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Archive for March 18th, 2010

My Cato colleague Jose Pinera makes a powerful argument for “privatizing” Social Security, which is something that has happened in about 30 nations.

My Ph.D. dissertation was on Australia’s private system, so I’ve always had a soft spot for this issue. Sadly, Washington is busy creating new entitlements instead of fixing the ones we already have.

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Washington is buzzing with news that the Congressional Budget Office has a new cost estimate for the President’s proposal to further expand the federal government’s control over the healthcare system. The White House is doubtlessly pleased because the takeaway message, as blindly regurgitated by the Associated Press, is that a giant new entitlement program is going to “drive down red ink”:

The Congressional Budget Office estimated the legislation would reduce the federal deficit by $138 billion over its first 10 years, and continue to drive down the red ink thereafter. Democratic leaders said the deficit would be cut $1.2 trillion in the second decade – and Obama called it the biggest reduction since the 1990s, when President Bill Clinton put the federal budget on a path to surplus.

My Cato Institute colleague Michael Cannon already has explained that the cost estimate is fraudulent because of what it leaves out, so let me explain why it is fraudulent because of what it includes. The CBO has a very dismal track record of getting the numbers wrong (see first video below), in part because there is no attempt to measure how a bigger burden of government has negative macroeconomic effects, but also because the number crunchers do a poor job of measuring the degree to which people (recipients, healthcare providers, state and local politicians, etc) will modify their behavior to become eligible for other people’s money. The problem is compounded by similar mistakes for revenue estimates from the Joint Committee on Taxation, which (like CBO) makes no attempt to capture macroeconomic effects and has a less-than-stellar history of predicting behavioral responses (see second video below).

If the legislation passes, we will get more spending, more taxes, and more debt. Equally troubling, we will get more dependency. That’s good for Washington and bad for the country.

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I don’t think the number of doctors leaving the profession will come anywhere close to this level, but polling data reported by the New England Journal of Medicine is another indication of the dangers of letting politicians get even more power over the health care system. The politicians will still get quality care, but average Americans will find that going to a doctor or hospital is more akin to a visit to the Post Office or DMV:

46.3% of primary care physicians (family medicine and internal medicine) feel that the passing of health reform will either force them out of medicine or make them want to leave medicine.

To add to the grim news, Intrade.com shows that chances of passage are now up to 75 percent. I’ll try to find something humorous to post later today to compensate for this grim news.

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