Free Markets, Free People

Policy


CBO, Entitlments, Health Care Reform and the Deficit

One more time into the breach. The CBO has issued a warning to Congress about entitlement spending. Again. Here’s a key paragraph:

Almost all of the projected growth in federal spending other than interest payments on the debt comes from growth in spending on the three largest entitlement programs–Medicare, Medicaid, and Social Security.

Most of you know that Medicare and Medicaid have an unfunded future liability of 36 trillion dollars. That’s about 3 times the annual total GDP of the US economy. And they are the very same type of “public option” program – i.e. government insurance – that the left says is so very necessary and crucial to real “health care reform”.

In other words, the left’s argument is that adding at least 47 million (presently uninsured), plus the possibility of adding 119 million who are shifted to the public option from private insurance (private insurance, btw, doesn’t have any effect on the deficit whatsoever since we, the private sector, are paying for it) will somehow make the deficit picture better?

I’m obviously missing something here.

With the public option, we’re adding a new entitlement (47 million who presently supposedly can’t afford insurance, meaning taxpayers will subsidize theirs). Assuming it is set up originally to be paid for by premiums, at some point, like Medicare and Medicaid, and every other government entitlement program I can think of, it will pay out more than it takes in. How can it not? It is a stated “non-profit” program and it will include subsidies. At some point, another revenue stream is going to be necessary as it burns through the premiums with its payouts.

Well, say the proponents of government involvement in your health care, we’re going to save money by doing preventive health care. Yes, preventive care is the key to lower costs because a healthier population is one which visits the doctor less. While that may seem to be at least partially true (you’d think a healthier population would, logically, visit the doctor less) the part that is apparently missed when touting this popular panacea is the cost of making the population healthier (and the fact that the assumption of less visits isn’t necessarily true) doesn’t cost less – it costs more:

If health care providers can prevent or delay conditions like heart disease and diabetes, the logic goes, the nation won’t have to pay for so many expensive hospital procedures.

The problem, as lawmakers are discovering to their frustration, is that the logic is wrong. Preventive care — at least the sort delivered by doctors — doesn’t save money, experts say. It costs money.

That’s old news to the analysts at the Congressional Budget Office, who have told senators on the Health, Education, Labor and Pensions Committee that it cannot score most preventive-care proposals as saving money.

So with that myth blown to hell, we’re now looking at a government plan which will add cost to the deficit by subsidizing the insurance of 47 million and (most likely) many more, plus a plan to use a more costly form of medicine as its primary means of giving care.

But, back to the entitlement report – or warning. The CBO says that unless entitlements are drastically reformed (that means Medicare, Medicaid and to a lesser extent, Social Security) we’re in deep deficit doodoo:

The most frightening findings in this report are the deficit and debt projections. In this year and next year, the yearly budget shortfall, or deficit, will be the largest post-war deficits on record–exceeding 11 percent of the economy or gross domestic product (GDP)–and by 2080 it will reach 17.8 percent of GDP.

The national debt, which is the sum of all past deficits, will escalate even faster. Since 1962, debt has averaged 36 percent of GDP, but it will reach 60 percent, nearly double the average, by next year and will exceed 100 percent of the economy by 2042. Put another way, in about 30 years, for every $1 each American citizen and business earns or produces, the government will be an equivalent $1 in debt. By 2083, debt figures will surpass an astounding 306 percent of GDP.

The report also finds high overall growth in the government as a share of the economy and of taxpayers’ wallets that provides an additional area of concern. While total government spending has hovered around 20 percent of the economy since the 1960s, it has jumped by a quarter to 25 percent in 2009 alone and will exceed 32 percent by 2083. Taxes, which have averaged at 18.3 percent of GDP, will reach unprecedented levels of 26 percent by 2083. Never in American history have spending and tax levels been that high.

Here’s the important point to be made – these projections do not include cap-and-trade or health care reform.

Got that? We’re looking at the “highest spending and tax levels” in our history without either of those huge tax and spend programs now being considered included in the numbers above. Total government spending, as a percent of GDP is now at an unprecedented 25%. And they’re trying to add more while this president, who is right in the middle of it, tells us we can’t keep this deficit spending up forever.

Fair warning.

~McQ


Krugman Endorses “Carbon Tariff”

Paul Krugman came out today for “border adjustments” (tariffs) on goods from countries who aren’t participating in economy killing CO2 emissions control taxation.

His argument:

If you only impose restrictions on greenhouse gas emissions from domestic sources, you give consumers no incentive to avoid purchasing products that cause emissions in other countries; as a result, you have an inefficient outcome even from a world point of view. So border adjustments here are entirely legitimate in terms of basic economics.

Actually they’re “entirely legitimate” if you swallow the premise Krugman is pushing here, namely that CO2 is a “pollutant” and its restriction is a “legitimate” reason for imposing taxes on both your own economy and the goods coming from another economy which doesn’t agree with the premise. And, of course, this ignores the probable reaction countries hit with this tariff might have.

Krugman then attempts to justify such a “border adjustment” by claiming such a move is probably legal under “international law”:

The WTO has looked at the issue, and suggests that carbon tariffs may be viewed the same way as border adjustments associated with value-added taxes. It has long been accepted that a VAT is essentially a sales tax — a tax on consumers — which for administrative reasons is collected from producers. Because it’s essentially a tax on consumers, it’s legal, and also economically efficient, to collect it on imported goods as well as domestic production; it’s a matter of leveling the playing field, not protectionism.

And the same would be true of carbon tariffs.

What he sort of dances around when he claims this will “level the playing field” is all products, regardless of their origin, will see dramatically increased pricing. The point of the tax is to hopefully steer consumers to domestically produced products which are produced under government approved conditions rather than those from countries like China and India which aren’t playing the game the US wants them to play. Not only will the consumer here be asked to pay for the CO2 offsets imposed on domestic industry, but they will have to pay for offsets for foreign producers as well when the VAT cost is passed on in the price of the goods.

The thinking, obviously, is that if prices are the same, US consumers will buy US goods instead of, say, Chinese goods. The problem, of course, is much of what we consume isn’t made here anymore. So the result would be the US consumer would end up paying higher prices for goods produced in China with no change in behavior by China.

Additionally, China will view this as a protectionist measure, whether the WTO thinks it is “legal” or not. China will simply claim that the US, as a rich country and large “polluter”, should be doing more than they are doing in terms of emissions control, and impose its own “WTO legal” VAT in response. Same with any other country targeted by the US for a tariff.

This is, frankly, an invitation to a trade war. Krugman can wrap his protectionist argument in whatever legality he’d like, but the fact remains most countries effected will view it as an attempt to limit trade and react accordingly. And, of course, by Krugman’s own admission, it is you who will be paying the tariff cost for China and India if this is ever passed into law.

~McQ


Obama’s Contradictory Foreign Policy

Melanie Phillips points to an interesting contradiction:

As the world watched events unfold in Iran, Obama’s double standard over Israel was illuminated in flashing neon lights. How come he’s saying it is wrong for him to tell the Iranians what to do, people asked themselves, when he is dictating to Israel its policy on settlements?

It’s an excellent question. So what is the policy of the United States qua Barack Obama – strict hands off concerning the “internal affairs” of a country, or, in the case of Israel, what can only be considered “meddling” in internal affairs?

Just wondering …

~McQ


No Hot Dogs For Iran

It took almost two weeks of brutalizing their own people, but the invitation for Iranian diplomats to attend Fourth of July parties at U.S. Embassies around the world has finally been rescinded. Of course this was done about a day after President Obama gave this mealy-mouthed answer to a question on the subject:

Q: Are Iranian diplomats still welcome at the embassy on the Fourth of July, sir?

THE PRESIDENT: Well, I think as you’re aware, Major, we don’t have formal diplomatic relations with — we don’t have formal diplomatic relations with Iran. I think that we have said that if Iran chooses a path that abides by international norms and principles, then we are interested in healing some of the wounds of 30 years, in terms of U.S.-Iranian relations. But that is a choice that the Iranians are going to have to make.

For those of you who need a translator, the answer was “yes”. Today the answer is “no”.

I’m glad they’ve awakened up there to the reality of what is happening in Iran and finally made some sort of move, no matter how trivial or symbolic, to show their disapproval. But it has taken unrelenting pressure to get them to move off of their “engagement at any cost” policy.  In the case of 4th of July celebrations, it would have been a travesty to have representatives of the present brutal regime present.  Ed Morrissey asks what they’d have been present for anyway:

Besides, what Independence Day values would the Iranian regime want to celebrate with us? Freedom of speech? Freedom of religion? The freedom to peaceably assemble or petition government for a redress of grievances?

Obama rather arrogantly reminded us that “only I am President of the United States”. But as former Secretary of State Lawrence Eagleburger reminded Obama, that means he represents the people of the United States when he speaks and in the case of the Iranian violence, he hasn’t represented them very well at all.

~McQ


The “Bullet Fee”

Shades of the Chicoms and Saddam Hussein.

A protester is shot dead in Iran. His father learns of his death:

Upon learning of his son’s death, the elder Mr. Alipour was told the family had to pay an equivalent of $3,000 as a “bullet fee”—a fee for the bullet used by security forces—before taking the body back, relatives said.

But we don’t want to be the “foil” so we’ll withold saying anything that might be misinterpreted. Well, except this:

But privately Obama advisers are crediting his Cairo speech for inspiring the protesters, especially the young ones, who are now posing the most direct challenge to the republic’s Islamic authority in its 30-year history.

Ed Morrisey calls this “despicable”. I say he’s being very understated in his criticism.

Pass the hot dogs.

Please.

~McQ


Questions And Observations

Some conversation starters:

  • For new readers, the title is what the shortened “QandO” means.
  • I’m constantly amused by the anecdotal evidence I gather while on the road that says if you’re over 65 you have to drive a Buick.
  • One thing to keep in mind as you listen to all of these proponents tell you that government can do health care better than the private sector – The private sector is a net producer of wealth. The government sector is a net consumer of wealth. That’s why the more of the economy a government takes over the less wealth is produced and thus available within the economy.
  • Interesting chart showing the level of spending in the last 12 months compared to the spending over the last 206 years in inflation adjusted dollars.  How do people believe that such a massive increase in spending doesnt have to be paid for at some point?
  • Is Obama’s honeymoon over?  Is enough resistance building to derail some of these economy killing policies and programs now on the table?
  • Former President Bush speaks out, apparently tired of a president 150 days into his own administration continuing to blame the previous administration. Appropriate or should he remain silent? And interestingly, since the left excused Jimmy Carter’s criticism of the Bush administration, does that mean they’re fine with Bush speaking out?
  • Is it “IGgate”? What’s up with this story about the Americorps IG and are there more IGs with whom the administration has messed? Wasn’t this the administration which was going to “return” us to the “rule of law”? Why aren’t they following it?

~McQ


Conference on Health Care Reform

Cato Institute is hosting a conference on health care reform today that will be webcast live. It will feature the following speakers:

* Rep. Paul Ryan (R-WI)
* Rep. Michael C. Burgess, M.D. (R-TX)
* Rep. Jason Altmire (D-PA)
* Karen Davenport, Director of Health Policy, Center for American Progress
* Douglas Holtz-Eakin, Former Director, Congressional Budget Office, and Director of Domestic and Economic Policy for the McCain presidential campaign
* Tom G. Donlan, Barron’s
* Karen Tumulty, Time Magazine
* Susan Dentzer, Health Affairs
* John Reichard, Congressional Quarterly

This represents a wide range of views and promises to be much more interesting and informative than the White House/ABC News infomercial scheduled for next week. so if you’re interested in this topic at all, take some time to check it out.


Obama Media

While it comes at no real surprise given how they behaved during the presidential campaign, the MSM has finally decided to go all in with its support for the President. Next Wednesday night, June 24, ABC News will host a program about health care reform from inside the White House, but only one side will be presented — i.e. Obama’s. The Chief of Staff for the RNC is not happy about this decision and sent the following letter to David Westin, the President of ABC News:

Dear Mr. Westin:

As the national debate on health care reform intensifies, I am deeply concerned and disappointed with ABC’s astonishing decision to exclude opposing voices on this critical issue on June 24, 2009. Next Wednesday, ABC News will air a primetime health care reform “town hall” at the White House with President Barack Obama. In addition, according to an ABC News report, GOOD MORNING AMERICA, WORLD NEWS, NIGHTLINE and ABC’s web news “will all feature special programming on the president’s health care agenda.” This does not include the promotion, over the next 9 days, the president’s health care agenda will receive on ABC News programming.

Today, the Republican National Committee requested an opportunity to add our Party’s views to those of the President’s to ensure that all sides of the health care reform debate are presented. Our request was rejected. I believe that the President should have the ability to speak directly to the America people. However, I find it outrageous that ABC would prohibit our Party’s opposing thoughts and ideas from this national debate, which affects millions of ABC viewers.

In the absence of opposition, I am concerned this event will become a glorified infomercial to promote the Democrat agenda. If that is the case, this primetime infomercial should be paid for out of the DNC coffers. President Obama does not hold a monopoly on health care reform ideas or on free airtime. The President has stated time and time again that he wants a bipartisan debate. Therefore, the Republican Party should be included in this primetime event, or the DNC should pay for your airtime.

Respectfully,
Ken McKay
Republican National Committee
Chief of Staff

This comes on the heels of a Politico report about how Obama has been “wooing” the New York Times (as if it needed wooing), and further evidences a disturbing level of acquiescence to the White House. It’s one thing to have a broadcast from inside the White House, although it does strike an appearance of impropriety, but its another thing altogether to so blatantly snub an opposing views when the production is supposed to be one of news reporting. Presenting the view of those in power without question or examination, and refusing to allow any other voice, is pretty much the textbook definition of propaganda.

Since there is sure to be an uproar over this in the blogosphere, however, I’m wondering whether ABC News will back down and either allow some token opposition voice, bring on a known opponent of the President’s plan to raise some issues, or allow some questions of the President from actual reporters (Jake Tapper does still work for ABC News, doesn’t he?). Either way, its awfully pathetic that the MSM can’t seem to figure out how to get it right the first place. They are so blinded by their fascination with all things Obama, apparently, that any semblance of actual news reporting has gone out the window, and is being replaced with unabashed cheerleading for The One.

UPDATE: Oops! I didn’t realize that Bruce was writing on the same topic until after I posted. See his take below as well.


Krugman: The “Nipponisation” of the World

After a lot of partisan “happy talk” about how the Obama administration is handling the economic crisis here, Paul Krugman goes on record saying the world is doomed to suffer Japan’s lost economic decade on a global scale.

The thing about Japan, as with all of these cases, is how much people claim to know what happened, without having any evidence. What we do know is that recessions normally end everywhere because the monetary authority cuts interest rates a lot, and that gets things moving. And what we know in Japan was that eventually they cut their interest rates to zero and that wasn’t enough. And, so far, although we made the cuts faster than they did and cut them all the way to zero, it isn’t enough. We’ve hit that lower bound the same as they did. Now, everything after that is more or less speculation.

For example, were the problems with the Japanese banks the core problem? There are some stories about credit rationing, but they are not overwhelming. Certainly, when we look at the Japanese recovery, there was not a great surge of business investment. There was primarily a surge of exports. But was fixing the banks central to export growth?

In their case, the problems had a lot to do with demography. That made them a natural capital exporter, from older savers, and also made it harder for them to have enough demand. They also had one hell of a bubble in the 1980s and the wreckage left behind by that bubble – in their case a highly leveraged corporate sector – was and is a drag on the economy.

The size of the shock to our systems is going to be much bigger than what happened to Japan in the 1990s. They never had a freefall in their economy – a period when GDP declined by 3%, 4%. It is by no means clear that the underlying differences in the structure of the situation are significant. What we do know is that the zero bound is real. We know that there are situations in which ordinary monetary policy loses all traction. And we know that we’re in one now.

Shorter Krugman, “we’re in new territory in terms of the size of the problem, but it is all eerily similar to what happened to Japan”. Unfortunately our reaction has been eerily similar to what Japan did as well.

Krugman’s bottom line:

WH: So, one way to think about it is that self-reinforcing financial crises rooted in overstretched, overborrowed companies and governments in less developed countries – like those in Argentina and Indonesia, which were amazingly destructive in the 1990s and 2000s, but localised – are now playing out in the developed world?

PK: There are really two stories. One is the Japan-type story where you run out of room to cut interest rates. And the other is the Indonesia- and Argentina-type story where everything falls apart because of balance-sheet problems.

WH: So in a nutshell your story is …

PK: The “Nipponisation” of the world economy with a bunch of “Argentinafications” playing a role in the acute crisis. But even after those are over, we have the Nipponisation of the world economy. And that’s really something.

And of course, implicit in the “Nipponisation” of the world economy is the “Nipponisation” of the US economy – something we’ve been talking about for some time. Now, add “cap and trade” and “health care reform” into the mix.

What will we be wishing we were suffering when that all kicks in, should it pass? Nipponisation, of course. As bad as lost decade or two might be, it would be heaven compared to the economic carnage those big tax and spend programs will inflict on a very weak economy here in the US. And that, of course, will ensure the “Nipponisation” of the world economy.

~McQ


Health Care: “Special Interest Democracy”

It may be hard to believe [/snark], but it appears when Democrats speak of “fairness” they define it in their own special interest kind of way.

Take the talk about taxing your private health care benefits (something adamantly opposed by Obama during the campaign).

Originally it was going to be everyone. But other Democrats complained mightily to Senate Democrats who were considering such a tax to pay for the conservatively estimated 1.5 trillion necessary to pay for “health care reform” (PAYGO? HA!). So they modified it a bit – tax the “rich” – those who had the best of coverage. Always a popular populist fallback, Sen. Dems were sure that would work.

Alas it was soon discovered that a huge number of those holding “Cadillac” health care policies were unions. Yes, the special interest group in the pocket of the Dems (and vice versa) would be heavily hit by such a tax. As you might imagine, they were not happy.

Solution – drop this bad idea?

Of course not. Instead exempt the unions, you silly person:

Mr. Baucus officially floated his plans for a tax this week, only with a surprising twist: His levy will not apply to union plans, at least for the duration of existing contracts. In other words, Mr. Baucus intends to tax the health-care benefits only of those who didn’t spend a fortune electing Democrats to office. Sen. Ted Kennedy, who is circulating his own health-care reform, has also included provisions that will exempt unions from certain provisions.

The union carve-out is designed to allay the fears of many Democrats who remain outright hostile to a tax on health-care benefits, whether out of principle, political fear or union solidarity.

This is not your grandfather’s America. Pay czars who arbitrarily set arbitrary pay limits based on what they “think” (according to presidential spokesperson Robert Gibbs) is “fair”, a government appointed CEO for an auto company who admits he knows nothing about cars and the government hijacking of health care.

If you’re not concerned, you’re not paying attention.

~McQ