, this is not what we want.”
The president and his party are emotionally invested in GovCare, and they have the votes in Congress to push legislation through. A major healthcare bill still seems likely this year, although it may be watered down. The public’s concerns are not clearly based on the real healthcare problem – a tide of red ink for government healthcare programs.
But time enough for our prognosis; this entry will survey what others have been saying and doing about GovCare. We invite you to settle back and enjoy the ride, including some striking videos.
MOUNTING SKEPTICISM – The president and his supporters initially painted GovCare as an “everybody wins” proposition – better healthcare for all at lower cost – but the claim was dubious from the start and the public is not buying it. For example:
• If GovCare included a “public [insurance] option,” could people who liked their existing healthcare insurance keep it? Yes, said the president, and in a 6/15/09 speech to the American Medical Association, he rejected the “illegitimate concern” that a public option could be a Trojan horse for single payer healthcare. It turns out, however, that both the president and his supporters had said essentially the opposite on other occasions. Video (1:52), Breitbart TV.
• Critics claim that healthcare costs would rise (not fall) with GovCare, unless restrained by rationing. The president attempted to defuse this claim at a prime time news conference on 7/22/09, offering examples of the painless elimination of waste. This set the stage for a sarcastic response: “I’m not a doctor, but I play one on TV,” video (52 seconds), GOPLeader.gov.
RESEARCH – In an effort to come to grips with the GovCare proposal, some people have resorted to reading HR 3200, a 1,000+ page healthcare bill that was introduced in the House on July 14. For those disposed to do likewise, here is a link to the bill (as passed by the House Committee on Energy and Commerce on July 31).
• Notice the provision for “advance care planning consultation” (or end of life counseling), which appears in Section 1233 starting on page 424. Despite an attempt to blame questions about this provision on right wing talk show hosts, it seems strange that the government would want to intrude in such an area unless major cost savings were anticipated. Phantom pains at The Post, Fred Thompson, Washington Times, 8/5/09.
So is this a conspiracy to kill off granny? No. Will seniors be forced to make decisions they don't want to make? No. But will "practitioners" be encouraged to have end-of-life discussions that include when it might be best for patients to allow their life to end earlier than it has to? Of course. And seniors have a right to be satisfied that there is not, at the heart of this process, [undue] consideration given to cost-cutting.
• Thompson’s column refers to his July interview of Betsy McCaughey, a former Lt. Governor of New York who chairs the Committee to Reduce Infectious Deaths. In addition to warning against HR 3200, McCaughey points out that the government is already authorized (under provisions buried in the economic stimulus bill) to set up a mandatory system of electronic medical records and conduct “comparative effectiveness” research for medical procedures. She perceives the potential for a “vicious” assault on medical care for the elderly.
Although rather long (8:12), the McCaughey interview is well worth listening to. Here is the link.
• Taking a shotgun approach, columnist Mike Adams jotted down a series of true/false questions about HR 3200 that might be asked of politicians supporting GovCare. Some examples follow. A Health Quiz for Barry, Townhall.com, 8/5/09. (Note: as Adams was working from an earlier draft of the bill, some of the page numbers may be a little off.)
On Page 22, I saw some language, which suggested that the bill mandates audits of all employers that choose to self-insure. Can you tell me whether that is a) True or b) False?
On Page 29, I saw what appeared to be an admission that health care will be rationed under this new plan. Can you tell me whether that is a) True or b) False?
On Page 30, I discovered that a government committee will be established to decide what treatments and benefits I get. However, unlike an insurer, I see no evidence that there will be a process to appeal their decisions. Can you tell me whether that is a) True or b) False?
• Readers may notice that HR 3200 sounds different than the promotional pitches for GovCare, and unsurprisingly so because the choice of language is different. To make the point, the National Taxpayers Union Foundation developed a chart comparing the president’s overwhelming choice of positive words like “choice” in talking about GovCare with the verbiage of HR 3200 (negative words predominate by a 3:1 margin). NTUF press release, 7/21/09.
"Words don't always have a lot of meaning inside the Beltway, but if the language of the 'America's Affordable Health Choices Act of 2009' is a guide to its true intent, then the bill is really about empowering bureaucracy and limiting freedom, competition, and the marketplace," said NTUF Director of Congressional Analysis Jeff Dircksen.
Check out the chart, which provides a handy one page summary. NTU Health Care One-Pager
QUESTIONS – Recent polls indicate declining support for GovCare and growing fondness for the current healthcare system. Reading between the lines, we would infer that many Americans are concluding that they would have to pay higher taxes or have their medical options restricted with GovCare – and are not happy about it.
• Such sentiment is particularly strong in the 65+ age bracket. Seniors Most Skeptical of Healthcare Reform, Gallup.com, 7/31/09.
Seniors are the least likely of all age groups in the U.S. to say that healthcare reform will benefit their personal healthcare situation. By a margin of three to one, 36% to 12%, adults 65 and older are more likely to believe healthcare reform will reduce rather than expand their access to healthcare. And by 39% to 20%, they are more likely to say their own medical care will worsen rather than improve.
• Some seniors envision that GovCare could be tailored to ensure strengthened support for the elderly. Thus, six people (ranging from 55 to 87 years old) were arrested recently when they refused to leave the Los Angeles office of Senator Dianne Feinstein (D-CA). The group had hoped to “talk to Feinstein about strengthening Medicare and using the program as a model for health[care] reform.” Democraticunderground.com, 7/30/09.
• Speaking of seniors, the national leadership of the AARP is backing GovCare. New e-mail endorsement shows AARP going all-out for Dems, Obamacare, Mark Tapscott, Washington Examiner, 8/7/09.
It is unclear, however, that the 40 million members of the AARP are on the same page. Consider what happened at an 8/4/09 “listening session” in Dallas, Texas when participants refused to let two visitors from the national office do all the talking. The presenters packed up and left; the meeting continued without them. Video (7:58, but worth it!), Breitbart.tv.
ACTION – Politicians who back GovCare have been encountering public skepticism and/or hostility in their respective states. Democrats’ break looking like a bad trip, Politico.com, 8/4/09.
• Senator Arlen Specter (D-PA) and HHS Secretary Kathleen Sebelius got a rocky reception in Philadelphia. Crowd Explodes When Arlen Specter Urges that We “Do This Fast,” youtube video (2:36).
• Congressman Lloyd Doggett (D-TX) had an even tougher time at a GovCare event in Austin, Texas. The video (2:21) posted on Youtube shows lots of people milling around in an outdoor setting and chanting “just say no.”
• Congressman Frank Kratovil (D-MD) was greeted by a 250-person audience in Mardella Springs, a tiny town on the eastern shore of Maryland. He had expected “maybe two or three dozen residents” for his “Congress in Your Corner” meeting. There was much applause for the residents who spoke out against GovCare. A Town-Hall Protest in Maryland, Max Schultz (Manhattan Institute), Wall Street Journal, 8/8/09.
REACTION: Supporters of GovCare responded to the emerging opposition in a negative way. It does not seem to have occurred to them that they might learn something from the public angst over their proposal, let alone that they might want to rethink it.
• Protestors were dismissed as an “angry mob,” by people who should know better – such as Professor Paul Krugman of Princeton, a Nobel Prize winner yet, who views the protests as racist. The Town Hall Mob, New York Times, 8/6/09.
• It has also been suggested that the resistance to GovCare is being orchestrated. Thus, Senator Barbara Boxer (D-CA) commented on how “well dressed” the protestors seemed to be. MSNBC (Hardball) interview, video (0:58).
• Resistance to a “public option” has been attributed to the activities of private insurance companies that do not want competition. Pelosi lashes out against insurance companies, Reuters, 7/30/09.
"It's almost immoral what they are doing," [Speaker of the House Nancy] Pelosi said to reporters, referring to insurance companies. "Of course they've been immoral all along in how they have treated the people that they insure," she said, adding, "They are the villains. They have been part of the problem in a major way. They are doing everything in their power to stop a public option from happening."
• At the White House, healthcare czar Nancy DeParle posted an online bulletin soliciting reports of “disinformation about health[care] insurance reform” on the Internet. Who’s Behind the Internet Snitch Brigade? Michelle Malkin, Townhall.com, 8/7/09.
What will health care czar DeParle do with this information? Where will it be stored? Who has oversight of the czar's powers, budget and personnel? Concerned citizens, alas, will have a hard time tracking down the "Office of Health Care Reform" created by executive order in April. There is no central website for the office, no direct channel for transparency and no congressional accountability.
• And in a mass e-mail to supporters, the president urged them to show up at GovCare events during the August recess and, in effect, drown out dissent. Barrack Obama urges backers to fight health “lies,” Politico, 8/5/09.
There are those who profit from the status quo, or see this debate as a political game, and they will stop at nothing to block reform. They are filling the airwaves and the internet with outrageous falsehoods to scare people into opposing change. And some people, not surprisingly, are getting pretty nervous. So we've got to get out there, fight lies with truth, and set the record straight.
• In a meeting for Senate Democrats, senior White House officials outlined a get tough strategy for the August recess. White House to Democrats: “Punch back twice as hard,” Politico.com, 8/6/09.
• Although the “punch back twice as hard” line was presumably not meant to be taken literally, GovCare protestors may indeed encounter physical intimidation. At an 8/6/09 meeting in Tampa, Florida, the room was apparently packed by admitting supporters early and shutting the door in the face of other would-be attendees. The people who were turned away felt frustrated, and they reacted accordingly.
Congresswoman Kathy Castor (D-FL) declared afterwards that she was determined to vote for GovCare, and that her office was receiving hundreds of supportive phone calls and e-mails. She hedged, however, when asked whether protests at the event represented a genuine expression of grassroots opposition. Caster heartened by reaction to town hall tumult, 8/6/09, TBO.com.
For those who would like to see some live footage from the Tampa fiasco, here is a video (3:37). The action is chaotic and intense, although we did not see anyone actually throwing a punch.
* * * *
A debate about GovCare seems overdue, and we hope it will take place. We are appalled by the reactions of supporters, who apparently would prefer to stifle dissent. And we are not the only ones who feel that things are in danger of going off the rails. Mr. President, Americans are not an “angry mob,” Washington Examiner, 8/9/09.
We are witnessing something terribly ugly in America this summer. Obama is leading a campaign to shift our peaceful democratic process away from civil discussions of programs and candidates to using the power of the state to bully those who oppose the majority party's policy proposals. The threat may be as subtle as the fear of being reported by a neighborhood informant to the White House, or as overt as stick-wielding union toughs who might not approve of the way you ask your congressman a question.
Hang in their folks!
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8/3/09 – Wishful thinking: a weak basis for government action
We referred in a previous blog entry to how an ancient ruler ordered the tide to stop. How to win: be proactive, not reactive, 10/29/07.
Remember King Canute (the ruler of England some thousand years ago), who is said to have commanded the tide to stop coming in. He did not do this because he expected the command to be obeyed, but rather to impress a point on his flattering courtiers.
The discussion continued in the vein that fiscal conservatives will fail if they merely resist change, for which reason it may be more productive to advocate constructive changes – in effect becoming visionaries rather than conservatives.
Similarly, changes advocated by liberals will fail if they are undeliverable or poorly designed. This entry will provide five examples. In addition to being important in their own right, these examples demonstrate the need to scrutinize all government programs (existing or proposed) that are aimed at economic and social problems.
Economic stimulus – The purported benefits of deficit spending during economic downturns was invoked in February to justify a two-year, $787 billion economic stimulus bill (2/3 spending, 1/3 tax benefits).
Granted that additional government spending is stimulative, it can only be paid for by taking money from the private sector (via taxes or borrowing) that could otherwise be spent by individuals or businesses. Sounds a bit like “robbing Peter to pay Paul,” to say nothing of the difficulty of cutting back government spending later.
Moreover, the bill enacted did not comport with the “timely, targeted and temporary” criteria that all concerned professed to support. Economic stimulus package: what’s the rush? 2/2/09.
Subsequent developments, notably further increases in the jobless rate, have led to widespread disillusionment with the economic stimulus bill. There are critics aplenty saying “we told you so.” Obama’s plan stimulates the deficit, not the economy, Washington Examiner, 5/18/09.
George Mason economist Tyler Cowen predicted such dismal results when he pointed out that “it is very hard to find [historical] examples of successful fiscal stimulus driving an economic recovery. Ever.” In other words, the stimulus package was passed without any evidence that it would work. “It is becoming increasingly clear that the long-term fiscal strategy of the White House is based on large doses of wishful thinking,” concludes Harvard economist and former Bush administration advisor Greg Mankiw. But when you insist on ignoring basic economic principles, wishful thinking is all that's left.
Minimum wage – A time-honored (since 1938) approach for helping lower income workers is to set a minimum wage rate. The earnings of these workers can be raised by the stroke of a pen, or so it might seem until one considers that wage rates result from supply and demand.
If the minimum wage rate is set low, prevailing wages will almost invariably be higher. If it is set high, some lower paid workers may benefit but others will lose their jobs or be unable to find jobs in the first place. Hmm, that does not sound like what the minimum wage was supposed to accomplish.
Consider the Congressional testimony of Paul Kersey of the Heritage Foundation, 5/3/04, re a proposal to raise the federal minimum wage by $1.50 per hour.
Labor economists refer to the “elasticity” of demand for labor to describe the ratio of jobs gained or lost when wages change. Estimates of this “elasticity” vary, but the average estimate by labor economists is that for a 10 percent increase in the minimum wage, employment among those affected drops by 5 percent. If the minimum wage is increased from $5.15 to $6.65 per hour, demand for unskilled labor could drop by as much as 15 percent in jobs that earn the minimum wage, resulting in the loss of hundreds of thousands of jobs and making it more difficult for poor families to take this escape route out of poverty.
An increase in the federal minimum wage was enacted in 2007, despite the views of Kersey et al., with the increase phased in as follows:
Given the high and still rising jobless rate in the spring of 2009, a good case could have been made for cutting the minimum wage or at least deferring the increase scheduled to kick in on July 24. There was no serious consideration of such a move, however, even though it could have saved jobs for low-level workers. Mandating Unemployment: Congress prepares to kill more jobs, Wall Street Journal, 7/14/09.
If Congress were wise and compassionate, it would at least suspend the wage hike for one or two years until the job market recovers. We know this Congress won't do that, but someone has to speak up for the poorest, least skilled Americans.
Healthcare – We have discussed the Administration’s healthcare “reform” plan in previous entries. Briefly, this plan would greatly reduce the number of Americans without healthcare insurance, while increasing healthcare costs and/or curtailing healthcare consumption by the majority of the population.
The president and his advisers initially argued that it would be possible to have the best of all possible worlds, namely better healthcare for everyone at lower cost. But this claim has grown increasingly threadbare. Why Obama Care is Sinking, Charles Krauthammer, Townhall.com, 7/24/09.
President Obama premised the need for reform on the claim that medical costs are destroying the economy. True. But now we learn -- surprise! -- that universal coverage increases costs. The congressional Democrats' health care plans, says the [Congressional Budget Office], increase costs in the range of $1 trillion plus.
In response, the president retreated to a demand that any bill he sign be revenue neutral. But that's classic misdirection: If the fierce urgency of health care reform is to radically reduce costs that are producing budget-destroying deficits, revenue neutrality (by definition) leaves us on precisely the same path to insolvency that Obama himself declares unsustainable.
Bottom line, the only rational argument for the healthcare proposal is a moral one – that our country should provide healthcare for all residents (including illegal aliens) as a matter of right. It might be thought to follow that everyone is entitled to the same excellent service, never mind the cost.
But there is a limit to how much any society can afford to pay for healthcare, even the United States. State-of-the-Art Healthcare for Everyone? William Poole (Cato Institute), Forbes, 7/28/09.
Providing today's state-of-the-art healthcare for everyone is simply impossible. Moreover, relentless and highly desirable technical improvements keep pushing the healthcare frontier outward. * * *Advocates of reform will object that they are not proposing state-of-the-art healthcare for everyone. But in practice, that is exactly what they are doing. A government-operated plan will have no satisfactory way of saying "no" to certain expensive treatments, especially when such treatments are known to be effective. We need to face the moral dilemma of saying no.
If the government guarantees healthcare for all, expect deteriorating service to make ends meet. Certainly this has occurred in the UK. Is There a “Right” to Healthcare? Theodore Dalyrymple, Wall Street Journal, 7/28/09.
After 60 years of universal health care, free at the point of usage and funded by taxation, inequalities between the richest and poorest sections of the population have not been reduced. But Britain does have the dirtiest, most broken-down hospitals in Europe.
An intention to manage healthcare costs has been signaled, as for example by two of the president’s comments during a prime time press conference on 7/22/09.
• So if they're looking -- and you come in and you've got a bad sore throat, or your child has a bad sore throat or has repeated sore throats, the doctor may look at the reimbursement system and say to himself, you know what, I make a lot more money if I take this kid's tonsils out. Now that may be the right thing to do, but I'd rather have that doctor making those decisions just based on whether you really need your kid's tonsils out or whether it might make more sense just to change -- maybe they have allergies, maybe they have something else that would make a difference.
• Why would we want to pay for things that don't work, that aren't making us healthier? And here's what I'm confident about: If doctors and patients have the best information about what works and what doesn't, then they're going to want to pay for what works. If there's a blue pill and a red pill and the blue pill is half the price of the red pill and works just as well, why not pay half price for the thing that's going to make you well?
Saying that rationing is on the way, however, might doom the healthcare plan. Thus, at a 7/27/09 town-hall style meeting in the AARP headquarters, the president maintained that Medicare spending reductions would only represent the elimination of “waste.” Obama to seniors: “This is not like Canada,” Washington Times, 7/28/09.
All I know right now is we have a problem, and it includes the spiraling cost of Medicare. * * * Nobody is talking about reducing Medicare benefits. If it works, we don't want to change it. What we want to do is to eliminate some of the waste.
Meanwhile, at the other end of Pennsylvania Avenue, Congress was reviewing tax increase options – including a new payroll tax on employers and employees for cases in which an employer does not choose to provide the mandated healthcare coverage. The Pelosi Jobs Tax, Wall Street Journal, 7/30/09.
Even many Democrats are revolting against Speaker Nancy Pelosi’s 5.4% income surtax to finance ObamaCare, but another tax in her House bill isn’t getting enough attention. To wit, the up to 10-percentage point payroll tax increase on workers and businesses that don’t provide health insurance.
Given the weakened state of the economy, it would be hard to imagine a worse time for such tax increases – especially if combined with the latest increase in the minimum wage and the energy legislation that is on the drawing board.
“Cash for clunkers” – The popularity of this program is understandable. Give people a substantial financial incentive (up to $4,500) to do something congenial, namely buy a new car with few strings attached, and they will react enthusiastically.
The original authorization, $1 billion, was exhausted in a matter of days, and it is clear that Congress will provide additional funding.
The results: a boost for the hard-pressed automobile industry and, to the delight of environmentalists, a quick increase in the average fuel efficiency of American owned and operated vehicles. What’s not to like?
Well, for one thing, the government is already in over its fiscal head. Why on earth should taxpayers start subsidizing the trade-ins of used automobiles? Yet, some observers are already predicting that the “cash for clunkers” program will be a keeper. Five reasons why Obama and Congress will make Cash-for-Clunkers a permanent federal entitlement, Mark Tapscott, Washington Examiner, 7/31/09.
Another concern arises from the requirement that traded-in “clunkers” be certifiably destroyed. Some of the cars would be scrapped anyway, no doubt, but others have economic value. Taking them off the market will boost prices for buyers (e.g., teenagers) who are looking for a low cost, starter car.
Oil prices – With oil prices on the upswing after having plunged to recession-driven lows, government leaders are sounding the alarm about another price spike.
One suggestion is that the oil-consuming nations should initiate a dialog with the Organization of Petroleum Exporting Countries (OPEC) about the management of global oil prices. Oil Prices Need Government Supervision, Gordon Brown and Nicholas Sarkozy, Wall Street Journal, 7/8/09.
This sounds rather like price controls to us, which as has been shown many times create more problems, e.g., supply shortages and “black markets,” than they solve. Why on earth should different results be expected this time?
Another tactic is to blame rising oil prices on “excessive speculation,” a theory that was rejected by the Commodity Futures Trading Commission (CFTC) a year ago but has been revived by the new Administration. The Politics of “Speculation,” Wall Street Journal, 7/28/09.
The CFTC’s about-face is all about the politics, not the economics, of price discovery. And the real goal is not to blame the evil speculators for last year’s price spike or this year’s oil rally, but to lay the groundwork for explaining away the commodity-price bull run that we’re likely to see as a result of the Federal Reserve’s easy money and the Obama Administration’s spending and debt party.
Meanwhile, the federal government continues to play a blocking role to the development of domestic oil and gas reserves that could reduce the need for U.S. oil imports and help to hold down global oil prices. Obama Blocks New Energy Exploration, [Congressman] Doc Hastings (R-WA), Wall Street Journal, 7/14/09.
Exactly a year ago, President Bush issued an executive order lifting the ban on offshore oil and natural gas drilling on the Outer Continental Shelf (OCS) and opened the door for new energy production and the creation of millions of new energy jobs in our country. But today, a de facto ban remains in place only because the Obama Administration has actively blocked the new 5-year leasing program which would open areas for offshore exploration and development.
Global temperatures –As discussed in previous entries, it seems unlikely that manmade emissions of CO2 and other greenhouse gases will trigger catastrophic global warming. Warming trend since about 1800 has been modest by historical standards – no warming over the past ten years – available evidence indicates solar activity is the dominant factor in determining global temperatures.
Nevertheless, the U.S. government has pursued various policies designed to foster the development of green energy – including the Waxman-Markey bill (cap & trade, etc.) that was narrowly passed by the House of Representatives in June and will be taken up by the Senate later this year.
We believe Waxman-Markey would inflict a devastating blow on the U.S. economy without having much effect on global temperatures. Among other things, any reduction of CO2 emissions here would be dwarfed by the continuing growth of emissions in China and India – which countries have no intention of hobbling their economies based on an unproven theory. How to win the global warming debate, 6/8/09.
So it was interesting to see what would be said about the matter at the recent G-8 summit. Rather amazingly, the upshot was a resolution setting a target “to limit global warming to 2 degrees Celsius (3.6 Fahrenheit) compared with pre-industrial levels.” [Temperatures are currently up by about 0.7 degrees Celsius from the start of the Industrial Revolution.] Gordon Brown calls on developing nations to sign up to G8 climate pledge,” UK Telegraph, 7/9/09.
If the warming trend is fated to exceed this target due to increasing solar activity, we doubt the human race will have much luck in stopping it.
King Canute would have known better!
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7/27/09 – Education: never mind a master plan
Some readers may have heard a story about Irish playwright George Bernard Shaw that goes something like this:
An acclaimed actress approached Shaw and said they should marry and produce children with her beauty and his brains.
“But, madam,” replied Shaw, “what if the children had my beauty and your brains?”
Developing a national master plan for the K-12 (kindergarten through 12th grade) school system would be somewhat analogous, in that the results might not turn out as expected. So while supporting the ideas for improving the curriculum presented in last week’s entry, we would not think of asking the federal government to implement them.
For one thing, there is no such thing as an ideal curriculum for U.S. schools. The capabilities of teachers, preferences of parents, and needs of students vary widely, and these factors have a considerable bearing on what should go on in classrooms.
Ideas about the objectives of education have changed over time, and will doubtless continue to do so. Feds in the Classroom, Neal P. McCluskey (Cato Institute), Rowman & Littlefield (2007), pp. 19-21.
Beginning in the latter years of the 19th Century, many public school leaders saw the schools as “factory-prep programs in which students learned to keep schedules, follow the regimented dictates of bells and superiors, and be acceptably passive.”
Many parents did not share this enthusiasm for vocational education, which gave short shrift to the prospects of their children to get ahead in life. But by 1940, progressive educators had succeeded in “making most public school districts large, bureaucratic machines in which operations were standardized and professionals, not families and parents, determined who would learn what and when they would learn it.”
The Soviet Union’s launch of Sputnik (first man-made satellite) in 1957 sparked fears that the United States might be falling behind academically. The National Defense Education Act was enacted the next year to provide federal assistance for math, science and foreign language programs.
Today, the operative assumption is that public schools should “give all children, regardless of class, the chance to become independent, upwardly mobile men and women.” [Comment: this mindset is not necessarily better than the vocational education model. Society needs followers as well as leaders, and the widespread promotion of student self-esteem, whether merited or not, will predictably lead to disappointment for many in later life.]
Finally, a standardized curriculum is a two-edged sword. While we can envision educating students about the danger of chronic government borrowing in a financial literacy course, for example, such a course could be designed (as noted in last week’s entry) to showcase the purported merits of Keynesian economics instead.
Suppose the federal government was empowered to decide what should be taught in the schools, and the feds botched the job. If the 50 states continue running their respective school systems, they will surely make mistakes, but they probably will not all make the same mistakes at once.
Also, it is doubtful that the drafters of the Constitution intended to give the federal government the power to control education. There is no mention of “schools” or “education” in the enumerated powers of Congress. See also the 10th Amendment: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Feds in the Classroom, pp. 129-140.
If education is federalized, all Americans will be forced to entrust their children to a single system dominated by whatever faction can bring the most raw political force to bear, the very opposite of the liberty our system of government was designed to protect. We ignore the Constitution at our peril.
So it’s settled, the time has come to disband the U.S. Department of Education (ED) and leave the states to their own devices? Perhaps, but this may not be the best answer.
1. Disbanding the ED would be easier said than done.
The first ED (which operated under various names over the years) was established in 1867. Its function was to collect and disseminate information that would help the states to establish effective school systems.
Many responsibilities were added in time, re (among other things) land grant colleges (1890), vocational education (1917, 1946), the GI Bill of Rights, the National Defense Education Act (1958), ending school segregation (a one-time situation in which federal intervention was clearly needed), and the Elementary and Secondary Education Act (1965, aimed at helping poor school districts).
In 1980 (final year of the Carter Administration), at the insistence of the National Education Union (NEU), the ED was separated from the Department of Health, Education and Welfare and made a cabinet level department. Long a professional association dominated by school administrators, the NEU had recently been transformed into a politically formidable teacher’s union; the ED reorganization served to cement its power base. Feds in the Classroom, pp. 50-52.
Elected with a conservative mandate, President Ronald Reagan proposed to replace the ED with a subcabinet-level “foundation” that would administer federal education programs. The change would have been primarily symbolic as Reagan had made little headway in slashing federal spending for education, but even so it died in Congress.
Then came a 1983 study written by the National Commission on Excellence in Education (convened by the ED), “A Nation at Risk,” which blamed the mediocre performance of U.S. schools on low standards. Feds in the Classroom, pp. 55-56.
[We] find that for too many people education means doing the minimum work necessary for the moment . . . But this should not surprise us because we tend to express our educational standards and expectations largely in terms of “minimum requirements.”
The Nation at Risk findings caught on, and discretionary ED spending grew 19% in constant (1988) dollars between 1984 and 1988. William Bennett, who became secretary of education in 1985, promoted the federal government as a source of educational wisdom and cash. Ever since, the ED’s primary role has been seen as setting educational standards and pushing for their attainment. Feds in the Classroom, pp. 56-57.
According to research conducted by the Cato Institute, there is scant evidence that the programs administered by the ED (from National Defense Education Act funding for science, math, foreign languages, etc. to the No Child Left Behind program launched in 2002) have raised student test scores or otherwise achieved their stated purposes.
Accordingly, Cato advocates termination of the programs (phasing out the $70 billion per year funding over a 3-year period). Handbook on Policy, Chapter 20, 2009.
On the basis of the inconceivably expensive failure of federal interventions over more than half a century, it would be foolish not to cease them immediately.
The net revenue loss to the states would be considerably less than $70 billion per year, by the way. Federal grant programs are inherently wasteful – breeding bureaucracy in Washington (to set standards, apportion funds, and monitor compliance) and more bureaucracy at the state and local level (to research the federal regulations, request funds and demonstrate compliance). SAFE director Barry Dorsch described the dynamics as follows in a 12/11/06 letter.
Here’s what’s going on [with federal grants]: We send taxes to Washington, D.C. The bureaucrats spend part, then let us have the rest if we spend it according to their complicated rules. I say, use the money to pay off debt, to help protect our children and grandchildren. Let the states raise the money they want to spend.
Logically speaking, the case for getting the federal government out of education seems solid, but remember that there would be a bruising political battle – which could easily be lost. Perhaps the better part of valor would be to keep the ED, but redefine its role.
2. State-run school systems are far from perfect.
In colonial times, responsibility for the education of American children rested with families and local schools. The results were better than one might have expected. As of 1785, the literacy rate among free males stood at roughly 65%, which was probably higher than the comparable figure in England. Feds in the Classroom, p. 12.
State control of the schools developed later, with decidedly mixed results. The segregated school system that came into being in the South after the Civil War and lasted until the 1954 Supreme Court decision in Brown v. Board of Education was a national disgrace. The long-time emphasis on vocational education undervalued the aspirations of many Americans, and the upward mobility for all thrust that supplanted it is patently unrealistic.
Notwithstanding the growing influence of the federal government, the public schools are still run by the states. (Some 90% of the funding comes from state and local taxes.) So current problems, such as the deficiencies in the school curriculum discussed in last week’s entry, provide further evidence that state control is no panacea.
U.S. education costs are high by international standards. The average cost per student is currently about $12,000 per year (including cost elements that are sometimes overlooked, such as pensions for retired educators), 38% above the OECD average. Patrick Byrne, director of the Friedman Foundation of Educational Choice, Talk at the National Taxpayers Conference, 6/12/09.
On the other hand, U.S. test results are far from stellar. In a 2003 OECD test of the ability of 15-year-old students to solve problems requiring computational, reading and reasoning skills, for instance, the U.S. came in 29th out of 41 countries. Feds in the Classroom, pp. 117-119.
3. Other possibilities should be considered.
“If we really want to improve education,” says McCluskey, “we must give parents school choice and schools autonomy, and let the market go to work.” Feds in the Classroom, p. 187.
With such an approach, it would not be necessary to reach a consensus – at either a national or state level – as to what students should study in school. Schools would be free to design their curricula; parents could choose where to send their children; school costs would be lower due to reduced overhead (fewer administrators engaged in monitoring compliance with bureaucratic requirements) and competition. Sounds great to us, but not everyone would approve.
• Bureaucrats and school administrators might not welcome the prospect of being displaced from their comfortable, well-paid jobs.
• Teachers might fear that competition between schools would undermine pay scales and/or result in job losses.
• Another source of opposition would be politicians, who are accustomed to bragging about how their programs have solved (or will solve) problems whether their claims are factually valid or not. Such posturing is generally a low risk activity due to public ignorance and/or apathy. Feds in the Classroom, pp. 124-125.
Politicians win when they appear to do something about a problem and appease those who live off government funding, while they lose very little when their initiatives do not work.
Opponents of a free market solution for K-12 education, or “School Choice” for short, would have no shortage of arguments about the dire consequences of scrapping existing government programs and/or the need for controls over new ones. For example:
• The charter (or private) schools “cherry pick” the good students; no wonder their test scores look good. You can bet they don’t want the Special Ed kids.
• There is no way to be sure that home schooling works, and the social development of the children is stunted.
• Sounds like you want to revert to an 18th Century model for education, but this is the 21st Century and the United States cannot afford schools run by amateurs.
Such arguments would be hard to counter because of the well-known difficulty of disproving a negative. So if fiscal visionaries decide to back a School Choice solution, they had better work out the details carefully and develop a powerful game plan for marketing it.
But, oddly enough, pushing for School Choice might be an easier battle to win than simply disbanding the ED.
We will have more to say about this subject, stay tuned.
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7/20/09 – Education: revamping the curriculum
A 2006 membership survey confirmed support for SAFE’s agenda, and also provided some useful feedback on strategy. Our Members Speak: New name OK, keep plugging, Newsletter 43, Fall 2006.
Feelings re SAFE strategy (as government’s fiscal situation has continued to deteriorate): 2/3 said we should “keep plugging,” 1/3 said to try new strategies (in many cases offering suggestions, which will be thoughtfully considered. No one voted for “giving up.”
We were struck at the time by a comment from SAFE member Spear Lancaster, but unclear about just how to follow up on it. [Update: we are planning a field trip in the fall to observe Spear’s charter school and compare notes.]
Only long-term answer is to change K-12 education. We have an island of socialism polluting our culture. I am on the board of the first charter school in Anne Arundel Country, Maryland.
SAFE was already on record as favoring the abolition of the federal Department of Education in the interest of reducing government spending. See, e.g., Two More Cuts, Newsletter 42, Summer 2006.
The U.S. Department of Education ($71 billion) should be abolished. President Reagan and Newt Gingrich proposed to abolish it, but it has continued to grow. Much better to let the states compete and learn from each other. Expect the education of children to improve after abolition.
But Lancaster’s point went beyond getting the federal government out of education to changing the information being taught in schools across the country. Hmm, sounded like a tall order for a little organization like SAFE.
On the other hand, the “island of socialism” label carried some weight. Many Americans are ill prepared to manage their own financial affairs, let alone to understand how the economy works. They overestimate the government’s contribution to the national welfare, underestimate the private sector’s contribution, and pay limited attention to how the government is spending their money. These attitudes may be due, at least in part, to what they were taught in school.
Revamping the school system would be no small task, but it might be easier than trying to “educate” a substantial segment of the adult population. In our experience, “grownups” do not change their minds about anything very easily.
The idea would not be teaching sophisticated financial strategies (leave that to the business schools), but imparting an understanding of basic financial principles. Thus, DeWayne Wickham advocated “a massive financial literacy education program” in a recent column, on grounds that some borrowers in the 2007-08 subprime crisis did not understand the mortgage obligations they were assuming. Financial literacy: A way out of economic crisis, 11/27/08.
[Many Americans] don’t understand the need to live within their means. They don’t know the long-term value of a personal savings account. They buy cars they can’t afford, clothes they don’t need and homes that cost more than they can actually pay.
Wickham sees financial literacy as a subject to be “pushed” by the federal government. How ironic, given the seeming inability of the government to manage its own fiscal affairs! Why not extend the training, we wonder, to the workings of the overall economy?
To spell it out, people need to understand that wealth in our society is created by the private sector. Taxes are collected to pay for government spending, and regulations imposed to foster desired behaviors. Both taxes and regulations deter private economic activity; this drag effect may outweigh the hoped-for benefits. The government can properly borrow from time to time, as individuals and businesses do, but there will be adverse consequences if this practice becomes habitual and excessive.
Although these principles may sound glaringly obvious, many people ignore them in practice – aided and abetted by politicians. Happytalk blossoms in the nation’s capital, 7/6/09.
• Yes, I strongly believe in private enterprise, but the government must get involved in XYZ (whatever subject happens to be under discussion, from light bulbs in private homes to expenditures on purportedly unnecessary medical procedures).
• I have always stood for fiscal responsibility, the government must live within its means like everyone else, but action on the ABC crisis cannot wait a minute longer. Conservatives, let this be our Waterloo [victory over the liberals], Dan Gainor, Townhall.com.
A quick search of the White House Web site finds 530 separate mentions of “crisis.” They’ve got an “economic crisis,” a “financial crisis,” a “home mortgage crisis,” a “flooding” crisis, an “international financial crisis,” a couple of “humanitarian” crises and even a “potential environmental crisis” in Australia.
• The program will create jobs, speed economic recovery, and prevent anything like the ABC crisis from ever happening again. (Never mind that reckless government spending and borrowing threaten to trigger a fiscal meltdown that would make ABC look like a minor problem.)
We do not necessarily favor incorporating financial literacy in the school curriculum. One concern is the crowding out of academic subjects, such as math, English, and civics. FLT: a nightmarish scenario, 12/8/08.
There is just so much time in the school year. The more time is devoted to ancillary programs, such as driving training or financial literacy, the less time will be left to teach the core curriculum. Expanding such programs may not be smart at a time when the U.S. school system is falling behind.
It also seems unrealistic to rely on a government-run school system to teach that the government needs to manage its fiscal affairs in a more responsible manner. Before long, the financial literacy instructors might be singing the praises of Keynesian economics (deficit spending to boost the economy).
We would therefore recommend that financial literacy training be offered on an elective basis, ideally as an extracurricular activity, for the purpose of helping participants learn to manage their personal finances. If students grasp that the “no free lunch” principle applies in their own lives, they will hopefully remember that principle in later years when considering the merits of government programs.
One form of financial literacy training, the Money Rules summit, has been well received in the First State. At a daylong session in 2007, 200 high school students compared notes on spending wisely, saving early, and not getting into debt. The event was co-sponsored by the Delaware Money School and state Treasurer (now Governor) Jack Markell. Teens say money class enriching, Drew Volturo, Delaware State News, 11/27/07.
SAFE director Steve McClain, who worked in the Delaware school system for a number of years, recalls a classroom exercise that he developed. At the outset, the students were presented with the following scenario:
You come home from school and find a note on the kitchen table. “Your father and I have decided to retire and move to Florida. From now on, you will have to support yourself. Good luck!”
In light of this development, students were asked to make a list of what they would need (e.g., housing, utilities, food, clothes, transportation, healthcare, and entertainment) to live on their own, look up prices in the newspapers that were provided, and prepare a monthly budget.
At a subsequent session, students were asked what employment they would obtain; they then forecast their earnings (using the newspapers as a reference for wage rates) and subtracted the applicable taxes.
When the spending and earning budgets were compared, says McClain, many students saw that drastic adjustments were needed on the spending side – and came away with heightened appreciation for the support being provided by their parents.
Aside from financial literacy, what changes in the curriculum might be considered? Very briefly, here are some potential areas for improvement.
• Math – Emphasize the importance of getting the correct answers, not simply using the right method. Require students to solve the problems manually until they master the computational techniques involved before permitting the use of calculators.
• English – Assign lots of writing, and review the work critically. High school graduates should be able to express their ideas clearly, using proper grammar and complete sentences. They should not be allowed to copy (or paraphrase) material they found on the Internet and turn it in as their work.
Also, we question the concept of teaching “English as a second language” while providing non-English instruction in other courses. The predictable results will be to increase the number of teachers employed and slow the assimilation of immigrant children into the mainstream.
• Civics – We do not believe that U.S. culture is no better than any other culture, that the political system envisioned by the Constitution is passé, or that this country should apologize to the world for its success. Yet, sadly, U.S. schools (and colleges) are doing a poor job of teaching American values, institutions, and history – the collective memories essential to know what this nation represents and reason about where it should be headed. David Boren [president of the University of Oklahoma, formerly the state governor] explained why in A Letter to America, University of Oklahoma Press (2008), p. 99.
We have sidestepped the obvious need for core requirements essential to civic literacy, because we do not want to set off controversies between races, genders, and ethnic groups about what we should require all students to study. We can no longer allow these “culture wars” to paralyze us. We must take action.
• Computers – Digital devices have vast potential for improving the efficiency and quality of education. Videotaped training modules (such as those sold by the Teaching Company to the general public) can provide mass access to highly skilled instructors at a modest cost. Learning a language can be greatly facilitated by the use of well-designed computer program, such as Rosetta Stone. And Internet research is faster and more effective than traditional library research, although perhaps less conducive to thoughtful contemplation than reading books.
Educational professionals may resist the use of videotaped or on-line training, however, because it could reduce the number of teachers required. To our knowledge, limited use has been made of these techniques in K-12 schools.
As for Internet research, it is a mistake to expect students to use their time productively if the goals of a project have not been clearly defined and their work is not critically reviewed. Yes, Johnny spent two hours on the Internet, but what did he learn from the sites visited and what was done with the information? The idea should not be to let students learn what they want; it should be to help them learn what experience shows that they need to know. The Dumbest Generation: How the Digital Age Stupefies Young Americans and Jeopardizes Our Future, Mark Bauerlein (a professor of English at Emory University), Tarcher/Penguin (2008).
OK, that should be enough to make the point that there is room for improvement in the curriculum of U.S. schools. Reasonable minds could differ on the points that have been covered, and it would be very difficult to achieve consensus for a “new curriculum” unless some centralized authority was empowered to mandate that it be followed.
Does this mean the federal government should take over the school system, contrary to the position SAFE has always taken, or is there some other way to proceed? We will discuss the question in next week’s entry.
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7/13/09 – SAFE to Congress: wake up
We posted a hypothetical letter to Congress in May 2008, urging big spending cuts to balance the budget. A line in the sand on taxes, 5/26/08.
Proclaiming your dedication to spending the taxpayers’ money wisely will not suffice; we have heard such claims before. Forget about blaming the deficit on the other party, that excuse is threadbare too. Instead of the usual talk, let’s see some action.
We want wasteful programs terminated – not renamed, reorganized, or cut 5%. Ethanol mandates and subsidies – gone. Agricultural subsidies – gone. Export-Import Bank – gone. Hundreds of federal grant programs that most taxpayers have never heard of – gone.
Then we were complaining about a $400 billion deficit; now a $1.8 trillion deficit is projected for fiscal year 2009. So perhaps a second letter is needed, e.g., we told you to cut spending, you did the opposite, and the window of opportunity is about to slam shut.
But would anyone in Congress pay attention to such a letter, other than the heroes (a distinct minority) who are already fighting for fiscal responsibility? Before putting pen to paper, we decided to run a reality check.
Public sentiment – Our May 2008 letter cited a low Congressional approval rating as evidence that Americans were tired of ever-growing government spending.
Aside from shutting down the Interstate Commerce Commission a few years ago, when is the last time that you terminated a government program? No wonder the approval rating for Congress has sunk to 18%.
The source was a recently conducted Gallup poll. Approval of U.S. Congress ties record lows [in 1992 and 2007], UPI.com, 5/14/08.
Based on our theory, one might think the Congressional approval rating would be in the single digits by now, but guess again. It rose to 40% after the election, and is only now tailing off. Congress’ Approval Rate Drops to 33%, Gallup, 6/23/09.
A more encouraging sign from our standpoint might be the number of Americans who identify themselves as “conservative” vs. “liberal.” Recent polls indicate about twice as many conservatives as liberals in the population, and also a shift to the right (by Republicans, Independents, and to a lesser extent Democrats) “in recent years.” Ideologically, Where Is the U.S. Moving, Gallup, 7/6/09.
A conservative trend is belied, however, by the victories of the traditionally more “liberal” Democratic Party in the 2006 and 2008 elections.
Also, the trend of opinions on individual issues does not bear out an overall increase in “conservative” sentiment. One might conclude from the data (measured by polls in 2004 and 2008-9) that Americans are growing more conservative about some things (including issues unrelated to the SAFE agenda, e.g., gun rights) and more liberal about others.
When it comes to healthcare, for example, the public seems conflicted. Many people hope to benefit from government-run healthcare in some fashion, but they do not necessarily want to help foot the bill.
Changes in public attitudes on healthcare reform have been mixed. The percentage of Americans in favor of maintaining the current healthcare system based on private insurance was 63% in 2004 but 56% in March 2009 -- a drop of seven points for the traditionally conservative healthcare position. (Support for the alternative position -- replacing the current healthcare system with a government-run system -- grew from 32% to 39%.) At the same time, Gallup saw a seven-point increase, from 34% to 41%, in views that it is not the government's responsibility to provide all Americans with healthcare coverage.
All things considered, muses the Gallup analyst, “many in and outside of the Republican Party [are] wondering whether the country has outgrown the GOP’s largely conservative platform.” The polling firm does not appear convinced that the country is moving to the right, nor for that matter are we.
Activity – We previously reported on the tea parties with a healthcare theme that were planned in Delaware on July 2. They have now taken place. There was a rally in Georgetown, plus sidewalk demonstrations outside the district offices of Delaware’s three members of Congress (one location in Dover, two in Wilmington).
SAFE monitored all of these events. They appeared to be well run, although the turnout was relatively modest. The biggest one was the rally in Georgetown. Check out these photos posted by the Sussex Countian.
Maybe things need to get worse (think California, where politicians are still reeling because voters rejected all of the tax increase proposals in a recent referendum) before demonstrators start turning out en masse. Or perhaps the place to demonstrate is in Washington D.C. (the heart of the fiscal problem), where a July 4th tea party drew a crowd estimated at 2,000. Photos posted by Freedom Works attest to the spontaneity and enthusiasm of that event.
Advance registration for the September 12 “March on Washington” is reportedly up to 9,000 already. We will remind you again, but please note this event on your calendar now so you will remember to watch it on television – or better yet, be there.
Ideas – Last week, we reviewed the marketing pitches for the economic stimulus bill (already passed, but in the news because it does not appear to be working), government-run healthcare, and cap & trade. None of these proposals holds water, in our opinion, and certainly the downside aspects have not been honestly disclosed. Happytalk blossoms in the nation’s capital, 7/6/09.
SAFE and its allies may not be in the ideological majority right now, but we can point out gaping holes in the other side’s arguments and present arguments of our own. Somebody needs to do this, because things are moving very fast in a direction that cannot be readily reversed if the Administration’s proposals get approved. We are glad to take the initiative, but would hope that others will join us – lots of them.
* * * *
OK, now we are grounded, and it is time to act. Here is SAFE’s on-line letter to the members of Congress, which is shorter and less emotional than the first, perhaps more realistic, but equally pointed. We will also e-mail Senator Carper, Senator Kaufman, and Representative Castle to bring the letter to their attention.
Readers are urged to follow our example by calling, e-mailing or writing the members of Congress who represent them. Many contacts will be needed to have real impact, so please do not rationalize that “SAFE has done the job already.”
One approach would be to forward a link to our letter with your personal endorsement. Such action would be quick, easy, and supportive of our efforts.
It might be even better, however, to make the case for fiscal responsibility in your own words. If you use this approach, feel free to borrow any of the words or ideas in our letter that you would like.
Finally, please respond to the question of the week (link is in the box below). We would appreciate your input, and so would other readers.
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7/6/09 – Happytalk blossoms in the nation’s capital.
We have noticed a pattern in Washington of late, which goes something like this. A huge government program is proposed to deal with a problem (whether current or forecast). The purported benefits are touted relentlessly, without discussion of drawbacks or costs. There is such a rush to enact legislation that members of Congress may not have time or inclination to read the final bill before voting. And anyone who complains runs the risk of being labeled a diehard extremist.
Is this country headed for a situation like the one described by George Orwell in 1984, a novel set in a futuristic totalitarian state where the distinction between propaganda and reality has been largely obliterated by Newspeak (enforced by the Thought Police).
War is Peace, Freedom is Slavery, Ignorance is Strength, etc.
Maybe, but things have not gone that far in the United States – yet. So let’s refer to the kind of one-sided political rhetoric that is in vogue as Happytalk.
It is nothing new for politicians to promise more than they can deliver, especially on the campaign trail, but the practice seems to be growing worse. One reason may be the blurring of the traditional distinction between campaigning and governing, with some politicians operating in nonstop campaign mode. In any case, people had better start paying attention to what is happening, or they may be shocked by the results.
Three Happytalk examples will be presented. The subjects are different, but the marketing approaches are similar.
Economic stimulus – For all the reasons to doubt that the president’s stimulus proposal would speed an economic recovery, no serious consideration was given to taking a more measured approach – let alone opting for “lower tax rates and a reduction in the burden of government,” which several hundred economists called “the best ways of using fiscal policy to boost growth.” Economic stimulus package: what’s the rush? 2/2/09.
The tactics used to push through the $787 billion economic stimulus bill have already been reported. Scary talk – blame game – faux economic history – naked partisanship. Playing hardball, 2/16/09.
Members of Congress who voted for the bill were quick to take credit for the predicted benefits – without discussing how the spending would be paid for.
Senator Tom Carper (D-DE): Delawareans will see benefits from this bill in the form of jobs and tax cuts. Over the coming weeks, I look forward to sharing the ways in which Delaware families and businesses will receive badly needed assistance with the passage of this legislation.
Senator Ted Kaufman (D-DE): After a month where we lost 600,000 jobs – 20,000 per day – this economic recovery package delivers what we need: 3.5 million jobs. There is no higher priority than getting our citizens back to work. The American people are demanding bold and quick action, and today we delivered it.
Administration officials soon began talking about the recession as though it had gone away – having saved the economy, they had other fish to fry. Despite the president’s assertion on February 9 that speedy passage of the stimulus bill would “save or create up to 4 millions jobs,” however, joblessness (a lagging indicator) continued to climb. Whatever happened to the greatest financial crisis of our time? 6/15/09.The unemployment rate now stands at 9.5%, and many people with jobs are working part-time. Despite some encouraging economic signs, such as low inventory levels that will be restored at some point, one might logically conclude that the stimulus bill is not working as advertised. Tilting at Windmill Jobs, Wall Street Journal, 7/3/09.
The Administration argues that the recession would be worse without the stimulus, which is impossible to disprove. However, it's worth recalling that Mr. Obama's economists predicted late last year that the stimulus would keep the jobless rate from exceeding 8%. That was a percentage point and a half ago. It's far more likely that the economy would have been better off without the spending, and the higher taxes and debt financing that it implies.
Skepticism about the stimulus bill has spread. Thus, in a June poll, 61% of respondents said the bill either hurt the economy or had no effect on it. And 45% said “the rest of the new government spending in the new stimulus bill should be stopped right away.” 31% Say Stimulus Plan Has Helped Economy, 30% Say It Hurt, Rasmussen Reports, 6/25/09.
Unfazed, senior officials have hinted that the president would consider more economic stimulus (although much of the money already authorized remains to be spent) if needed. When asked about this possibility during an CNBC interview, for example, Christina Romer (who chairs the Council of Economic Advisers) said “we’ll do whatever it takes” to promote economic recovery. No second stimulus, please, Washington Examiner, 7/3/09.
Healthcare – Advocates of healthcare “reform” say it should be possible to provide coverage for most (if not all) of the Americans who currently lack healthcare insurance while lowering costs for everyone.
Consider the president’s keynote remarks at the Forum on Health Reform (White House, 3/5/09). Those who do not have healthcare insurance should be enabled to get it, he told the audience. Those who are satisfied with their healthcare insurance should be able to keep it and pay less. And his version of healthcare reform is “one of the best ways, in fact maybe the only way” to “get our federal budget under control.” A tale of two summits, 3/16/09.
Really? Many observers believe that extension of healthcare insurance to some 45 million additional people would increase healthcare costs without limitations on access to healthcare services (aka rationing). No such conclusion has been communicated to the general public, however, nor would it be well received.
The projected cost of some of the healthcare bills under consideration has led to discussion of accompanying tax increases (or the equivalent, e.g., requiring employers to “play or pay”), but any tax increases that might be imposed are already spoken for. We interrupt this program for a special announcement [that the government is out of money], 6/1/09.
The idea seems to be that the government can spend more money on healthcare so long as taxes are raised by a like amount. Ideally the burden would fall on people with more money than they need, or those who are running up healthcare costs with unhealthy habits, but a sales tax on everyone would do in a pinch.
The fiscal problem is huge, however, and there is just so much the public is willing to pay in additional taxes. Even if taxes were to be raised, the proceeds should be allocated to reducing deficits – not funding new spending programs.
As for expecting to pay for healthcare reform with cost savings, Stuart Butler of the Heritage Foundation suggests that the cost savings be realized before taking on any new commitments. Time for “real world” health budgeting, Washington Times, 7/2/09.
If Congress and Mr. Obama are serious about paying for healthcare, and if they seriously think it can largely be paid for by savings, they have nothing to lose by agreeing to a kitchen-table style of saving money in a cookie jar before they spend it. But if they won't do that, then make sure your children and grandchildren get really high-paying jobs - because they will be stuck with the tab.
Reasonable minds may differ on how healthcare should be reformed, but we would hope for agreement on two points.
First, there been more than enough Happytalk. Let’s have a realistic discussion of what should be done (if anything) about healthcare, and whether the country can afford it.
Second, all reasonable viewpoints (including ours, see the link below) should be considered. There is no compelling reason that the job must be concluded in 2009.
Energy policy – The Happytalk model might seem inapposite in this context, as the prime argument for expanded government control over the energy sector has been the purported danger of leaving decisions to the private sector.
In the 1970s, the theme was scarcity, e.g., energy conservation needed to be mandated before the world ran out of oil and economic activity ground to a halt. Although the predicted oil shortages failed to materialize, there is continuing talk about how the United States must cure its “addiction to oil” so as to reduce or eliminate oil imports.
Nowadays, the manmade global warming theory is said to justify drastic action to “save the planet.” The theory has been pushed hard by environmentalists, is generally accepted by the mainstream media, and enjoys an aura of “political correctness.”
Proponents of increased government regulation are fond of doomsday scenarios about the consequences if their proposals are not implemented. Consider the scary statements of former Vice President Al Gore, and his award-winning movie, “An Inconvenient Truth.”
Several officials in the current Administration seem to be global warming alarmists, notably Energy Secretary Steven Chu. After speaking at the Summit of the Americas in the Caribbean nation of Trinidad and Tobago, for instance, Secretary Chu summed up his thoughts in a 4/19/09 interview with Major Garrett of Fox News. Here’s an extract.
I think the Caribbean countries face rising oceans and they face increase in the severity of hurricanes. This is something that is very, very scary to all of us. The island states in the world represent -- I remember this number -- one-half of 1 percent of the carbon emissions in the world. And they will -- some of them will disappear.
A shift in strategy is in the making, however, with less scary talk about global warming and more Happytalk.
Thus, Speaker of the House Nancy Pelosi (D-CA) declined Al Gore’s offer to come to Washington during the countdown to a vote on the Waxman-Markey bill (W-M) and “deliver a final pitch to the House Democratic Caucus.” She reportedly preferred to have Gore making telephone calls from Tennessee. Michelle Malkin’s blog, 6/25/09.
In the debate before voting on W-M, Speaker Pelosi took a new tack. Never mind whether the manmade climate change theory is right or wrong; this is a jobs bill. Cap and Confuse, Paul Greenburg, Townhall.com, 7/2/09.
[She] didn't even bother to answer the minority leader's numerous and pointed criticisms of this energy bill. Surprise: It's not actually about saving energy after all, but about providing employment. At least to hear her yell it. Instead of a speech, she just repeated, like a cheerleader: "Jobs, jobs, and more jobs. Let's vote for more jobs."
Hmm, that’s odd! A forced switch to higher cost energy sources should depress the economy and produce lower employment, as economic analysts have confirmed. Son of Waxman-Markey: More Politics Makes for a More Costly Bill, William Beach et al., Heritage Foundation, 5/18/09 (updated 6/16/09).
Analysis of the economic impact of Waxman-Markey projects that by 2035 the bill would reduce aggregate gross domestic product (GDP) by $9.4 trillion; destroy 1,145,000 jobs on average, with peak years seeing unemployment rise by over 2,479,000 jobs; . . .
What’s going on? It seems that polling and focus group discussions have shown that the environmentalists need to adjust their pitch, and they are doing so. The switch from “global warming” to “climate change” was a first step; many additional changes have been recommended by experts in environmental marketing and messaging. Seeking to Save the Planet, With a Thesaurus, John Broder, New York Times, 5/1/09.
“Energy efficiency” makes people think of shivering in the dark. Instead, it is more effective to speak of “saving money for a more prosperous future.” In fact, [ecoAmerica’s] surveys and focus groups found, it is time to drop the term “the environment” and talk about “the air we breathe, the water our children drink.”
“Another key finding: remember to speak in TALKING POINTS aspirational language about shared American ideals, like freedom, prosperity, independence and self-sufficiency while avoiding jargon and details about policy, science, economics or technology,” said the e-mail account of the group’s study.
Judging from his comments after W-M passed the House, the president gets it. Has the White House decided global warming is a losing issue? Timothy Carney, Washington Examiner, 6/27/09.
If you went by President Obama's words alone, you would think this bill had nothing to do with capping greenhouse gas emissions in an effort to battle climate change. He has vague talk of praising "action" and "change" over "inaction" and the "status quo." He talks about "clean energy," and once about "pollution." But he completely ignores the aspect of this bill that garnered almost all of the media, lobbyist, and congressional attention: that the bill, for the first time in history, regulates the emission of carbon dioxide from many U.S. sources.
Similarly, consider the 1,100+ word statement that Representative Mike Castle (R-DE) released to explain his vote for W-M.
“Global warming” is not mentioned, and there is only one reference (in a quote) to “climate change.” It seems that the legislation is primarily about strengthening the economy by driving advancements in industry and new business growth.
As for costs, a study is cited to the effect that Delawareans might have to pay an extra $3 per month on their electric bills. That sounds low to us, and the estimate is certainly out of line with the results of other studies. Thus, the above-cited Heritage study concludes that by 2035 W-M would “raise electricity rates 90 percent after adjusting for inflation.”
According to former Speaker of the House Newt Gingrich, W-M “could be the largest tax increase in history on the American people.” Cap-and-Trade is another way of saying 2+2=5, Washington Examiner, 6/26/09.
The sponsors of the global warming bill, which is known as Waxman-Markey, are telling Americans that not only will the legislation save us from calamitous climate change, it will also produce new jobs and new prosperity by transitioning America to new forms of "green" energy.
In other words, under Waxman-Markey, there's no trade-off necessary to save the planet; no price to be paid. It's a win-win-win.
* * * *
We are not buying the Happytalk about economic stimulus, healthcare, or energy policy. Shame on the proponents; they should present their proposals honestly and be open to other viewpoints – including the dictates of fiscal responsibility.
Help us hold them to a higher standard!
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6/29/09 – Stopping the big government express: what’s the plan?
The National Taxpayers Union hosts a conference every other year on taxpayer concerns. Two SAFE directors (Steve McClain and Bill Whipple) attended the latest one (Alexandria, Virginia, June 11-13). Their report follows.
The tone of the 2007 conference was generally upbeat. SAFE represented at National Taxpayers Conference, 6/20/07 (first entry in this blog).
The focus was not on whether our country needs more limited government, everyone agreed it does, but how to get there. * * * The problems of an unwieldy, relentlessly invasive government that is in a deep financial hole took years to develop, and it will take years of dedicated effort to start turning things around. That being said, we left the conference feeling that SAFE is not a voice in the wilderness – there are some very fine people in other organizations, big and small, who share our values and vision and are working like us to make them a reality. Together, we can make a difference!
Much has happened since these words were written. A recession (aka economic crisis) fueled demands to “do something.” The country elected a president who favors government-run solutions, and gave his party a commanding edge in both houses of Congress. Government spending and deficits are soaring. Big tax increases will follow, although the president and his allies have been less than upfront about this.
Speakers and participants at the NTU conference decried the contemplated expansion of government and warned of the consequences. There was little agreement, however, as to how fiscal conservatives (or fiscal visionaries, as we prefer to think of ourselves) should try to get back in the game. This entry will discuss some of the competing visions.
Political comeback: Polls can be cited (more Americans consider themselves to be “conservatives” than “liberals”), and activities (e.g., the tax day tea parties) pointed to, which suggest this country does not want to go Socialist.
The tea parties were not dreamed up by the Republican Party, Fox News, or any other well-established organization, said Representative Mike Pence (R-Indiana). They were genuine “grass roots” demonstrations, which show that something BIG is happening out in the hinterlands – to the terror of entrenched politicians. Pence’s theory is that people are demonstrating against government expansion and for freedom, because "when government expands, freedom contracts.”
The opposition party fondly recalls how it rebounded after election losses in 1976 and 1992. As columnist John Fund of the Wall Street Journal observed, however, another political comeback is not preordained; the point is simply that conservatives have a chance and should keep trying.
Liberals know their hold on power is insecure, which is one of the reasons for their advice to conservatives: “Unless you become more like us, you are history.” Ignore them, said Fund, because reducing the conservative message to mush is a prescription for failure.
Belying the political comeback theme, there was recurring criticism at the conference of past actions by Republican leaders. One would gather that many fiscal conservatives are disinclined to support a Republican comeback, at least until they see more evidence that the GOP has gotten its house in order.
Note that conservatives are not joined at the hip with either of the major political parties. Historically the Republican Party has been seen as pro-business and fiscally conservative, but it drifted away from these values in recent years. A growing number of Americans (39% per a poll in April 2009) view themselves as independents rather than Democrats or Republicans.
Both political parties have lost adherents since the election and an increasing number of Americans identify as independents. The proportion of independents now equals its highest level in 70 years.
But if fiscal conservatives disassociate themselves from the messy business of recruiting candidates and trying to get them elected, how can they bring their influence to bear? One way might be to push for fiscal reform on a nonpartisan basis.
A grand bargain – David Walker, CEO of the Peterson Foundation and former Comptroller General of the United States, painted a dire picture of the recent fiscal record. His points should sound familiar to readers of this blog.
• The Troubled Assets Relief Program (financial sector bailout) lacked both clearly defined objectives and sound criteria for making loans. The conditions for the financing were only spelled out after the fact.
• One-third of the $787 billion stimulus bill met the timely, targeted and temporary criteria. The rest was for “investments” to be charged on the national credit card.
• The omnibus budget bill for FY 2009 (unfinished business from 2008) was too big and loaded with earmarks.
• The economic assumptions in the president’s budget for FY 2010 et seq. were unduly rosy. No appreciable cuts in government spending programs were reflected, nor was a restructuring of entitlement programs called for.
By the end of Fiscal Year 2010 (9/30/11), the gross National Debt will stand at about 100% of GDP; the projected growth of entitlement spending (Social Security, Medicare and Medicaid) could “sink the Republic” over the longer term.
Walker visualizes a commission or task force, established by statute, which would be empowered to review the fiscal situation with the objective of recommending a “grand bargain” on spending, taxes and entitlements. The group’s recommendations would be presented to Congress for an “up or down” vote.
There is considerable interest in the independent commission concept among members of Congress who have despaired of addressing the fiscal problem through traditional means. Voinovich and Lieberman Introduce SAFE proposal, 5/7/09.
The proposal, dubbed the SAFE (Securing America's Future Economy) Commission Act, seeks to establish a commission that will examine our tax and entitlement programs. The hope is that the commission will offer recommendations about how to reform a system the senators deemed unsustainable and irresponsible.
Such an approach would require give and take, and Walker counseled the NTU attendees to be realistic in their expectations. Smaller government is not in the cards, and taxes will have to go up. Get on board now, because the longer action is delayed, the bigger the required tax increase.
Walker did express confidence, however, that the progression towards a European-style welfare state can be stopped. “Yes, we can institute tough budgeting controls,” he said, with the controls being instituted before the higher taxes go into effect.
Despite our great respect for Walker, who has spoken out courageously about the government’s fiscal problems, we are less confident than he about the independent commission approach. Some concerns follow.
• Prior proposals of this nature, e.g., the SAFE Commission proposal of Representatives Jim Cooper (D-Tenn.) and Frank Wolf (R-Virginia), focused on spending and taxes. In other words, the entire fiscal equation was to be put on the table. Cooper, Wolf Reintroduce SAFE Commission Long-Term Fiscal Reform Bill, Spring 2009.
[The Commission] would be tasked with holding town hall meetings around the country and then submitting a report that balances long-term spending and revenue scenarios for the nation. If Congressional leaders fail to introduce their own proposal, the SAFE Commission’s legislative proposal is automatically brought to the House floor. If passed, it is sent to the Senate for similarly expedited consideration.
The Voinovich-Lieberman approach is apparently directed at entitlements and taxes, however, which would leave wasteful government spending out of the equation. We suspect that this would stack the deck in favor of tax increases, as the only alternative would be cuts in entitlement programs that have heretofore been regarded as sacrosanct.
• Another worrisome aspect of the SAFE Commission concept is that healthcare “reform” would be taken up first. Although Walker visualizes the invocation of a “do no harm” fiscal standard in addressing healthcare, the proposals on the table involve substantial additional costs that could only be paid for by raising taxes (thereby eliminating sources of revenue to reduce deficits).
In our view, the sequence of events should be reversed. Thus, the soaring cost of current healthcare programs (Medicare, Medicaid, and SCHIP) would be addressed first, whether through a SAFE Commission or otherwise, with healthcare reform to be considered later.
• Finally, note that the president and his advisors were talking about a “grand bargain” before the inauguration. Obama Targets a “Grand Bargain” to Fix Budget Mess, Wall Street Journal, 1/16/09.
Odd as it sounds amid a wheezing economy, mounting bankruptcies and rising unemployment, President-elect Barack Obama and his aides realize they'll actually be dealing with the easy part of their economic challenge when he takes office next week. After all, getting Congress to agree to spend billions of dollars and cut billions more in taxes to stimulate the economy right now is, politically speaking, relatively easy.
The harder part will be trying to follow that up by creating what is coming to be known in Obama circles as a Grand Bargain: getting everyone to agree to clean up the nation's budget mess in a really big way, one that doesn't just fix the problems being created now, but also addresses the frightening long-term problems America was going to face anyway to pay for Social Security and Medicare in coming decades.
It sounds like the president’s game plan all along has been to ram through a huge increase in government spending and then maneuver his political opponents into sharing the responsibility for the resulting tax increases.
In the words of Benjamin Franklin, “necessity never made a good bargain.” Are there any other ideas out there?
Fix taxes – Some fiscal conservatives remain keen on reinventing the tax system. Thus, under the FairTax proposal, income taxes and payroll taxes would be replaced by a national sales tax. The IRS would be disbanded. Hundreds of billions of dollars in tax compliance costs would be eliminated, and there would supposedly be less opportunity for tax evasion by people working off the books.
To ensure that the country would not wind up with a national sales tax and an income tax, the 16th Amendment (providing for an income tax) would be repealed. Or so it is said. In practice, amending the Constitution in this regard would be easier said than done.
SAFE agrees the tax law should be simplified, and we would probably line up behind the FairTax proposal if it gained traction. We would also support other approaches to tax simplification, such as a flat tax or radical overhaul.
But genuine tax reform may prove elusive, and even if achieved it would not rein in government spending covered by borrowing.
Spending cap – Imagine a Constitutional amendment requiring Congress to balance the budget every year. In addition, total spending would be limited to a stated portion (say 20% or 25%) of Gross Domestic Product, except in times of declared war or when authorized by a 2/3 majority of both houses of Congress. Wouldn’t that be nice?
Maybe, but it would not be enough. The government is in a huge fiscal hole, and explicit action would be required to adjust its unsustainable commitments for Social Security, Medicare and Medicaid. Without such action, a spending cap would only restrain expenditures for the functions of government, e.g., national defense, that fall under the heading of “discretional” spending.
The idea of a balanced budget amendment is not necessarily dead. During the concluding session of the conference, NTU Chairman David Stanley reminded everyone that a balanced budget amendment passed the House in 1995 and came within one vote of the required 2/3 vote in the Senate. Maybe the NTU will have another go at it, he said.
* * * *
With a rapidly deteriorating situation, what should fiscal visionaries try to do?
We are not inclined to count on “one-shot” solutions, such as a SAFE Commission or balanced budget amendment, although we would be willing to support them. The crux of solving the fiscal problem is applying sustained pressure in the right direction.
Perhaps “smaller, more focused, less costly government” is not in the cards right now, but it is also hard to imagine the fiscal problem being solved while the government continues to expand its influence at the expense of the private sector.
Unless someone puts an axe to government programs and spending, this country is headed for a big fall – and it could happen quicker than people think.
Don’t say we did not warn you!
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6/22/09 – Delaware tea parties with a healthcare theme
It was not our idea, but the next round of TEA (taxed enough already) parties in Delaware – scheduled for Thursday, July 2, in Wilmington (two locations), Dover, and Georgetown – will protest the Administration’s plan for healthcare reform.
April 15th marks the day when over 2000 Delawareans added their voices to over 1 million voices in every state in this Country. The cry then was to stop the reckless spending. These voices will once again unite in Delaware stating, not only [stop] the reckless spending, but present a health care reform plan that will actually solve the health care problems facing our Country.
Such a theme has some logic. The Administration’s plan would cost a ton of money (on top of hundreds of billions already being spent on Medicare and Medicaid), the government is running record deficits now, and taxes would inevitably be raised. People who are “taxed enough already” do not want to pay higher taxes. So make a sign, everyone, and let’s go.
Except for one little detail! If we the taxpayers intend to not only protest the Administration’s healthcare plan but also demand an alternative, what do we want? Here are the criteria posted by the Delaware Tea Party (restated in the interest of brevity):
Put patients first -- keep medical decisions between doctors and patients – do not give an advantage to the government, insurance companies, or pharmaceutical companies – ensure that healthcare will no longer be a big business – place healthcare choices in the hands of patients, guided by their physicians, and provide tools to make this happen – do not cause our children to pay for our mistakes.
The foregoing represents a wish list and nothing more. How can one expect that “healthcare will no longer be a big business,” for example, when it represents about 1/6 of the U.S. economy? What specific changes are desired from the status quo, and how would they be brought about? Would the plan save money or cost money? If costs increased, who would pay?
Our ideological opponents might seek to co-opt the demonstrations. “Why, of course you should have all these things, and that is exactly what the Administration’s healthcare reform plan would do!” Whether or not anyone believed them, the impact of the planned rallies would be blunted.
The media would dismiss the second round of tea parties as meaningless. Delaware members of Congress would feel no pressure to reconsider their votes. And taxpayer activists would be discouraged, making it difficult to call on them in the future – as suggested by this posted comment.
April 15 many of us stood in the rain at a tea party in Georgetown. Was anything accomplished besides being criticized by the mainstream news media (and getting wet)? Will anything be accomplished by meeting in Georgetown in July? I don't mind being criticized by the news media (or standing in the rain) as long as it means something. I think the only thing that will cause our President and Congress to pay attention is for millions to rally in front of the Capital Building or White House--probably more than 1 or 2 times. -- Carole Cullen
A Washington, D.C. event is planned on September 12, and the July 4th round of tea parties around the country will lay the foundation. 6/11/09, Freedom Works Foundation.
But Ms. Cullen’s feelings are understandable, and they underscore our conviction that the upcoming tea parties need to be well handled. Some suggestions follow.
First, emphasize the connection to taxpayer interests rather than healthcare reform as such. For example:
• Experts say the Administration’s healthcare plan would cost some $1.5-2.0 trillion over the next 10 years.
• The government is already on track to run $9 trillion in deficits over the next 10 years, which could lead to a reduced U.S. government credit rating, sharply higher interest rates, and double-digit (or worse) inflation.
• Raising taxes to pay for increased healthcare spending is no answer. Any additional tax revenues should be applied to reduce deficits – not used to pay for additional spending.
Second, he (she) who succeeds in framing the issue will win the debate, according to communication experts. Remember that the fundamental problem with the healthcare system is not the 46 million or so Americans (including illegal aliens) without insurance coverage, it is skyrocketing costs that threaten to make healthcare unaffordable for all concerned. A “ready, aim, fire” approach to healthcare reform, 3/30/09.
Stay on message! Here is what you should say, for instance, if asked about the people without healthcare insurance. “That’s an interesting question, but we need to get healthcare costs under control first.”
Third, why are healthcare costs growing so fast? Government subsidies and controls come to mind, which undermine personal/family responsibility for medical decisions and reward treatment vs. disease prevention. Reining in healthcare costs is complicated, and some of the steps involved would be controversial. SAFE plan for healthcare reform is “government-lite,” 4/6/09. But here are some broad principles on which participants should be able to agree:
• Thoughtfully consider all responsible options; there should be no rush to enact a healthcare bill that has not even been written yet. Biggest Shift in U.S. Healthcare Needs 45-Day Sprint, 6/17/09, Bloomberg.com. “Haste makes waste,” as the saying goes, and in this case the waste could turn out to be colossal.
“I don’t think we’ve ever had anything this large in American history aimed to go this quickly that touches everybody’s lives,” said Robert J. Blendon, a professor of health policy and political analysis at Harvard University in Cambridge, Massachusetts, in a telephone interview. “They’re moving at a pace we’ve never seen before.”
• Do not authorize new government interventions in the healthcare sector. They would increase costs, not reduce them, unless government bureaucrats were empowered to make medical decisions for people. That would represent rationing, and we do not want it.
• Stop nickel and diming family doctors, and protect them from the trial lawyers by capping medical malpractice awards (e.g., no punitive damages).
• Encourage competition in the healthcare sector and empower patients and their families to make informed treatment decisions.
* * * *
Be there at the tea parties on July 2, folks, and remember:
ü Haste makes waste!
ü There is no such thing as a free lunch.
ü Getting healthcare costs under control is the real problem.
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6/15/09 – Whatever happened to the greatest financial crisis of our time?
Released in January of 2009, “The End of Wall Street As We Know It” by Dave Kansas covers the financial turmoil that erupted in 2008 – why a speculative bubble in housing got started a few years back, how big Wall Street firms and Fannie Mae/Freddie Mac made matters worse, and what happened when the bubble burst.
The story is not over of course. Important developments have taken place since January, such as a $787 billion economic stimulus bill and the prepackaged bankruptcies of Chrysler and GM. And it remains unclear how the story will end.
Although Kansas speaks in terms of “the greatest financial crisis of our time,” perhaps to hype the book, he seems more optimistic about the future than we are as of this writing.
Timing – It is suggested (p. 192) that the timing of the crisis was somewhat fortuitous in that the newly elected president and his “top-rate economic team” would have “time to act boldly to solve problems outside the glare of election-year politicking.”
Thus far, the performance of the president’s economic team has been uneven, politics came to the fore from the start, and there is limited evidence of an economic recovery.
Consider the $787 billion economic stimulus bill, which was enacted in February on an essentially party line vote. Members of the opposition party complained that (a) they were not consulted about the details, and (b) the bill was pushed through without much opportunity for debate or even time to read the final text.
The stimulus bill did not meet the “timely, targeted and temporary” criteria that most of the participants supposedly subscribed to, and it might more properly have been labeled a spending bill. Economic stimulus package: what’s the rush? 2/2/09.
At an evening press conference on February 9, the president urged speedy passage of the bill as a means to “save or create up to 4 million jobs, because that's what America needs most right now.”
The stimulus bill was enacted, but the U.S. jobless rate has continued to climb: 7.6% for January, 8.1% February, 8.5% March, 8.9% April, 9.4% May, stay tuned for the June number in early July.
Critics point to continuing job losses as evidence that the stimulus bill was not properly designed to achieve its ostensible purpose. The president and his advisers say the bill is “working,” and has “saved or created 150,000 jobs” to date, but the support for this claim is primarily anecdotal. Obama’s plan stimulates the deficit, not the economy, Washington Examiner, 5/19/09.
On June 8, after the jobless rate for May was reported, the president pronounced himself “not satisfied” with the results of the stimulus program so far. Although reiterating that “at least 150,000 jobs” had been saved or created, he promised to push for faster spending and said another 600,000 jobs would be saved or created in the next 100 days. Obama to hurry recovery effort amid rising doubt, Jon Ward, Washington Times, 6/9/09.
Maybe, but overall joblessness is expected to go higher. According to the Congressional Budget Office, economic growth is likely to resume in the second half of 2009, but the jobless rate (a lagging indicator) will be on the rise for another year and peak at over 10%. Reuters, 5/21/09.
Opportunity for reform – New regulations of the financial sector are inevitable; they will be proposed (naively in our view) as a means of ensuring that no crisis of this nature ever happens again. Kansas suggests (p. 120), however, that the Administration may take advantage of this opportunity to redo the regulatory system from the ground up.
Traditionally, regulatory reform has simply meant more regulations and regulators. It would be shrewd to start over and discuss what exactly is the right kind of regulation and remake the system in the cleanest, most technologically sophisticated way possible. Grafting onto the old system, which creaking under the seventy-five years of legacy, would simply create a regulatory behemoth without actually addressing the issues of the 21st century in an intelligent manner.
As expected, the president and Treasury Secretary Tim Geithner have proposed new federal oversight over financial derivatives and financial institutions considered “too big to fail” (including hedge funds and traditionally state-regulated insurance companies). See, e.g., Geithner Unveils Massive Regulatory Agenda, CBN News, 3/26/09.
But there may be a lot of resistance to reining in the regulatory functions already being exercised by various federal and state agencies. Lobbyists and agency rivals fight to shape the new Wall Street, Stephen Foley, The Independent (UK), 6/7/09.
The Commodities Futures Trading Commission and the Securities and Exchange Commission seem to have fought off the Treasury's plan to merge them, keeping the regulation of securities separate from derivatives. Regulation of the commercial banks, too, is likely to remain partly fragmented after turf wars between the Federal Deposit Insurance Corp, which protects depositors, and two other organisations which examine banks.
On the whole, we would be inclined to bet on a “more regulations and regulators” outcome.
Duration – What about the possibility that the current recession will turn into a long, drawn-out affair? Unlikely, says Kansas (p. 196):
. . . don’t expect long soup lines and tattered men selling apples from a bucket. The references to the Great Depression are hyperbolic and the product more of reduced memories [of what actually happened in the 1930s] than of reality.
We are not so sure. There is an eerie similarity between the present situation and the Great Depression, which boils down to the government’s capability to make a bad economic situation worse by responding inappropriately.
The stock market crash of 1929 marked the onset of the Depression. A nasty shock, no doubt, but it took three government blunders to create an economic disaster – tight monetary policy, the infamous Smoot-Hawley tariff bill, and a major tax increase to balance the budget. The U.S. economy sank into a deep trough as a result, and despite the New Deal programs of the Roosevelt Administration it remained weak until World War II. Big Spending and Easy Money Will Produce a Recovery: The question is whether policy errors will cause another dip, Michael Darda, Wall Street Journal, 5/6/09.
Today, the government could again make blunders that would prolong the current recession or cause another downturn in the near future.
#The monetary policy of the Federal Reserve under Chairman Ben Bernanke, formerly a professor at Princeton University who spent years studying policy errors during the Depression, has been aggressively expansionary – a vast departure from the policies of the 1930s.
The Fed may have gone overboard, however, and it will soon be forced to either (a) rapidly drain the financial system of excess liquidity in order to avert double-digit inflation, or (b) maintain course and allow such inflation to happen. Either way, the economic consequences will be ugly. Get Ready for Inflation and Higher Interest Rates, Arthur Laffer, Wall Street Journal, 6/11/09.
Now the Fed can, and I believe should, do what it must to mitigate the inevitable consequences of its unwarranted increase in the monetary base. It should contract the monetary base back to where it otherwise would have been, plus a slight increase geared toward economic expansion. Absent this major contraction in the monetary base, the Fed should increase reserve requirements on member banks to absorb the excess reserves. Given that banks are now paid interest on their reserves and short-term rates are very low, raising reserve requirements should not exact too much of a penalty on the banking system, and the long-term gains of the lessened inflation would many times over warrant whatever short-term costs there might be.
Alas, I doubt very much that the Fed will do what is necessary to guard against future inflation and higher interest rates. If the Fed were to reduce the monetary base by $1 trillion, it would need to sell a net $1 trillion in bonds. This would put the Fed in direct competition with Treasury's planned issuance of about $2 trillion worth of bonds over the coming 12 months. Failed auctions would become the norm and bond prices would tumble, reflecting a massive oversupply of government bonds.
# No one is considering a tariff hike, to our knowledge, but the Waxman-Markey bill and other environmental proposals under consideration in the name of combating global warming could inflict just as much damage on the economy. The high cost of “green energy,” 5/25/09.
So not only are these proposals misguided over the long term, but negative results (in the form of another economic downturn) could begin to show up before the next election. Now there is an argument that even politicians with a short attention span should be able to appreciate.
# As for raising taxes, the idea seems to be gaining currency despite the president’s promises to the contrary (95% of Americans were supposed to get a tax cut). Moreover, the driving force is to cover the cost of new spending programs – notably the president’s healthcare plan – rather than to reduce the huge deficits that are projected. We interrupt this program for a special announcement, 6/1/09.
Ultimately, higher taxes may be needed. But rushing the increases through could imperil a much-desired economic recovery, and fiscal visionaries should insist – as a minimum – that the proceeds of any tax increases be used for deficit reduction. 6/8/09 letter
* * * *
Once again, whatever happened to the “greatest financial crisis of our time”? We fear it is still out there waiting to happen. So let’s press the country’s political leaders to keep their eye on the ball, and in the meantime refrain from risky initiatives that would grow the government and further undermine the private sector.
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6/8/09 – How to win the global warming debate
In three previous entries (5/11/09, 5/18/09, 5/25/09), we reported on plans afoot to restructure the U.S. energy sector in the name of averting a global warming crisis.
On the legislative front, the Waxman-Markey bill, which would institute a “cap and trade” regime and much more, has passed the House Energy and Commerce Committee.
On the regulatory front, the Environmental Protection Agency (EPA) proposes to classify CO2 and other greenhouse gas emissions as “pollutants,” thereby justifying regulations to force the reduction of such emissions. Furthermore, the president has announced an accelerated phase-in of higher mileage standards for new motor vehicles, to be accomplished by joint action of the EPA and the Department of Transportation.
The need for action is dubious. These initiatives would be costly and disruptive. The effect on global temperatures would be insignificant.
Fine, fiscal visionaries should prevail – if we can make our case effectively. This entry will offer some suggestions for doing that.
STRATEGY – Resistance to proposals for expanding the reach and cost of government is generally not enough; alternatives must be offered as well. How to win: be proactive, not reactive, 10/29/07.
Instead of simply opposing tax increases, for example, SAFE advocates making the tax law simpler and fairer. Let’s stop tinkering with taxes and reboot the system, 11/19/07.
While opposing the president’s healthcare plan, we have offered a plan for real healthcare reform. SAFE plan for healthcare reform is “government-lite,” 4/6/09.
Although not in favor of government-mandated conservation measures (e.g., mileage standards) to achieve “energy independence,” SAFE favors easing government restrictions on domestic drilling in order to reduce the need for oil imports. To drill or not to drill, that is the question, 7/7/08.
But if ever a government plan deserved a “no” response, the forced reduction of CO2 emissions is it! SAFE does not intend to suggest alternative ways to reduce CO2 emissions; we will concentrate on pointing out deficiencies of the “green energy” proposals on offer.
Who are our opponents? Some people sincerely believe that global warming represents a threat to the human race. There are also business executives, lobbyists, attorneys, and political leaders who hope to benefit from the green energy agenda. For convenience, we will collectively refer to all of the above as the Climate Scare Lobby (CSL).
Alas, the alleged threat of manmade global warming has been so uncritically and repeatedly reported by the mainstream media that many people think it must be true. People who are skeptical about global warming, therefore, may be reluctant to expose themselves to possible embarrassment by asking questions.
TACTICS – Multiple audiences need to be addressed, and the message and mode of delivery will vary depending on the situation. Here are some illustrative examples of efforts to sway public opinion.
# One of the CSL’s favorite talking points is the alleged consensus of scientific opinion about manmade global warming. The implication: “resistance is futile, come out with your hands up.”
In this vein, the president (then president-elect) said the following on 11/19/08:
Few challenges facing America and the world are more urgent than combating climate change. The science is beyond dispute and the facts are clear.
Really? Over 100 scientists (including David Legates of the University of Delaware) signed an answering statement, which the Cato Institute ran as a full-page ad in the New York Times, Washington Post, Chicago Tribune, Washington Times, and Los Angles Times on 3/30/09.
With all due respect Mr. President, that is not true.
We, the undersigned scientists, maintain that the case for alarm regarding climate change is grossly overstated. Surface temperature changes over the past century have been episodic and modest and there has been no net global warming for over a decade now. After controlling for population growth and property values, there has been no increase in damages from severe weather-related events. The computer models forecasting rapid temperature change abjectly fail to explain recent climate behavior.
Mr. President, your characterization of the scientific facts regarding climate change and the degree of certainty informing the scientific debate is simply incorrect.
#The EPA’s proposed finding that CO2 and other manmade greenhouse gas emissions represent “pollutants” for purposes of the Clean Air Act was published in the Federal Register (25-pages of three-column text) on 4/24/09. The verbiage is dense and hard to follow. We doubt that many people will download and read this document, even though it is posted on the Internet.
Further, the EPA finding references “a technical support document (TSD) which synthesizes major findings from the best available scientific assessments that have gone through rigorous and transparent peer review.” Anyone with the time to locate and read the TSD must be truly dedicated, good luck to them!
Comments may be submitted until June 23, but it would be easy to rationalize that doing so is useless. Having expended the time and effort to create this pile of paperwork, how likely is it that the EPA will give any weight to critical comments?
Unless critics refute the EPA finding, however, it will be cited repeatedly as showing that manmade global warming poses a grave risk, so we decided to make the effort.
Our 6/4/09 letter makes the following points about the EPA’s proposed finding: (1) the gravity of the alleged global warming threat is exaggerated, (2) the principal sources relied on are hopelessly biased, and (3) the EPA should reverse its previous decision and conduct “a new assessment of the scientific literature.”
We cited some solid sources in the letter, which in sum demonstrate that many scientists are skeptical of the manmade global warming theory – and understandably so because the known facts do not support the theory very well.
By way of follow-up, SAFE sent a 6/8/09 letter to members of Congress from Delaware to advise of the position we have taken. Hopefully, contacts of this nature can start to erode Congressional support for the green energy agenda – and Congress has ample power to tell the EPA to “back off.”
# Short of submitting formal comments on the EPA’s proposed findings, there is an easy way to get your “two cents worth” in. The Friends of the U.S. Chamber of Commerce have created a message board on “The Environmental Protection Agency Runs Amuck,” and comments received will be forwarded to Carol Browner, the Administration’s energy czar. Among the comments posted to date:
"I just wish you and I could be alive to see you all with egg on your faces. This is just a theory and not a very good one. Stop all the madness!!!" Posted By: Joyce Neidlinger (Denver, Co) Posted on June 2 @ 3:04 PM
"Assessment reports of the IPCC and CCSP are hopelessly biased. You should have conducted "a new assessment of the scientific literature." Do it over!" Posted By: William Whipple III (Middletown, DE) Posted on June 1 @ 8:37 PM
"Though I am not an expert I am informed. If you look at the hundreds of solar experts, geologist, and climate scientist you find that this is a bogus tax ploy" Posted By: Shawn T. Chriest (Anchorage Alaska) Posted on May 31 @ 4:02 PM
We urge readers to access the link, type in their comments (up to 160 keystrokes), and click “broadcast to feed.” Your comment will instantly show up as the latest in the series, providing you with the satisfaction of having done your part.
#At a 6/2/09 conference in Washington, D.C, sponsored by the Heartland Institute and attended by SAFE director Bill Morris and many others, an 800+ page report was distributed that reviews the scientific literature on global warming and reaches dramatically different conclusions than did the 2007 assessment report of the UN-sponsored International Panel on Climate Change (IPCC) [one of the EPA’s key sources]. Climate Change Reconsidered: The Report of the Nongovernmental International Panel on Climate Change [NIPCC], Craig Idso and S. Fred Singer, The Heartland Institute, 2009.
On the most important issue, the IPCC’s claim that “most of the observed increase in global average temperatures since the mid-twentieth century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations [emphasis in the original],” NIPCC reaches the opposite conclusion – namely, that natural causes are very likely to be the dominant cause. Note: We do not say anthropogenic greenhouse gases (GHG) cannot produce some warming or has not in the past. Our conclusion is that the evidence shows they are not playing a substantial role.
As for why this project makes sense and the results should be heeded, the following explanation is offered.
Before facing surgery, wouldn’t you want a second opinion?
When a nation faces an important decision that risks its economic future, or perhaps the fate of the ecology, it should do the same. It is a time-honored tradition in science to set up a “Team B,” which examines the same original evidence but may reach a different conclusion.
#The green energy agenda would entail huge costs, whether manifested in higher taxes, higher prices, or a reduced level of economic output. This is not a favored theme of the CSL, so fiscal visionaries should ensure that the public is informed of the economic realities. See, e.g., Son of Waxman-Markey: More Politics Makes for a More Costly Bill, William Beach et al., Heritage Foundation, 5/18/09.
By 2035, says the Heritage team, the Waxman-Markey bill (as revised) would (a) reduce aggregate gross domestic product (GDP) by $9.6 trillion; (b) destroy 1.1 million jobs on average (2.5 million jobs in peak years); (c) raise inflation-adjusted electricity rates by 90%, inflation adjusted gasoline prices by 74%, and residential natural gas prices by 55%; (d) raise an average family’s annual energy bill by $1,500; and (e) increase inflation-adjusted federal debt by 26% ($29,150 per person).
Hmm, seems that people will need to make up their minds just how worried about global warming they really are.
#As suggested earlier, some people may be supporting green energy for reasons that are not completely altruistic. Bjorn Lomborg, a well-known global warming skeptic, reflects on the activities of firms that stand to benefit, including appearances at international climate change forums and the growing use of high-powered lobbyists to jockey for preferential treatment. The Climate-Industrial Complex, Wall Street Journal, 5/22/09.
U.S. companies and interest groups involved with climate change hired 2,430 lobbyists just last year, up 300% from five years ago. Fifty of the biggest U.S. electric utilities -- including Duke [Energy] -- spent $51 million on lobbyists in just six months.
Some observers question whether the opposition party, which generally considers itself as pro business, will stand up to corporate boosters of green energy mandates and subsidies. Cap-and-trade as corporate welfare, Timothy Carney, Washington Examiner, 5/21/09.
Can Congressional Republicans, fond of calling themselves "pro-business," and accustomed to defending corporate America from Ralph Nader-type attacks, convincingly argue against corporate-welfare draped in green?
Well, that is up to the opposition party, but we don’t think they have much choice if they hope to be on the winning side in this debate.
#Science & Public Policy Institute – There is some fascinating information on the SPPI Website, such as:
•A 5/27/09 account by Joseph D’Hippolito of how “Al Gore Rakes in the Green” from crusading against global warming. It is alleged that the former vice-president’s net worth has grown from $2 million to $100 million since he left government service.
•Announcement of the results of a study by Lord Christopher Monckton, which allegedly demonstrated that IPCC computer models overstated CO2’s effect on global temperatures by 500-2000%. Proof: There is no climate crisis, SPPI, 7/15/08.
•Several essays by Lord Monckton, an eminent scientist with a flair for writing and speaking, including 35 Inconvenient Truths: The errors in Al Gore’s movie, 10/18/07.
* * * *
Some of the foregoing initiatives required enormous time, energy and expertise, notably the NIPCC report and the Heritage economic impact study.
Others were simple, such as posting comments about the proposed EPA findings on a message board.
So if you are not able to take on one of the big jobs, find alternative ways to promote a rational understanding of the manmade global warming theory.
“Many hands make light work,” as the saying goes, and this debate can be won if we all pitch in and make things happen.
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6/1/09 We interrupt this program for a special announcement
We have it on the highest authority that the U.S. government is “out of money,” and everyone knows what that should mean – adjustments on the spending side. Here is an old story, which makes the point.
A college student sent his father a telegram: “No mon, no fun, your son.”
Back came this reply: “How sad, too bad, your dad.”
So we decided to cover the breaking story. Tune in next week for suggestions on combating the climate scare lobby.
Statement – The president’s comment was made during a C-SPAN interview that aired on May 22. He had laid out his ideas for healthcare reform, and host Steve Scully asked a question: “At what point do we run out of money?”
“Well, we are out of money now,” the president said, and “operating in deep deficits.” He attributed the situation to “the crisis that we’ve seen” and to “our failure to make some good decisions on healthcare over the last several decades.”
As for solutions, the president did not speak of deferred initiatives, spending cuts, or even tax increases. Instead, he advocated making healthcare “investments” now “that are going to reduce costs, even if they don’t reduce them this year or next year, but 10 years from now or 20 years from now.”
Our view – The statement about being out of money may not be literally true, but things are headed in that direction. And rapid growth in healthcare spending has been a major factor in the deterioration of the government’s fiscal situation.
Thus, Medicare + Medicaid outlays rose from 4% of federal spending in 1968 to 20% in 2008, with no end in sight. Citizen’s Guide, The Peterson Foundation, March 2009.
As for the president’s healthcare plan helping to solve the government’s fiscal woes, however, forget it. Providing healthcare insurance for an additional 46 million Americans would not come cheap, and the president’s 10-year budget projection identifies precious little in the way of offsetting cost savings. Healthcare plan will not pay for itself, 3/23/09.
Furthermore, action is needed now to avert the “fiscal meltdown” SAFE has been warning about. Not the current recession, which is hopefully waning, but a crisis due to a loss of confidence in the financial soundness of the U.S. government, which would lead to curtailment of credit, send interest rates soaring, and create a well nigh irresistible temptation to resort to printing money.
Such situations have developed elsewhere (from Argentina to Zimbabwe), with disastrous results. Avoiding a similar fate for the United States is far more important, in our opinion, than reducing the number of Americans without healthcare insurance.
No one can say when the U.S. government’s turn might come, but there has been fiscal irresponsibility aplenty and international investors have clearly taken notice.
#Federal deficits for FY 2009 and FY 2010 are now estimated to total $3.1 trillion, $176 billion higher than the corresponding estimates in February. Deficits soar even with rosy Obama budget assumptions, David Lightman, McClatchy, 5/11/09.
#Edmund Conway of the UK Telegraph suggests in a 5/26/09 blog post that the next stage of economic/financial turmoil will be “a sovereign debt crisis.” Spain and Ireland have been downgraded already, the UK and other European countries may follow, and “even the US’s AAA status is under question.”
#Dallas Federal Reserve Bank President Richard Fisher says a “perception of risk” has been created by the Fed’s purchases of Treasury bonds, etc. This practice is weighing on the minds of financial officials in China, Japan, Singapore and Korea. Don’t Monetize the Debt, Mary O’Grady, Wall Street Journal, 5/23/09.
He has just returned from a trip to China, where "senior officials of the Chinese government grill[ed] me about whether or not we are going to monetize the actions of our legislature." He adds, "I must have been asked about that a hundred times in China."
#Despite Fed purchases of U.S. Treasury bonds, the rates on these securities and other debt obligations are trending up – which market observers attribute to fears of renewed inflation. Bond Vigilantes Confront Obama as Housing Falters, Liz McCormick and Daniel Kruger, Bloomberg.com, 5/29/05.
“The bond-market vigilantes are up in arms over the outlook for the federal deficit,” said Edward Yardeni, who coined the term in 1984 to describe investors who protest monetary or fiscal policies they consider inflationary by selling bonds. He now heads Yardeni Research Inc. in Great Neck, New York. “Ten trillion dollars over the next 10 years is just an indication that Washington is really out of control and that there is no fiscal discipline whatsoever.”
Other skeptics – We are not the only ones who think the president’s healthcare plan would boost government spending, and question assertions to the contrary.
#Star Parker, president of the Coalition on Urban Renewal & Education, says “we already have massive government involvement in healthcare,” which led to a big expansion in healthcare spending. Why add fuel to the fire?
In 1960, 60 percent of Americans' healthcare expenditures were out of their own pocket. Today it is 12 percent. So massive growth in healthcare spending and cost escalation correlates directly with increasing government involvement in this marketplace and decreasing consumer control over their own expenditures. Does this tell you something?
#Michael Tanner of the Cato Institute supports the idea of healthcare reform, but he says the president’s plan would result in de facto rationing, the demise of most private insurance plans, and at least $1.5 trillion in higher federal outlays over the next 10 years. The Obamacare to Come, National Review, 5/21/09.
#Financial commentator Larry Kudlow dismisses the cost-cutting claim out of hand. Obama’s Public Health[care] Plan Will Bankrupt the Nation, Townhall.com, 5/14/09.
Does anybody really believe that adding 50 million people to the public health-care rolls will not cost the government more money? About $1.5 trillion to $2 trillion more? At least. So let’s be serious when evaluating President Obama’s goal of universal health care, and the idea that it’s a cost-cutter. Can’t happen. Won’t happen. Costs are going to explode.
Supporters – Business Week says “covering the uninsured could add anywhere from $1 trillion to $2 trillion to the federal budget over 10 years.” Three payment options are identified: raise taxes, cut payments to medical providers, or ration care. Healthcare Reform: Who Pays Is So Taboo, Catherine Arnst, 5/20/09.
Omission of cost savings from the list, plus discussions of three politically unpalatable alternatives, shows that no one really believes the president’s plan would pay for itself.
RAISE TAXES - An increase in the Federal excise tax on tobacco was included in the SCHIP expansion bill enacted in early February to pay for the additional spending.
Tax increases ($318 billion over 10 years, by tinkering with income tax deductions for upper income taxpayers) were proposed in the Fiscal Year 2010 budget proposal, with the proceeds to be earmarked for the cost of the president’s healthcare plan. “A New Era of Responsibility,” Office of Management and Budget, 2/26/09, pp. 29-30.
On May 20, the Senate Finance Committee (chaired by Senator Max Baucus, D-Montana) issued a 39-page report on “Financing Comprehensive Healthcare Reform.” The prime focus is on ways to raise taxes, e.g., (a) restrict tax exclusion for employer-provided healthcare benefits, (b) repeal itemized deductions for medical expenses, (c) raise excise tax on alcoholic beverages, and (d) impose an excise tax on sugary drinks.
Finally, there is said to be growing interest in a national sales tax or “value added” tax (VAT) – not to replace the income tax (FairTax proposal) but on top of it. Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look, Lori Montgomery, Washington Post, 5/27/09.
A White House official said a VAT is "unlikely to be in the mix" as a means to pay for health-care reform. "While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers," said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag.
Still, Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel and author of the 2008 book "Health Care, Guaranteed." Meanwhile, former Federal Reserve chairman Paul A. Volcker, chairman of a task force Obama assigned to study the tax system, has expressed at least tentative support for a VAT.
"Everybody who understands our long-term budget problems understands we're going to need a new source of revenue, and a VAT is an obvious candidate," said Leonard Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, who testified on Capitol Hill this month about his own VAT plan. "It's common to the rest of the world, and we don't have it."
The idea seems to be that the government can spend more money on healthcare so long as taxes are raised by a like amount. Ideally the burden would fall on people with more money than they need, or those who are running up healthcare costs with unhealthy habits, but a sales tax on everyone would do in a pinch.
The fiscal problem is huge, however, and there is just so much the public is willing to pay in additional taxes. Even if taxes were to be raised, the proceeds should be allocated to reducing deficits – not funding new spending programs.
Also, this could be a very bad time for a big U.S. tax increase. [Dr. Nouriel] Roubini says U.S. economy may dip again next year. Reuters.com, 5/28/09
So we are not about to buy into a tax fix to keep the spending spree going, and “Mainstream America” may not be on board either. 77% See Politicians Unwillingness to Cut Government Spending as Bigger Problem Than Voter Resistance to Tax Hikes, Rasmussen Reports, 5/22/09.
As is frequently the case, the gap between Mainstream America and the Political Class [government employees and lobbyists?] on the question is wider than that between political parties. While 90% of Mainstream Americans see the bigger problem as a failure to cut government spending, the Political Class is evenly divided over whether voters or politicians are more to blame.
CUT PAYMENTS TO MEDICAL PROVIDERS
On May 11, representatives of the healthcare industry pledged to shave increases in healthcare spending (their revenues) by $2 trillion over the next 10 years. Not all the savings would go into the federal government’s coffers, but still this would represent a big step (if the industry delivered) in financing the president’s healthcare plan. Health savings first step in long fight, Washington Times, 5/12/09.
There is an open question as to what is going on, however, and the real question may be who is getting fooled.
#The Wall Street Journal characterizes this “vague, probably illusory promise” as a Faustian bargain, which in time would “result in price controls and restrictions on care.” Signing on to an Obama Dream, 5/13/09.
The implicit assumption in the providers' deal announced [Monday] seems to be that the private companies will do the price controlling so the government won't have to do it for them. But when the savings prove illusory, as in the past, the feds will step in and order them to do so.
#Columnist Timothy Carney says healthcare insurers and other players may hope to get more out of the deal than they committed to put into it, i.e., the real loser might be the general public. Washington Examiner, 5/11/09.
1) Some of the proposals include a federal mandate that individuals maintain health insurance. Yes, Ted Kennedy wants to require you to buy Blue Cross's product, and Paul Krugman is wondering why Blue Cross is supporting Ted Kennedy.
2) All regulation creates a barrier to entry. Adding costly regulations and new mazes of government bureaucracy, while making top-shelf lobbyists a must keeps out new competitors.
#Michael Cannon of Cato Institute sees the industry pledge as a gambit to pacify the Congressional Budget Office. Healthcare Reform? Maybe Next Year, NPR.org, 5/11/09.
Senate Finance Committee chairman Max Baucus (D-MT) has spoken openly about getting the CBO to change its mind. If reformers can say that even the industry is committed to achieving savings with these reforms, that might make it easier to get the CBO to relent, and allow health care reform to pass without the necessary payment cuts or tax increases — even if there's still no evidence that the assumed savings will appear. Don't call it cooking the books. Call it the new math of universal coverage.
Don’t expect supporters of the president’s healthcare plan to talk about “rationing,” but Larry Summers, the president’s chief economic adviser, came close in an April 19 appearance on Meet the Press. Rationing healthcare, Washington Times, 4/21/09.
"Whether it's tonsillectomies or hysterectomies ... procedures are done three times as frequently [in some parts of the country than others] and there's no benefit in terms of the health of the population. And by doing the right kind of cost-effectiveness, by making the right kinds of investments and protection, some experts ... estimate that we could take as much as $700 billion a year out of our healthcare system."
“Let’s be clear,” the newspaper’s editorial continues, U.S. healthcare expenditures could not conceivably be cut by 30% per year under a government-managed plan without rationing.
There is plenty of waste in healthcare spending, which needs to be eliminated somehow. We see the solution (basically) as patient empowerment, but rationing could work. If that’s the game plan, however, this should be acknowledged up front so the public can make an informed decision.
* * * *
As of this writing, efforts to put the president’s healthcare plan over the top appear to be gearing up – while leaving the government’s dire fiscal situation to be dealt with down the road. Obama says healthcare changes must come this year, Phillip Elliott, Breitbart.com, 5/28/09.
The president said the costs of the nation's $2.5 trillion health care system are crushing families and businesses and pose the largest threat to the economy.
The White House is leaving it to lawmakers to work out the details of a health care plan, but Obama has said it should ensure choice and lower costs, while extending coverage to the 50 million Americans now uninsured. The [10-year] cost of accomplishing that has been estimated around $1.5 trillion, and figuring out how to pay is emerging as a major challenge for Congress and the White House.
How can this be when, as the president said, “we are out of money now”?
Save those tea party signs, folks, they may come in handy.
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5/25/09 – The high cost of “green” energy
Last week’s entry presented three arguments against the proposed cap and trade system: (a) the necessity of curbing greenhouse gas (GHG) emissions is dubious, (b) a cap and trade system would be a nightmare to administer, and (c) a carbon tax would be simpler and more effective, but has little support because the cost is readily apparent.
If it can be shown that the cap and trade system would be costly as well, a disguised carbon tax if you will, that should clinch our case. But making this claim is not enough; specifics must be provided. That is what we will attempt to do in this entry.
Context: Cap and trade is one of several energy policies that have been adopted or proposed in the name of reducing oil imports, conserving energy resources, and/or combating global warming. Here are some others:
• The December 2007 energy bill mandated higher mileage standards for new motor vehicles (35 miles per gallon on average for automobiles and light trucks), to be achieved by 2020. The bill also mandated growing use of biofuels and a switch to compact fluorescent (CFL) light bulbs. Bush signs energy bill, CNN Money, 12/19/07.
• On the negative side of the ledger, federal and state restrictions on domestic drilling for oil and gas in unexploited areas (principally offshore and in Alaska), reinforced by nonstop environmental lawsuits, have contributed to rising oil imports. 7/7/08 entry. Removal of these obstacles is not being pushed by the Administration.
• Similarly, an expansion of the nuclear power industry cannot be expected unless and until an understanding is reached about the disposal or reprocessing of nuclear waste. (8/4/08, 8/11/08, 8/18/08 entries). Moving in the other direction, the Administration recently pulled the plug on the proposed nuclear waste depository at Yucca Mountain, Nevada, after two decades of study and expenditures of $11 billion, without identifying an alternative. Nuclear chief says Obama shuns science, Washington Times, 4/23/09.
• In addition to establishing a cap and trade system, the Waxman-Markey bill would mandate and/or subsidize production of electricity from renewable energy sources (Sec. 101); plug-in electric drive vehicles (Sec. 122); “smart grid” distribution of electricity (Sec. 144); energy-efficient buildings (Sec. 201), lighting fixtures (Sec. 211), and household appliances (Sec. 212); energy-efficient industrial plants (Sec. 241); etc.
• On May 19, the president announced that a reduction of GHG emissions for new motor vehicles will be achieved by moving up the already established 35 miles per gallon mileage standard (average for cars and light trucks) from 2020 to 2016. The Department of Transportation (DOT) and Environmental Protection Agency (EPA), which apparently have the requisite regulatory authority under existing law, would jointly take this action.
De facto tax: With a carbon tax, it would be relatively easy to track the revenues being collected by the government and therefore taken from the private sector. Divide the total tax revenues by the population or number of households for a figure people can relate to.
The opposition party attacked the cap and trade proposal in this fashion, saying it would cost American households an average of $3,100 per year. Cap and Trade, a “Declaration of War,” Say Republicans, CBSNews.com, 5/1/09.
According to [House Minority Leader John] Boehner's office, the $3,100 number is based on a Massachusetts Institute of Technology (MIT) study released earlier this year that examined cap-and-trade legislation from 2007. Republicans believe the new legislation for 2009, in its final form, will be similar to the 2007 bill.
The $3,100 per household annual cost figure was disputed from the start, and it is no longer operative because 85% of GHG permits will initially be given away. Proposed Allowance Allocation, Congressmen Waxman and Markey, 5/14/09.
Assuming that $465 ($3,100 x 15%) per household would be a ballpark estimate of the residual tax effect, the figure would be too small to impress anyone. Opponents of the cap and trade proposal should make other arguments.
Energy costs: For the foreseeable future, fossil fuels will represent the low cost sources of energy for running motor vehicles and generating electricity. Biofuels are not about to beat oil on a cost basis for powering cars, nor will wind and solar power be as cheap as coal-fired power. Nuclear power might be cost competitive, but it is not on the “green” agenda.
A forced transition to alternative energy sources would inflate energy prices – whether the price increases were passed on to consumers or subsidized by U.S. taxpayers. Either way, overall economic activity would be depressed, with net job losses (more regular jobs lost than “green” jobs created) and less tax revenue for the government.
Quantifying these effects would be a big job, which we are not equipped to handle. But we can cite a Heritage Foundation study by William Beach, David Kreutzer, Ph.D., Karen Campbell, Ph.D. and Ben Lieberman, which seems to be on the right track.
By 2035, the Heritage team reported on 5/18/09, the Waxman-Markey bill (as revised) would (a) reduce aggregate gross domestic product (GDP) by $9.6 trillion; (b) destroy 1.1 million jobs on average (2.5 million jobs in peak years); (c) raise inflation-adjusted electricity rates by 90%, inflation adjusted gasoline prices by 74%, and residential natural gas prices by 55%; (d) raise an average family’s annual energy bill by $1,500; and (e) increase inflation-adjusted federal debt by 26% ($29,150 per person).
These costs are for the cap and trade program, without regard to other provisions of the Waxman-Markey bill. The “economic cost of cap and trade hobbled further by mandates” would likely be higher.
The Washington Examiner cited the Heritage findings in a 5/18/09 editorial, calling the Waxman-Markey bill “a prescription for wrecking American prosperity for decades to come.”
Thinking along somewhat similar lines, perhaps, the Congressional Budget Office is expected to “score” the Waxman-Markey bill as either a major tax increase or a massive expansion of the federal government (no kidding!). Climate-bill foes likely to seize on CBO’s scoring, Washington Times, 5/19/09.
We also appreciated an off the cuff reaction from Charlie Munger, the long-time business partner of Warren Buffet who normally lets the “Sage of Omaha” do the talking. CNBC interview, 5/1/09.
Well, I think it would be monstrously stupid to do [cap and trade] right now. It would be a huge shock to the economy, and it wouldn't accomplish very much. Given the fact that the vast majority of the [pollution], or, rather, the CO2 is coming from a place like China. It would almost be demented if we would rush into cap and trade right now in the middle of this economic crisis.
Who’s in charge: Another drawback of cap and trade and the “green” agenda in general, hard to quantify but important nevertheless, is the shift of decision-making power from business leaders who are (or should be) focused on serving customers, running their businesses efficiently, and making money for their shareholders, to government leaders who, being in the reelection business, are more interested in favorable headlines (e.g., Senator X supports bold new plan).
Business firms face competition, they must comply with government regulations (actual or at times prospective), and they work with their own money. There is little to keep government agencies on their toes except public scrutiny, and the public has a short attention span. No wonder the track record of government in managing business operations is poor, dating back to examples like the nationalization of the phone system during World War I (it was turned over to the post office or “postalized”). Why Government Can’t Run a Business, John Gordon, Wall Street Journal, 5/20/09.
We do not mean to suggest the private sector is above reproach. As former Federal Reserve Chairman Paul Volcker observed in October 2008, this country could probably do with “more civil engineers and electrical engineers and fewer financial engineers.” After all, civil and electrical engineers design and build needed structures and facilities. By creating derivatives and leveraging balance sheets to the max, financial engineers may have done more harm than good.
But it might equally well be suggested that there is a surplus of lawyers and bureaucrats in this country. The work they spawn is time-consuming, expensive, and largely non-productive. Far from allowing the number of people engaged in such activities to keep increasing, it might be beneficial to reverse the trend.
Moreover, government intervention in the workings of the economy is a distraction. Before you know it, corporate executives will be spending more time in Washington, D.C. seeking favors and handouts than they do working with customers, suppliers, and people within their own companies to achieve business results in the traditional way.
A number of big companies (e.g., BP America, Conoco Phillips, Dow, DuPont, Ford, GE, and GM) have joined the U.S. Climate Action Partnership. Perhaps this reflects genuine concern about global warming, but these companies may also envision government-supported business opportunities. Thus, the USCAP consensus report is described as
. . . a direct response to federal policymakers who recognize, as we do, that well-crafted legislation can spur innovation in new technologies, help create jobs and provide a foundation for a vibrant, low-carbon economy.
The Climate Exchange that has been established in Chicago would grow like Topsy if the U.S. established a cap and trade system. No doubt many financial firms would love to participate in or facilitate the trading of carbon emission permits; this could be the biggest thing since subprime mortgages and credit default swaps.
Power companies are potential supporters too, provided they get enough emission permits for free. The same goes for companies interested in selling alternative energy equipment, “green” investment firms, and hired lobbyists.
Thus, as global warming skeptic Bjorn Lomborg puts it, an “unholy alliance” is emerging of “self-interested businesses, grandstanding politicians and alarmist campaigners.” The Climate-Industrial Complex, Wall Street Journal, 5/22/09.
The decline and fall of the Big Three represents a cautionary tale. While the U.S. auto companies made plenty of mistakes over the years, government policies hurt too – notably the mileage standards for new motor vehicles that began during the Carter Administration. Don’t bail out the Big Three, but an apology would be nice, 11/17/08.
Against our advice, the last Administration advanced bailout funds to Chrysler and General Motors (Ford managed to do without). Additional funds were provided by the current Administration, but Chrysler had to declare bankruptcy anyway and General Motors is expected to follow suit around the end of May.
Chrysler will probably have been acquired by Fiat, when the dust settles, and the government will control General Motors. The UAW will own big blocks of stock in both companies. Although nominally remaining independent, Ford will have little interest in rocking the boat. So the government will be in a position to dictate strategic decisions of the “Big Three,” including the kind of cars they will be making. Many observers fear the consequences. See, e.g., Federal control of General Motors is game changer, Daniel Howes, Detroit News, 4/29/09.
Government Motors could be a bulwark of infinitely patient capital married to major stakeholders whose goals aren't shareholder return, operational efficiency and market penetration but the social goals of maximized employment, environmental trend-setting and political (damage) control.
The new pecking order was apparent on May 19, when the president announced the accelerated phase-in of the new mileage standards. Among those present, and apparently all in favor, were Secretary of Transportation Ray LaHood, EPA Administrator Lisa Jackson, several state governors including Arnold Schwarzenegger of California, UAW President Ron Getelsfinger, and unnamed representatives of ten auto companies (U.S. and foreign).
Why did the auto companies accept this announcement so meekly? First, there was a silver lining, namely the threat of three conflicting sets of regulations (by the DOT, the EPA, and a group of states led by California) was being replaced by a single set. Second, although the president did not mention it, there was an understood quid pro quo – sizable tax subsidies for purchasers of fuel-efficient cars. Obama at the Auto Buffet, Holman Jenkins, Wall Street Journal, 5/21/09.
So far, the Obama administration has yet to lay out its magical thinking on how the homegrown auto makers are to become "viable" when required to subordinate every auto attribute that consumers find desirable in favor of achieving a passenger-car average of 39 miles per gallon [35.5 miles per gallons is the average for cars and light trucks] by 2016. Nonetheless the answer has quietly seeped out: Taxpayers will write $5,000 or $7,000 rebate checks to other taxpayers to bribe them to buy hybrids and plug-ins at a price that lets Detroit claim it's earning a "profit" on its Obamamobiles.
Fuel-efficient vehicles are not necessarily bad. (The author likes his Volkswagen Jetta diesel, which averages 50 miles per gallon.) But this is America, and buyers should be able to choose the type of vehicles they want. Moreover, the Big Three can hardly be faulted for tailoring their product lines to meet market demand.
Whether legal or not, the proposed regulations would be unwise. And the U.S. auto companies would continue to struggle, probably resulting in a continuing drain on the U.S. Treasury.
To meet the mileage requirements, motor vehicles would be made smaller, lighter and less powerful. The resulting cars would be more dangerous to drive than big cars, so there would be more traffic deaths. Fuel efficient cars can kill you, Washington Examiner, 5/20/09.
And consumers dissatisfied with the new cars would tend to keep their old cars on the road longer, thereby slowing the reduction of real pollutants such as ground level ozone, particulate matter, carbon monoxide, and sulfur dioxide. Light Cars Are Dangerous Cars: And other unintended consequences of strict fuel-economy standards, Robert Grady, Wall Street Journal, 5/22/09.
* * * *
Whether we like it or not, the Waxman-Markey bill has strong support in the majority party. The House Energy and Commerce Committee approved it on May 21, by a 33-25 vote. Panel OKs cap-and-trade proposal, Washington Times, 5/22/09.
As for tightening the mileage standards for motor vehicles, the only safeguard are the notice and hearing requirements to which the DOT and EPA are subject.
So how can SAFE and those who agree with us fight back? We’ll present some ideas in next week’s entry, and in the meantime we would welcome your suggestions.
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5/18/09 – A dubious case for cap and trade
Last week, we characterized EPA regulation of CO2, etc. as “a bad idea from any angle.”
Global warming threat exaggerated – not proven that manmade greenhouse gases are the main cause – economic tradeoffs would be ignored – regulatory process is ponderous and political – lack of Congressional accountability.
With a legislative approach, members of Congress would presumably consider the economic interests of their constituents. They would also, at least in theory (the time lag might provide cover in practice), be accountable for the results.
So would a forced cutback in greenhouse gas (GHG) emissions go better if Congress handled matters? Don’t count on it!
1. It remains debatable whether a reduction in GHG emissions should be forced instead of allowing energy sources (fossil fuels, solar, wind, or nuclear) to be chosen based on availability, cost and performance.
Congress has heard plenty of testimony about the gravity of the manmade global warming threat, which will supposedly necessitate a switch from fossil fuels to renewable energy sources. Consider these extracts from testimony before the House Energy and Commerce Committee (HECC) during the week of April 24.
#EPA Administrator Lisa Jackson: Legislation is needed “to tackle greenhouse-gas pollution, which threatens to leave to our children and grandchildren a diminished, less prosperous, less secure world.”
#Secretary of Energy Steven Chu: “There are two dangers, either one of which could dramatically weaken America’s future. The first is that the world will fail to take action on climate change in time to prevent its worst potential effects. The second is that the United States will fail to seize this opportunity to lead, and the new clean energy jobs will be created overseas rather than in America.”
#Former Vice-President Al Gore: “I am here today to lend my support to one of the most important pieces of legislation ever introduced in the Congress. I believe this legislation has the moral significance equivalent to that of the civil rights legislation of the 1960’s and the Marshall Plan of the late 1940’s.”
Among the ills that Gore attributed to global warming: melting of the Greenland ice sheet, increased frequency of glacial earthquakes, CO2 pollution changing the chemistry of the oceans, Canadian forests “contributing CO2 to the atmosphere rather than absorbing it,” and more intense hurricanes.
Not everyone agrees there is a climate crisis, and efforts were made to have a well-known global warming skeptic (who challenged Gore to a televised debate in 2007 and is still awaiting a response) testify before the HECC. However, these efforts were rebuffed. “The House Democrats don't want Gore humiliated,” suggested Lord Christopher Monckton of the UK, “so they slammed the door of the Capitol in my face.” Climate Depot.com, 4/23/09.
Nevertheless, there has been a fair amount of testimony questioning the gravity of the manmade global warming threat and/or suggesting less disruptive ways to address it.
# Lord Monckton assured a subcommittee of the House Ways and Means Committee on March 12 that “any restriction on the emission of carbon dioxide is unnecessary.”
It is simple to establish theoretically, and has been so established, that the UN’s climate panel has exaggerated the true effect of carbon dioxide enrichment on global temperature sevenfold. To confirm that theoretical result it is simple to verify empirically, and has been so verified by direct and repeated satellite observation, that the diminution over time in the outgoing long-wave radiation from the Earth is one-seventh of that which the UN’s computer games had been instructed to predict. Carbon dioxide is accumulating in the air at less than half the rate the UN had imagined. Not one of its games had predicted the rapid global cooling of the past seven years. Sea surface temperatures have fallen for five years. Sea level has not risen for three years, and is predicted to rise by little more than a foot this century. Worldwide hurricane intensity in October 2008 was at its least for 30 years. Global sea ice shows little trend in 30 years. The ice sheets of Greenland and Antarctica are thickening. The Sahara is greening. There is no “climate crisis”. The correct policy response to the non-problem of “global warming” is not to cap or tax carbon dioxide emissions. It is to have the courage to do nothing.
#William Happer of Princeton University offered another useful viewpoint in his testimony before the Senate Energy Committee on 2/25/09. Professor Happer agrees that (a) global warming has been occurring (albeit with intermittent reversals, such as the last 10 years during which “warming has ceased”), and (b) manmade CO2 emissions have contributed. In his opinion, however, the warnings of catastrophic consequences are “wildly exaggerated” (much as Prohibition advocates once exaggerated the evils of alcohol) and more CO2 in the atmosphere may on balance “be good for mankind.”
#Former Speaker of the House Newt Gingrich delivered the primary response to Al Gore’s testimony before the HECC. While not challenging the desirability of importing less oil or reducing GHG emissions, Gingrich panned the Administration’s plans for addressing these issues.
Wrong for national security - - - wrong for the economy - - - would “inevitably lead to fraud and corruption.” The right answers, said Gingrich, would include domestic drilling for oil and gas, more nuclear power plants (the Administration is pushing wind and solar energy), and aggressive support for the new energy technologies that would be required to effect the reductions in GHG emissions that are contemplated.
2. A cap and trade system might or might not be effective to reduce GHG emissions. In any case, it would be a nightmare to administer.
As a starting point, here are the basic elements of the cap and trade concept – which represents a variation on the theme of setting and enforcing limits on GHG emissions.
• Set overall GHG reduction targets over time.
• Issue GHG emission permits to participants in the system (households and small businesses would be exempted), which they can either use or sell.
• Participants that can reduce GHG emissions inexpensively will presumably do so, while selling their permits to firms with higher reduction costs.
• Gradually cut the number of permits, thus forcing attainment of the reduction targets.
There are some difficult design issues. Where would the line be drawn between big and small business? How many emission permits would be issued? Would recipients be charged for permits or get them for free? Would the system provide a windfall for firms that have never tried to reduce their GHG emissions, and therefore can reduce them cheaply now (while selling their permits for more)?
Set the bar too high and a cap and trade system would tank the economy. Set it too low and nothing would happen, as was reportedly the result of initial stabs at cap and trade by the European Economic Community. Cap and Trade Woes in Europe, Don Irvine (citing a New York Times report), 6/20/08.
This week, the European Environment Agency reported that emissions from factories and plants that trade pollution permits rose 0.4 percent in 2006 over the previous year, and 0.7 percent in 2007, the first two years of the system’s operations.
The European program has been beset by friction between countries, lobbying by energy-intensive industries, and reluctance of firms to invest in cleaner technologies until it becomes clearer how the rules of the game will evolve.
Would similar issues arise with a cap and trade system in this country? You bet, as has been amply demonstrated by the discussions going on in Washington.
In late March, Congressmen Henry Waxman (D-CA) and Edward Markey (D-MA), who respectively chair the HECC and a subcommittee thereof, released a draft bill to launch a cap and trade system and accomplish related purposes. A target was proposed of eliminating 83% of GHG emissions by 2050, with interim targets as shown in the table below. Highlights of draft bill to curb global warming, Washington Times, 3/31/09.
GHG emission targets (2005 actual = 1.00)
Strong opposition to the Waxman-Markey bill surfaced, notably from states that produce coal, are heavily reliant on coal-produced electric power, or have major manufacturing plants or oil refineries. Much of the opposition came from members of the majority party. Global Warming Overreach, Kimberly Strassel, Wall Street Journal, 4/24/09.
During opening statements, [Congressman Jim Matheson from Utah] detailed 14 big problems he had with the bill, and told me later that if he hadn't been limited to five minutes, "I might have had more." Mr. Matheson is one of about 10 moderate committee Democrats who are less than thrilled with the Waxman climate extravaganza . . .
Messrs. Waxman and Markey scrambled to win over the holdouts. Although Waxman denied that he was offering special deals, others saw things differently. To get votes, Waxman offers cap-and-trade breaks, Susan Ferrechio, Washington Examiner, 4/23/09.
On May 5, with the bill apparently stalled, a delegation of HECC members from the majority party went to the White House for a 90-minute meeting. There the president reportedly told them “to put together an energy bill that does not hurt low-income consumers or the ability of U.S. industries to compete internationally.” Dems hint energy compromise could be near, Susan Ferrechio, National Examiner, 5/6/09.
A revised version of the Waxman-Markey bill (900+ pages) was released on May 15. The reduction targets for GHG emissions remain intact, but it is now reported that the “revised plan would give away 85 percent of the plan’s carbon permits for free.” Energy deal clubs Obama tax hopes, Washington Times, 5/16/09.
Mr. Obama had campaigned for a plan to auction all of the carbon permits under the system to avoid problems encountered in the European Union after regulators gave away all of their permits to affected industries without charge.
Mr. Obama was banking on projected revenues of some $646 billion from the cap-and-trade auctions to cover his promised tax cuts over seven years, but the House proposal looks as if it will pull in significantly fewer dollars for the federal government.
Are all the controversies about the mechanics of the cap and trade system now resolved, paving the way for quick Congressional passage? We doubt it, because this proposal still has some glaring weaknesses.
#Households and small businesses emit a lot of GHGs in the aggregate, yet they are effectively exempted from the proposed cap.
#No matter how artfully the system was adjusted, there would still be winners and losers between the regions/industries/plants affected – not to mention that well-connected insiders could and would game the system. Talk about Enron on steroids!
#If manmade global warming is a real problem, it applies on a global basis. There would be little point in making a big push to cut back on the use of “dirty” fossil fuels in this country if China, India, et al. continued to build coal-fired power plants.
And if the United States levied import duties on goods from countries that were not curbing their GHG emissions, as Energy Secretary Steven Chu suggested in March Congressional testimony, the fallout could be severe. Cap and trade war, Wall Street Journal, 3/30/09.
The Chinese certainly heard Mr. Chu, with Xie Zhenhua, a top economic minister, immediately responding that such a policy would be a "disaster" and "an excuse to impose trade restrictions." Beijing's reaction shows that as a means of coercing international cooperation, climate tariffs are worse than pointless. China and India are never going to endanger their own economic growth -- and the chance to lift hundreds of millions out of poverty -- merely to placate the climate neuroses of affluent Americans in Silicon Valley or Cambridge, Massachusetts. And they certainly won't do it under the threat of a tariff ultimatum.
3. A tax on fossil fuels (aka “carbon tax”) would be simpler and more effective than a cap and trade system, but a “hard sell” politically.
Some environmentalists favor a carbon tax because it would operate more predictably than cap and trade, require far less regulatory oversight, and cover all energy consumers. Putting a Price on Carbon: An Emissions Cap or a Tax, Yale environment 360, 5/7/09.
Jeffrey D. Sachs, director of the Earth Institute at Columbia University. – A straightforward carbon tax has vast advantages. It can be levied upstream at a few dozen places — at the wellhead, the mine face, and the liquid natural gas depot — rather than at thousands or tens of thousands of businesses. A carbon tax covers the entire economy, including automobiles, household use, and other units impossible to reach in cap-and-trade. A carbon tax puts a clear price on carbon emissions for many years ahead, while a cap-and-trade system gives a highly fluctuating spot price.
Other environmentalists counter that cap and trade provides a clear goal for GHG emissions reduction, against which results can be monitored.
Frances Beinecke, president of the Natural Resource Defense Council. – A carbon cap is a more effective approach to solving global warming than a tax. First and most importantly, it sets a clear goal for emissions reductions. With a tax, we are guessing about how much it will reduce carbon emissions, and it may not be sufficient to change the course of global warming. A declining cap gives you firm reduction targets and a system for measuring when you hit them.
Policy considerations aside, polls have consistently shown that the public does not want to pay higher taxes on motor fuel. 81% Oppose Gas Tax Hike to Encourage Sales of More Efficient Cars, Rasmussen Reports, 5/11/09. We doubt that stiff taxes on heating oil, coal-generated electric power, etc. would be any better received – so do not expect a carbon tax to be proposed any time soon.
4. The proposed cap and trade system would have substantial economic costs, which should be weighed against the perceived benefits in order to make a rational decision.
How much cost and who would bear it? These are not easy questions, and we are out of space. Tune in next week for further discussion.
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5/11/09 – EPA regulation of CO2: a bad idea from any angle.
The Environmental Protection Agency (EPA) has issued a proposed finding, a decade in the making, that carbon dioxide (C02) is a pollutant that endangers public health and welfare. Based on the finding, it is proposed to regulate CO2 emissions under the Clean Air Act, starting with the beleaguered automotive industry.
But wait, C02 is a natural component of the atmosphere, essential to life on this planet. Animals exhale it; plants consume it to make food. How can CO2 be called a pollutant?
In an attempt to make sense of all this, we reviewed (and recap below) the 26-page EPA document that was published in the Federal Register on April 24, 2009.
Background - In October 1999, the International Center for Technology Assessment and 18 like-minded organizations petitioned the EPA to regulate greenhouse gas emissions (CO2, methane, nitrous oxide, and hydrofluorocarbons) from new motor vehicles under the Clean Air Act. It was claimed that said emissions contribute to global warming.
In August 2003, the EPA declined to act on grounds that (1) it lacked statutory authority to regulate greenhouse gas emissions, and (2) in any case, such regulation would have been unwise at the time.
The petitioners went to court; they were ultimately vindicated by the U.S. Supreme Court in Massachusetts, et al. v. EPA, 549 U.S. 497 (2007). The majority (5-4) decision held that the EPA’s grounds for denying the petition were inconsistent with its responsibilities under the Clean Air Act, wherefore the case was remanded for further consideration.
In short, EPA has offered no reasoned explanation for its refusal to decide whether greenhouse gases cause or contribute to climate change. Its action was therefore “arbitrary, capricious, . . . or otherwise not in accordance with law.” 42 U. S. C. §7607(d)(9)(A). We need not and do not reach the question whether on remand EPA must make an endangerment finding, or whether policy concerns can inform EPA’s actions in the event that it makes such a finding.
On 7/30/08, in an Advance Notice of Proposed Rulemaking, the EPA announced that it was preparing to decide whether CO2, etc. were pollutants under the statute.
On 4/24/09, after considering comments on the advance notice, the agency issued a proposed finding that (a) concentrations of CO2 and five other greenhouse gases, in combination, are endangering public health and welfare under the Clean Air Act, and (b) emissions of these substances (excluding perfluorocarbons, and sulfur hexafluoride) from new motor vehicles/engines are contributing to the problem. Ergo, the enumerated greenhouse gases are subject to regulation as pollutants.
No limits on emissions of greenhouse gases by new motor vehicles/engines have been proposed as of now, but standards are being developed that the EPA “will be ready to propose for public comment several months from now.”
Basis for finding – The EPA presents a sobering assessment of the global warming threat, which it attributes primarily to manmade greenhouse gas (GHG) emissions.
#The effects of climate change observed to date and projected to occur in the future – including but not limited to the increased likelihood of more frequent and intense heat waves, more wildfires, degraded air quality, more heavy downpours and flooding, increased drought, greater sea level rise, more intense storms, harm to water resources, harm to agriculture, and harm to wildlife and ecosystems – are effects on public health and welfare within the meaning of the Clear Air Act.
#Because atmospheric greenhouse gas concentrations are expected to climb for the foreseeable future, temperatures will continue to rise and the overall rate and magnitude of human-induced climate change will likely increase, such that risks to public health and welfare will likewise grow over time so that future generations will be especially vulnerable; their vulnerability will include potentially catastrophic harms.
#The heating effect caused by the human-induced buildup of greenhouse gases in the atmosphere is very likely the cause of most of the observed global warming over the past 50 years.
U.S. motor vehicles/engines are identified as a significant source of manmade GHG, albeit not the only source. Note that while the six types of greenhouse gases enumerated earlier (CO2, methane, etc.) are included in the GHG data, water vapor (about 95% of greenhouse gases in the atmosphere) is excluded.
On the EPA wavelength, the source categories (motor vehicles in the U.S.) accounted for 24% of U.S. GHG emissions (vs. 34% from electrical generation)/ 4.3% of global GHG emissions. And as James Benefiel of Dunedin, Florida, suggested in a letter to the Wall Street Journal published on 5/4/09, the percentages would be much smaller if water vapor was taken into account. However, we are dubious about Benefiel’s statement that only 3.2% of the CO2 in the atmosphere is manmade.
The EPA concedes that a major reduction in GHG emissions from U.S. vehicles would have only a minor effect on the global situation, but it says everyone must “do their part.”
If the U.S. and the rest of the world are to combat the risks associated with global climate change, contributors must do their part even if their contributions to the global problem, measured in terms of percentages, are smaller than typically encountered when tackling solely regional or local environmental issues.
As for the propriety of proposing to regulate CO2, etc. emissions by new motor vehicles/engines while not (at least for now) addressing CO2, etc. emissions of other sectors (e.g., the power industry), the EPA apparently relies on the step-by-step rationale articulated by the U.S. Supreme Court in Massachusetts, et al. v. EPA:
Agencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop. They instead whittle away at them over time, refining their preferred approach as circumstances change and as they develop a more-nuanced understanding of how best to proceed. That a first step might be tentative does not by itself support the notion that federal courts lack jurisdiction to determine whether that step conforms to law. [Citations omitted.]
Sources – In support of its view of global warming, the EPA has prepared a technical support document (TSD) that “synthesizes major findings from the best available scientific assessments that have gone through rigorous and transparent peer review.” The TSD “relies most heavily on the major assessment reports of both the Intergovernmental Panel on Climate Change (IPCC) and the U.S. Climate Change Science Program (CCSP),” rather than “conducting a new assessment of the scientific literature.”
As we understand it, both the IPCC and CCSP are institutionally invested in proving that manmade global warming is a huge problem. Using their assessment reports as the primary sources ensures a one-sided view of the issue. Consider these comments by Patrick J. Michaels, a climatologist with links to the University of Virginia, Marshall Institute, and Cato Institute, and also a contributing author and reviewer for the IPCC.
Cato Scholar Comments on IPCC Synthesis Report, 11/19/07 - Unlike the sober scientific assessment that the IPCC published last May – which the Synthesis Report was supposed to summarize – the new document is, to say the least, novel. The May document actually reduced median estimates of sea-level rise from previous reports, and projected temperature increases in coming decades that are quite similar to what has been observed in the last three decades, about one degree (F). The new report, instead, projects up to 6 degrees. Also, it conveniently ignores the fact that there has been very little net warming in the last ten years.
Record Low For Climate Science, Cato Institute, 8/31/08 - I found two changes in the thousands of pages of the last (2007) IPCC report - after I sent in a 30,000-word point-by-point review. I'll be lucky to get even that much attention after my equally long critique of a new CCSP report, Global Climate Change Impacts in the United States. The sum of my analysis: This is the worst document in this genre I have ever seen.
Process – Notably lacking from the EPA’s proposed finding is any discussion of the economic implications of regulating CO2 emissions for the automotive industry or its stakeholders (e.g., consumers, suppliers, and workers). Indeed, the word “cost” appears only twice in the 26-page document and the word “expense” not at all.
We do not mean this as a criticism of the EPA, because the provisions of the Clean Air Act probably do not require (may not even allow) the consideration of compliance costs. But, in our opinion, no sensible decisions can be reaching concerning the advisability of measures intended to combat global warming without considering the costs involved as well as the benefit (or avoidance of harm) expected.
If Congress were to consider imposing limits on CO2 emissions, it would presumably consider evidence as to the economic tradeoffs – and hopefully conclude that such limits are unjustified. Five Reasons the EPA Should Not Attempt to Deal with Global Warming, Ben Lieberman and Nicholas Loris, Heritage Foundation, 4/23/09.
The extraordinary perils of CO2 regulation for the American economy come with little, if any, environmental benefit. In fact, analysis by the architects of the endangerment finding, the EPA, strongly suggests that a 60 percent reduction in carbon-dioxide emissions by 2050 will reduce global temperature by 0.1 to 0.2 degrees Celsius by 2095.
Many environmentalists are equally unenthusiastic about EPA regulation, being well aware of how cumbersome and political the regulatory process can be. Thus, Congress initially established the EPA in order to demonstrate “action” on leaded gasoline (a far more logical target than CO2) without taking responsibility for banning it. The EPA did not step up to the problem, and leaded gasoline remained on the market for another 15 years. The EPA’s Faustian Bargain, David Schoenbrod (professor at New York Law School, senior fellow at Cato Institute), Regulation, Fall 2006.
Why have federal lawmakers mandated a system that is so bad for their constituents? Because it is good for the lawmakers. Congress outsources the rulemaking to the EPA so that the legislators can claim credit for protecting health while the agency bears the inevitable blame for delays, disappointments, and costs.
Politically, the calculation is that the threat of EPA regulation will serve as a prod to force action by Congress on limiting CO2, etc. emissions, e.g., by instituting a “cap and trade” program. EPA’s CO2 Finding: Putting a Gun to Congress’s Head, Bryan Walsh, Time Magazine, 4/18/09.
Feedback – There will be public hearings on the proposed finding, on May 18 (Arlington, VA) and May 21 (Seattle, WA). The deadline for comments is June 23.
We do not know whether comments in opposition to the proposal will be seriously considered, but some of you may want to give it a shot. Contact information is provided in the EPA’s proposed finding (page 18886). Here’s the link again.
Next week we will take up the status of “cap and trade” legislation in Congress, the other prong of the push to restructure the energy infrastructure of the U.S. economy.
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5/4/09 – Two milestones coincide: 100 entries and 100 days
Hey, folks, did you know this is entry 100 of SAFE’s blog? Seems like we have covered a lot of ground, hopefully to good effect, since entry one was posted in June 2007 after the National Taxpayer’s Conference.
AYMK, there is also another milestone in the news, the president’s first 100 days in office. Much has already been written about it, e.g., by eight Townhall.com columnists on April 29 (Day 100) alone, Time Magazine, the Wall Street Journal, and Fox News.
But perhaps we can sum things up and offer some useful insights. Our review will cover the build-up, the victory lap, the stakes, and the outlook.
BUILD-UP – Opinions about the first 100 days vary, as will be related, but most observers agree on one point: the president has been extraordinarily visible during this period. Thus, as columnist David Broder put it (Washington Post, 4/23/09):
Hardly a day has gone by in the first three months that Americans have not seen Obama on their TV screens in a variety of roles -- chiefly as economic salvage director for seriously shattered housing, credit and employment systems. But they've also seen him as commander in chief of armed forces fighting two wars, diplomatic traveler engaged with world leaders, and agenda-setter for Congress -- to say nothing of first father, first fan, first consort of Michelle and first master of Bo.
The president’s high visibility is part of the strategies for selling his policies. According to Jim Vandelei and John Harris (Politico.com, 4/23/09), senior advisers angled to implant the following themes in the 100 days coverage: The president is (1) a promise-keeper, (2) a game-changer, (3) the decider, (4) not in the bubble (cut off from real life), (5) not FDR (will need more time), (6) FDR (and Bush is Hoover), and (7) one cool cucumber.
Most of the mainstream media coverage has been favorable – one might even say fawning. A Hundred Days of Media Love, Brent Bozell, Townhall.com, 4/29/09.
There was even an unauthorized (but no complaints from the White House) picture of the president in a red (color altered) swimsuit on the May cover of Washingtonian magazine.
Surveys indicate the public is favorably impressed. Most give Obama thumbs up on first 100 days, polls say, CNN Politics, 4/29/09.
According to a CNN poll of polls compiled Wednesday, 63 percent said they approve of how Obama is handling his duties. Twenty-nine percent disapprove.
As most presidents start with favorable ratings, however, these results may be less impressive than they seem. Barrack’s in the basement, Washington Times, 4/28/09.
President Obama's media cheerleaders are hailing how loved he is. But at the 100-day mark of his presidency, Mr. Obama is the second-least-popular president [after Clinton] in 40 years.
VICTORY LAP – On April 29 (Day 100), the president flew to Arnold, Missouri for a town hall meeting with “ordinary people.” In touting his economic policies at this event, the president took a swipe at the tax day tea parties. According to the president, “certain news channels on which I’m not very popular” had covered “folks waving tea bags around” – while he was prepared to have “a serious conversation” about cutting down healthcare costs in the long run, stabilizing Social Security, and achieving greater discipline in federal spending.
The president then flew back to Washington for an evening press conference at the White House. Hmm, when does he find time to run the country?
The television networks were asked to cover the evening news conference in lieu of their normal commercial programming. After three evening news conferences in as many months, however, the characterization of these events as “news” is starting to wear thin.
Fox Network (as distinguished from Fox News) declined to cover the third news conference, although the other major networks did not follow suit, and the Washington Times complained the president was getting what amounted to an “unpaid political ad.”
The morning after media coverage was curiously muted, e.g., there was no story about the news conference on the front page of the [Wilmington] News Journal. Also, ratings for the event were down. The Live Feed, TWR.com, 4/30/09.
The telecast to mark Obama’s 100th day in office was viewed by 28.8 million people, according to Nielsen. That's a 29% drop from the president's last press conference, on March 24, and a 42% fall since his first, on Feb. 9.
As for what was said, the president kicked off the news conference with an update on the H1N1 [swine] flu virus. He is requesting Congress for $1.5 billion in emergency funding; rest assured that the government is “prepared to do whatever it takes” to deal with this situation. The president also offered some advice for the general public.
And, finally, I've asked every American to take the same steps you would take to prevent any other flu: Keep your hands washed; cover your mouth when you cough; stay home from work if you're sick; and keep your children home from school if they're sick.
The president praised the House and Senate for passing “a budget resolution today that will serve as an economic blueprint for this nation’s future.”
Glowing economic accomplishments were claimed: Recovery Act [Economic Stimulus Bill] – housing plan – “new investments” in education, renewable energy and healthcare – “new savings that will bring down our deficit.”
The president also said his Administration was beginning to end the war in Iraq, had forged a strategy with NATO to root out al-Qaida in Afghanistan and Pakistan, and was closing the Guantanamo detention center, banning torture without exception, and renewing diplomatic efforts to deal with a host of global challenges.
But some things remain to be done. The president cited high unemployment, credit still not flowing freely enough, tough times for families and communities touched by the auto industry, foreign threats, and pandemic flu. Also, “our projected deficits are still too high, and government is still not as efficient as it needs to be.”
The pace would continue in the second 100 days and beyond. “We will rebuild a stronger nation, and we will endure as a beacon for all of those weary travelers beyond our shores who still dream that there's a place where all of this is possible.”
The president then responded to 13 questions from reporters.
Two questions touched on the prospect of the government becoming a major stockholder in General Motors and Chrysler. “I would love to get the U.S. government out of the auto industry as quickly as possible,” said the president.
Some observers believe otherwise, however, based on how his Administration has been steering the situation. See, e.g., Gettelfinger Motors: The mauling of GM bondholders reveals Treasury’s political hand, Wall Street Journal, 4/30/09. We plan to say more about this situation in a future entry.
The reporters called on by the president failed to ask some obvious questions in the economic realm: Just what are those “savings that will bring down our deficit?” How do you propose to reduce healthcare outlays by spending more money? Why should the U.S. economy be saddled with immensely costly new energy restrictions during a recession?
STAKES – Critics say the president is trying to steer the country toward the left. The result would be bigger government, more government spending, tighter regulation of business, and huge increases in taxes.
Thus, talk show host Larry Elder writes (Townhall.com, 4/30/09) of a “100-day assault on America.” His favorite weapons appear to be sarcasm and rhetorical questions.
Given the government's vast business expertise, Obama proposes spending gobs of money to "invest" in green jobs. - - - He wants taxpayers to guarantee, presumably to all who request it, a "world-class education" -- whatever that means. - - - Do the President and members of Congress, many of whom never operated so much as a T-shirt concession booth, really believe that they can "modernize" health care, thus "saving" taxpayers buckets of money? Yes. - - - Will the President's budget really double the national debt within a few years and then increase still more beyond that? Yes.
Financial commentator Larry Kudlow condemns the takeover of one industry after another. The current victims are financial firms and auto companies; energy and healthcare will follow. 100 day lurch to the left, Townhall.com, 4/30/09.
Nowhere is the Obama vision of government interference more evident than on the banking front. The White House and Treasury are using TARP as a bullying club to force government control on the country’s financial institutions. There is no exit strategy; no endgame in sight. Quite the opposite: News reports suggest that six major banks could be subjected to government ownership, putting them in the same club as Fannie Mae, Freddie Mac, AIG, GM, and Chrysler.
Kudlow also decries the tax increases contemplated to pay for the spending spree that is in process.
The Obama budget already will raise taxes on overseas corporate earnings and oil-and-gas companies at home. It will elevate taxes on capital gains and dividends for investors and will lift the top tax rate for successful earners. And more is coming.
But this is the wrong direction for economic growth. Instead, business tax rates should be slashed -- which, by the way, would repatriate corporate earnings for domestic investment. We need a capital-gains tax holiday. We should be flattening individual tax rates across-the-board. And all manner of loopholes and special-interest deductions should be repealed to broaden the taxable-income base.
But let’s face it; “liberals” feel much the same way in reverse. Indeed, polarization of the body politic has reached an extraordinary level. Partisan Gap in Obama Job Approval Widest in Modern Era, Pew Research Center, 4/2/09.
For all of his [purported] hopes about bipartisanship, Barack Obama has the most polarized early job approval ratings of any president in the past four decades. The 61-point partisan gap in opinions about Obama's job performance is the result of a combination of high Democratic ratings for the president -- 88% job approval among Democrats -- and relatively low approval ratings among Republicans (27%).
OUTLOOK – Perhaps we are whistling in the dark, but it seems to us that the current situation is not as bleak as it appears.
Yes, the president is popular and a force to be reckoned with. As Newt Gingrich stated in a 4/29/09 letter, “President Obama’s first 100 days have been spectacularly successful.”
His control of Washington Democrats has been so masterful, and his policies so successful, that he has officially claimed ownership of the American economy.
But there are flaws in the policies that the president and his party are trying to peddle, and we are not the only ones to have spotted them. The most basic flaw is undisclosed costs – taxes, healthcare rationing, soaring energy prices, etc. – that could easily outweigh the benefits on offer. The Liberal Hour, Wall Street Journal, 4/29/09.
What's striking is that Mr. Obama betrays no sense that maybe all of this isn't achievable, much less affordable, all at once. In contrast to Bill Clinton, he has abandoned any deficit concern, building in red ink of at least 4% of GDP for the next decade. And that's assuming the revival of rapid economic growth, and before counting the real cost of health care.
One of the keys to the president’s success thus far is a gift for expressing himself in a way that makes everyone think he is listening to them – as for example by saying he is serious about tackling the deficit at the same time that he is running it up – but government entails choices and this technique may not keep working. 100 Days: “Harry, I Have a Gift,” Daniel Henninger, Wall Street Journal, 4/30/09.
Already, the polls indicate widespread skepticism about the president’s policies. The Seeds of His Own Destruction, Obama’s Hundred Days, Dick Morris and Eileen McGann, Townhall.com, 4/29/09.
By 42 percent to 8 percent, the Fox News poll (conducted on April 22-23) found that voters felt Obama had expanded government rather than contracted it (42 percent said it was the same size), and by 46 percent to 30 percent they reported believing that big government was more of a danger to the nation than big business. (They said Obama felt big business was more dangerous by 50 percent to 23 percent). By 62 percent to 20 percent, they said government spending, under Obama, was "out of control."
As for why the president’s personal ratings have nevertheless remained high, here is a theory:
[The voters] are like the recently married bride who took her vows 100 days ago. It would be a disaster for her if she decides that she really doesn't like her husband. But she keeps noticing things about him that she can't stand. It will be a while before she walks out the door or even comes to terms with her own doubts, but it is probably inevitable that she will.
We will refrain from joining Morris and McGann in predicting a time when “the Obama administration crashes and burns, with approval ratings that fall through the floor.”
But the words of Abraham Lincoln do come to mind: “It is true that you may fool all the people some of the time; you can even fool some of the people all the time; but you can’t fool all of the people all the time.”
If enough people ask good questions and demand real answers about the economic policies that are being proposed, rather than allowing themselves to be treated like children, then things may go better than many “conservatives” are currently expecting.
Keep the spirit of those tea parties alive!
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4/27/09 – Delaware’s fiscal situation: a case study
SAFE generally focuses on federal taxes and spending because about two-thirds of all the government spending in this country is at the federal level. Also, it is tough to monitor the fiscal management of 50 states and thousands of counties, cities, and school districts.
Although state and local (S&L) governments must balance their budgets every year, this does not preclude fiscal folly. These governments can and do (1) borrow for capital projects, (2) enter into future commitments (e.g., “gold-plated” pension plans) that will be tough to meet, and (3) ratchet up spending during good economic times in ways that cannot readily be reversed during downturns.
And S&L spending has hardly been static. It more than doubled as a share of the U.S. economy over the past century or so, even with federal grants for designated S&L programs (notably education, healthcare, and roads) counted as federal spending.
Government Spending as % of U.S. Economy (GDP)