Feeds:
Posts
Comments

Posts Tagged ‘Medicaid’

Last month, I nailed Bill and Hillary Clinton for their gross hypocrisy on the death tax.

But that’s just one example. Today, we’re going to experience a festival of statist hypocrisy. We have six different nauseating examples of political elitists wanting to subject ordinary people to bad policy while self-exempting themselves from similar burdens.

Our first three examples are from the world of taxation.

Here are some excerpts from a Washington Times report about a billionaire donor who is bankrolling candidates who support higher taxes, even though he structured his hedge fund in low-tax jurisdictions specifically to minimize the fiscal burdens of his clients.

Tom Steyer, the billionaire environmental activist who is spending $100 million to help elect Democrats this fall, is rallying support for energy taxes that could impact everyday Americans. But when he ran his own hedge fund, Mr. Steyer sought to help wealthy clients legally avoid paying taxes, confidential investor memos show. Mr. Steyer’s strategy included establishing funds in tax havens like the Cayman Islands and Mauritius… Mr. Steyer boasted to investors such as major universities that his hedge fund, Farallon Capital Management LLC, had a “desire not to earn income which would be taxable to our tax-exempt investors,” one internal memo reviewed by The Washington Times showed. Mr. Steyer also helped his firm’s wealthy clientele avoid the highest of U.S. taxes and penalties by establishing arcane tax shelters… Mr. Steyer is pushing for a variety of new taxes on the energy sector. In California, Mr. Steyer supports an oil extraction tax, and he is funding politicians who support taxing carbon, including Sen. Mark Udall, Colorado Democrat.

By the way, Steyer did nothing wrong, just as Mitt Romney did nothing wrong when he utilized so-called tax havens to manage and protect his investments.

But at least Romney wasn’t overtly urging higher taxes on everyone else, so he’s not guilty of glaring hypocrisy.

Speaking of international taxation, how about the behavior of Senator Joe Machin’s daughter? She’s the head of an American drug-making company, a position that almost surely has something to do with her father being a senator.  Particularly since the company gets a big chunk of its revenues from sales to the federal government.

In any event, her company has decided that it’s okay to benefit from sales to big government, but that it’s not a good idea to pay taxes for big government. Here are some blurbs from a National Journal report.

…this column happens to be about a Democratic senator from West Virginia, Joe Manchin, and his daughter, Heather Bresch, the chief executive of Mylan, a giant maker of generic drugs based outside Pittsburgh. Her company’s profits come largely from Medicaid and Medicare, which means her nest is feathered by U.S. taxpayers. On Monday, Bresch announced that Mylan will renounce its United States citizenship and instead become incorporated in the Netherlands – leaving this country, in part, to pay less in taxes.

By the way, I’m a big fan of companies re-domiciling overseas.

So long as our corporate tax system has high rates and punitive worldwide taxation, corporate expatriation is the best way of protecting the interests of American workers, consumers, and shareholders.

But it’s a bit hypocritical when the expatriating company is run by a major Democrat donor.

Our third example of hypocrisy also deals with corporate expatriation, and it’s probably the most odious and extreme display of two-faced political behavior. Here’s some of what was reported in the L.A. Times about the Secretary of the Treasury’s attack on corporate inversions.

Calling for “a new sense of economic patriotism,” a top Obama administration official urged Congress to take immediate action to stop U.S. companies from reorganizing as foreign firms to avoid paying taxes. …”What we need as a nation is a new sense of economic patriotism, where we all rise or fall together,” Lew wrote to the top Democrats and Republicans on the congressional tax-writing committees. “We should not be providing support for corporations that seek to shift their profits overseas to avoid paying their fair share of taxes,” he said. …Lew said such moves were unfair to U.S. taxpayers. …”Congress should enact legislation immediately — and make it retroactive to May 2014 — to shut down this abuse of our tax system,” Lew wrote.

Gee, big words from Mr. Lew. But too bad he didn’t say those words to himself when he was a crony capitalist at Citigroup. Why? Because he had big money parked in the Cayman Islands!

So he inverted his own funds but doesn’t want other taxpayers to have the right to make the same sensible choices.

Now let’s look at three non-tax related examples of hypocrisy.

First, we have a pro-Obamacare politician running for Congress. One of his main talking points is that his wife is an OB/GYN and he also trumpets his support for expansion of Medicaid (the government’s money-hemorrhaging healthcare program for lower-income people).

Here’s some of what was reported by the Free Beacon (h/t: National Review).

John Foust has made his wife the face of his campaign for Virginia’s 10th District. Dr. Marilyn Jerome is an OBGYN… Foust attacks his Republican opponent Barbara Comstock for opposing Medicaid expansion. Failure to expand Medicaid to rural hospitals could be “devastating,” he says. Dr. Jerome has also written in support of the Affordable Care Act on the Foxhall website, citing the Medicaid expansion as beneficial to low-income women.

But it seems that Medicaid expansion is only a good idea when other doctors are dealing with the government.

It turns out, however, that not all women can receive “compassionate reproductive healthcare” from Foxhall. The practice doesn’t accept Medicaid. …in public, Dr. Jerome is preaching the Affordable Care Act and praising the Medicaid expansion while, in her practice, she doesn’t accept it.

The message is that sub-standard government-run healthcare is okay for us peasants, but doctors who cater to the political elite in Washington want nothing to do with the program.

Sort of like the politicians and IRS bureaucrats who want to be exempted from Obamacare.

Second, it turns out that global warming alarmists use above-average amounts of energy.

Here are some tidbits from a column in the UK-based Telegraph.

People who claim to worry about climate change use more electricity than those who do not, a Government study has found. Those who say they are concerned about the prospect of climate change consume more energy than those who say it is “too far into the future to worry about,” the study commissioned by the Department for Energy and Climate Change found. …The findings were based on the Household Electricity Survey.

Not that this surprises me. I’ve previously shared evidence that elitist environmentalists want to dictate the energy consumption of ordinary people while suffering no cutbacks in their own extravagant living standards.

Third, we have a remarkable bit of political jujitsu from Martin O’Malley, the governor of Maryland, on the issue of illegal aliens. Here’s an amazing excerpt from a story in Politco (h/t: National Review).

Martin O’Malley says that deporting the children detained at the border would be sending them to “certain death” — but he also urged the White House not to send them to a facility in his own state.

Wow. Regardless of what you think about open borders, amnesty, and other immigration issues, O’Malley comes across as a craven politician. This is NIMBY on steroids.

In conclusion, I should point out that hypocrisy is not limited to leftists. I’m even harder on faux conservatives who pretend to favor small government when talking to voters but then aid and abet statism behind closed doors in Washington.

Read Full Post »

Let’s enjoy some semi-good news today.

We’ve discussed many times why Obamacare is bad news, whether we’re looking at it from the perspective of the healthcare system, taxpayers, or workers.

But it could be worse. Writing in the Washington Post, Robert Samuelson explains that two-dozen states have refused the lure of expanding Medicaid (the means-tested health care program) in exchange for “free” federal money.

From 1989 to 2013, the share of states’ general funds devoted to Medicaid has risen from 9 percent to 19 percent, reports the National Association of State Budget Officers. Under present law, the squeeze will worsen. The White House report doesn’t discuss this. …To the White House, the right-wing anti-Obamacare crusade is mean-spirited partisanship at its worst. The 24 non- participating states are sacrificing huge amounts of almost-free money… Under the ACA, the federal government pays all the cost of the Medicaid expansion through 2016 and, after that, the reimbursement rate drops gradually to a still-generous 90 percent in 2020.

But that “almost-free money” isn’t free, of course. It’s simply money that the federal government (rather than state governments) is diverting from the productive sector of the economy.

So the 24 states that have rejected Medicaid expansion have done a huge favor for America’s taxpayers. To be more specific, Nic Horton of Watchdog.org explains that these states have lowered the burden of federal spending (compared to what it would have been) by almost $90 billion over the next three years.

By not expanding Medicaid, 24 states are saving taxpayers $88 billion over the next three years. That is $88 billion that will not be added to the national debt — debt that will not be passed on to future generations of taxpayers. On the other hand, states that have expanded Medicaid through Obamacare are adding roughly $84 billion to the national debt through 2016.

Returning to Samuelson’s column, he would like a grand bargain between states and the federal government, with Washington agreeing to pay for all of Medicaid (currently, states pay a portion of the bill) in exchange for states taking over all spending for things such as roads and education.

We could minimize this process for states and localities by transferring all Medicaid costs to Washington (or at least the costs of the elderly and disabled). To pay for it, Washington would reduce transportation and education grants to states. Let Washington mediate among generations. Let states and localities concentrate on their traditional roles of education, public safety and roads. Spare them the swamp of escalating health costs. This is the bargain we need — and probably won’t get.

I like half of that deal. I want to transfer education, law enforcement, and roads back to the state level (or even the local level).

But I don’t want Washington taking full responsibility for Medicaid. Instead, that program also should be sent down to the states as well. This video explains why that reform is so desirable.

P.S. Since we’re on the topic of Obamacare, this Chip Bok cartoon perfectly captures the essence of the Hobby Lobby decision. The left wants the mandate that contraception and abortifacients be part of health insurance packages.

Rather than exacerbate the damage of using insurance to cover routine costs, wouldn’t it make more sense to have employers simply give their workers more cash compensation and then allow the workers to use their money as they see fit?

That way there’s no role for those evil, patriarchal, oppressive, and misogynistic bosses!

I realize this might upset Sandra Fluke, but at least she has the comfort of knowing that her narcissistic statism generated some good jokes (here, here, and here).

Read Full Post »

What’s the worst economic development during Obama’s reign?

Some would say it’s the higher tax burden.

Some would say it’s the wasteful faux stimulus.

Others would say it’s the fiscal nightmare of Obamacare.

And others would say it’s the loss of millions of workers from the labor force.

I suppose there’s no objective way to pick the most ill-conceived policy, but if you think the biggest problem is either Obamacare or falling labor force participation, then I have some very grim news that will confirm your fears.

According to new research, it appears Obamacare will drive many more people from the labor force. More specifically, the Medicaid expansion will alter – in a very destructive way – the tradeoff between labor and leisure.

Researchers Laura Dague, Thomas DeLeire, and Lindsay Leininger argue in a National Bureau of Economic Research working paper that Medicaid enrollment will lead to significant and lasting reductions in employment among childless adults. …Dague and her colleagues conclude that if the Medicaid expansion enrolls about 21 million additional adults, anywhere from 511,000 to 2.2 million fewer people will be employed. Furthermore, they argue that the Medicaid expansion will knock almost a full point off of today’s labor force participation rate — or share of the civilian population that is working — a measure of economic health that is already at its lowest point since 1977. …This research provides strong evidence for the contention that enrolling in Medicaid traps people in poverty and makes it harder for them to make their way into the middle class. Furthermore, it links the Medicaid expansion to the weakening of our nation’s economy.

By way of background, Medicaid is the federal government’s healthcare entitlement for (supposedly) poor people, while Medicare is the entitlement for old people. And, as part of Obamacare, the eligibility rules for Medicaid were dramatically weakened.

But the new research cited above shows that if you give people “free” health care, that makes them less likely to work.

Particularly when you combine that freebie with food stamps, housing subsidies, welfare, and other handouts.

That’s obviously bad news for taxpayers, who bear the direct cost of a bloated welfare state.

Welfare CliffBut it’s also bad for the less fortunate. They get trapped in a web of dependency, both because handouts reduce the incentive to work (humorously depicted here and here), band also because they face very high implicit marginal tax rates if they actually try to escape government dependency.

But Obama and other leftists probably see this as a feature, not a bug.

After all, those who are lured into being dependent on government presumably have an incentive to vote for those who give them the most goodies.

Read Full Post »

The Census Bureau just released a report on America’s aging population.

The big takeaway is that our population will be getting much older between now and 2050.

And since I’m a baby boomer, I very much like the fact that we’re expected to live longer.

But as a public finance economist, I’m not nearly as happy.

As I explain in this interview with the Wall Street Journal’s Digital Network (and as confirmed by BIS, OECD, and IMF data), the United States is going to get deluged by a tsunami of entitlement spending.

I mentioned that it’s important to focus on the ratio of workers to retirees. This “dependency ratio” matters because economic output largely is a function of an economy’s working-age population.

To cite my famous cartoons, you need a sufficient number of people pulling the wagon to support those riding in the wagon.

Here’s a chart from the Census report to help you understand the magnitude of the problem. As you can see, both in the United States and other nations, the increase in the dependency ratio is almost entirely the result of aging populations.

Census Dependency Ratio

This is why I said that we face a slow-motion train wreck because of poorly designed entitlement programs.

But the good news is that there is time to reform those programs and avert a crisis.

Which explains why I probably sound like a broken record about the need for genuine entitlement reform.

In a column citing the new private pension system in the Faroe Islands, I gave the arguments for modernizing Social Security with personal retirement accounts.

But we also need to deal with the health entitlements.

Here’s how to fix Medicare.

And here’s how to fix Medicaid.

By the way, some of the damaging provisions of Obamacare can be de facto repealed by including them in the Medicaid block grant, so it’s a critically important reform.

Needless to say, I think these reforms are far better for the economy than the big tax hike Obama has endorsed to deal with the giant financing gap.

P.S. For a clever look at the worker-dependency ratio, check out the party ship produced by a Danish think tank.

P.P.S. The interviewer also mentioned that America’s racial composition is changing, which gives me an excuse to point out that Social Security reform is particularly beneficial for blacks because of differences in life expectancy.

Read Full Post »

Self awareness is supposed to be a good thing, so I’m going to openly acknowledge that I have an unusual fixation on the size of government.

I don’t lose a wink of sleep thinking about deficits, but I toss and turn all night fretting about the overall burden of government spending.

My peculiar focus on the size and scope of government can be seen in this video, which explains that spending is the disease and deficits are just a symptom.

Moreover, my Golden Rule explicitly targets the spending side of the budget. And I also came up with a “Bob Dole Award” to mock those who mistakenly dwell on deficits.

With all this as background, you’ll understand why I got excited when I started reading Robert Samuelson’s column in today’s Washington Post.

Well, there’s a presidential whopper. Obama is right that the role of the federal government deserves an important debate, but he is wrong when he says that we’ve had that debate. Just the opposite: The White House and Congress have spent the past five years evading the debate. They’ve argued over federal budget deficits without addressing the underlying issues of what the government should do, what programs are unneeded, whether some beneficiaries are undeserving… The avoidance is entirely bipartisan. Congressional Republicans have been just as allergic to genuine debate as the White House and its Democratic congressional allies.

By the way, I have mixed feelings about the final sentence in that excerpt. Yes, Republicans oftentimes have displayed grotesque levels of fiscal irresponsibility. Heck, just look at the new farm bill. Or the vote on the Export-Import Bank. Or the vote on housing subsidies. Or…well, you get the point.

On the other hand, GOPers have voted for three consecutive years in favor of a budget that restrains the growth of federal spending, in large part because it includes much-needed reforms to major entitlement programs such as Medicare and Medicaid.

But Republican inconsistency isn’t our focus today.

I want to address other parts of Samuelson’s column that left a bad taste in my mouth.

He argues that you can’t balance the budget merely by cutting discretionary programs. That’s technically untrue, but it’s an accurate assessment of political reality.

I’m much more worried about his assertion that you can’t balance the budget even if entitlement spending also is being addressed.

Let’s look at what he wrote and then I’ll explain why he’s wrong.

Eliminating many programs that are arguably marginal — Amtrak, subsidies for public broadcasting and the like — would not produce enough savings to balance the budget. The reason: Spending on Social Security, Medicare and other health programs… But even plausible benefit trims for affluent retirees would still leave deficits. There would still be a need for tax increases.

This is wrong. Not just wrong, but demonstrably inaccurate.

The Ryan budget, for instance, balanced the budget in 2023. Without a single penny of tax hikes.

Senator Rand Paul and the Republican Study Committee also have produced balanced budget plans. Even as scored by the statists at the Congressional Budget Office.

By the way, you don’t even need to cut spending to balance the budget. Spending cuts would be desirable, of course, but the key to eliminating red ink is simply making sure that government spending climbs at a slower rate than revenues.

And since revenues are expected to grow by about 6 percent per year, it shouldn’t take advanced knowledge of mathematics to realize that the deficit will fall if spending grows by less than 6 percent annually.

Indeed, we could balance the budget as early as 2018 if spending merely was restrained so that the budget grew at the rate of inflation.

But never forget that the goal of fiscal policy should be shrinking the size and scope of the federal government, not fiscal balance.

Ask yourself the following questions. If $1 trillion floated down from Heaven and into the hands of the IRS, would that alter in any way the argument for getting rid of wasteful and corrupt parts of the federal leviathan, such as the Department of Housing and Urban Development?

If the politicians had all that extra money and the budget was balanced, would that mean we could – or should – forget about entitlement reform?

If there was no red ink, would that negate the moral and economic imperative of ending the welfare state?

In other words, the first part of Samuelson’s column is right. We need a debate about “the underlying issues of what the government should do, what programs are unneeded, whether some beneficiaries are undeserving.”

But we’re not going to come up with a good answer if we don’t understand basic fiscal facts.

Read Full Post »

When you work in Washington (and assuming you haven’t been corrupted), you run the risk of being endlessly outraged about all the waste.

But not all waste is created equal. Some examples are so absurd that they deserve special attention.

We now have another example to add to the list. Russian diplomats have been busted for bilking the Medicaid program of more than $1 million.

This is so outrageous that it may actually be the impetus for some desperately needed reform, as I suggest in this interview with Neil Cavuto.

But is fraud really a problem? Defenders of the Medicaid entitlement presumably would like us to think that this latest story is just an anomaly.

That would be nice, but the experts who have looked at the issue have come to a much different conclusion.

While food stamp fraud is significant, especially with a record-high 47 million Americans now on food stamps, it pales in comparison to what is stolen from Medicare and Medicaid. …It is widely accepted across the political spectrum that upwards of $100 billion of that amount is fraud and abuse. Recently, a report from the Oversight and Government Reform Committee in the US House of Representatives outlined many billions of dollars being wasted every year just in New York’s Medicaid program. Grossly inflated payments to intermediate care facilities and excessive salaries were just the tip of the iceberg in a $53 billion program that easily bleeds  more than $10 billion annually to criminals.

So what’s the best way of dealing with the Medicaid mess? Fortunately, we have a simple answer. As I mentioned in the interview, the entire program should be block granted and turned over to the states.

That doesn’t automatically eliminate fraud, but it does create much better incentives for sound governance since state taxpayers would be the ones picking up the tab if a state program is riddled with fraud. Under the current system, by contrast, the cost of waste and malfeasance is spread among taxpayers from all 50 states.

This video from the Center for Freedom and Prosperity explains how block grants would work.

One final point to emphasize is that fraud reduction is really just a fringe benefit if we reform Medicaid.

The main reasons to decentralize the program are fiscal sanity and better health care policy.

But the one common thread is that third-party payer facilitates problems, whether we’re looking at excessive costs, health inefficiency, or rampant fraud.

P.S. Don’t forget the other two big entitlements that need reform, Social Security and Medicare. Like Medicaid, Medicare has major challenges with fraud. From what I understand, the retirement portion of Social Security doesn’t have major fraud issues, but the disability program is a huge problem.

Read Full Post »

I’m glad I work for a principled and libertarian organization. At the Cato Institute, there’s never any pressure to say or do the wrong thing for partisan reasons.

When Republicans screw up, I don’t have to think twice about exposing their misdeeds.

I have repeatedly criticized President Bush (and his former top aide) for expanding the burden of government. Buying votes with other people’s money isn’t compassionate.

Incurable spendaholics?

I have excoriated former GOP Hill staffers who became lobbyists for various special interests groups looking to fleece taxpayers. Stealing is wrong, even when you get a lot of money to use government as middleman.

I have slammed a former Reagan Administration official for defending earmarks. I think it is morally offensive that he gets rich by facilitating the transfer of money from taxpayers to powerful interest groups.

I have condemned the former Senate Republican leader for defending Obamacare. I think it is disgusting that he puts his lobbying income ahead of America’s best interests.

I have denounced Illinois Republican legislators for killing school choice. I think it is downright nauseating that they condemn inner-city children to terrible schools in exchange for campaign contributions from teacher unions.

And I have pointed out that statist policies don’t become acceptable merely because they come from Republican presidential candidates. The road to serfdom oftentimes is bipartisan.

We now have another candidate for our “Republican Hall of Shame.” The governor of Ohio, John Kasich, is embracing Obamacare. Moreover, not only does he want bad healthcare policy, but he’s using third-world tactics and making morally reprehensible arguments.

The Wall Street Journal savages Kasich in a stinging editorial. Here’s a key excerpt that explains the overall situation.

…there are still a few disciples with faith in an ObamaCare higher power, and one of them happens to run Ohio. Governor John Kasich is so fervent a believer that he is even abusing his executive power to join the Affordable Care Act’s Medicaid expansion. Not to be sacrilegious, but the Republican used to know better. Now Mr. Kasich seems to view signing up for this part of ObamaCare as an act of Christian charity and has literally all but claimed that God told him to do so.

But Gov. Kasich has a slight problem. The legislature hasn’t approved this budget-busting part of Obamacare. So Kasich has decided that he can arbitrarily change policy, just like Obama did with the employer mandate and the Obamacare exemption for Capitol Hill.

The problem is that his evangelizing failed to convert the Ohio legislature, which is run by Republicans who understand the brutal budget and regulatory realities of participating in new Medicaid. So Mr. Kasich simply decided to cut out Ohio’s elected representatives and expand Medicaid by himself. …he appealed to an obscure seven-member state panel called the Controlling Board, which oversees certain state capital expenditures and can receive or make grants. …Mr. Kasich asked the panel to approve $2.56 billion in federal funding, and then he’ll lift eligibility levels via executive fiat. It’s a gambit worthy of President Obama, who also asserts unilateral powers to suspend laws that displease him and bypass Congress.

But what’s really nauseating is that Kasich equates big government and welfare spending with religious values.

Mr. Kasich really must feel like he’s guided by the Holy Spirit… “When you die and get to the meeting with St. Peter, he’s probably not going to ask you much about what you did about keeping government small. But he is going to ask you what you did for the poor,” to quote one of his favorite lines.

I suppose I could make a joke about communists presumably being super religious if you use this twisted metric, but there’s a serious point to be made. I’m not a religious scholar, but I wrote several years ago that, “Doesn’t Christianity (and, I assume, Judaism and other faiths) require individuals – using free will – to act charitably? Using the coercive power of government to forcibly redistribute other people’s money, by contrast, is moral preening at best.”

Moreover, Kasich must be delusional if he thinks making government bigger is good for the poor. Redistribution traps the poor in dependency and a larger public sector hinders economic growth, making life even more difficult for the less fortunate.

Heck, just compare Hong Kong and Argentina over the past 50-plus years and ask yourself which jurisdiction afforded more opportunity for those trying to climb the economic ladder.

Fortunately, the battle isn’t over yet.

Thirty-nine House Republicans signed a formal protest and some of them are threatening to sue, and well they should. They argue that circumventing the legislature subverts the Ohio constitution’s separation of powers and exceeds the statutory legal authorities of the Controlling Board, which is supposed to “take no action which does not carry out the legislative intent of the General Assembly.”

I don’t know whether a legal case will be successful, but I can share data showing that Ohio already is in deep fiscal trouble.

It ranks 39th in the Tax Foundation’s State Business Tax Climate Index.

It was the 7th-worst state on controlling spending over the past decade.

It ranks in the bottom 10 on measures of bureaucrats to teachers.

It was listed as one of America’s 11 states facing an economic death spiral.

And John “Barack” Kasich thinks he’ll make Ohio better by adding an additional layer of government spending to finance Obamacare expansion?!?

What makes this situation so sad is that Kasich was Chairman of the House Budget Committee in the mid-1990s, so he deserves some of the credit for restraining federal spending during that period, a very successful policy that led to better economic performance and budget surpluses.

P.S. Kasich’s push to expand Medicaid shows one of the reasons the program should be reformed. He’s being lured by the promise that Washington will pick up the entire tab for the first few years. Afterwards, state taxpayers will get saddled with some of the burden, but Kasich probably assumes he won’t be around to deal with that problem. This is why the entire program should be block-granted to the states. If Kasich really thinks God wants a bigger Medicaid system, he should go to Ohio voters and ask them to pay for it.

Read Full Post »

According to my reader poll, Michael Ramirez is the nation’s best political cartoonist.

His new masterpiece about entitlements is a good example of his talent. In one image, he manages to convey how the system lures people into danger by offering the illusion that they can get something for nothing.

Ramirez Entitlement Cartoon

The cartoon is an apt illustration of where we are today with programs such as Food Stamps and disability, with ever-greater numbers of people being lured into lives of dependency.

In other cases, though I’m afraid we’ve already passed the point of biting the hook, particularly for many of the middle-class entitlements. We’re now being reeled in and face a very real danger of being turned into euro-style fish filets.

Though if I’m allowed to extend the metaphor, many people are working to reform Social Security, Medicare, and Medicaid in hopes of escaping the hook of dependency and fiscal crisis.

But it’s very important to realize that not all entitlement reform is created equal. As I explained back in 2011, the left would be more than happy to impose price controls and means testing as part of a “grand bargain” that seduces gullible Republicans into accepting a tax hike.

Which is why this Glenn Foden cartoon hits the nail on the head.

Foden Entitlement Cartoon

Sort of reminds me of this Ramirez cartoon. Simply stated, Republicans are dangerously susceptible to bad deals, which helps to explain why tax-increase budget agreements are always fiscal disasters.

The moral of the story is that we need the right kind of entitlement reform, but that won’t be possible until at least 2017.

P.S. If you want a tragically funny look at how the welfare state changes people for the worse, read the politically correct version of The Little Red.

Read Full Post »

This is a tough question.

I obviously want comprehensive reform of all entitlement programs, so selecting just one is a bit of a challenge. Sort of like being asked to pick your favorite kid.

Would I reform Social Security? That’s a logical choice. It’s the biggest program in the federal budget, so it’s presumably the biggest problem.

And it sure would be nice to have personal retirement accounts, just like Australia, Chile, and other nations that have modernized their systems.

CBO Health Care Long Term Spending ForecastBut Medicare and Medicaid are growing faster than Social Security and the Congressional Budget Office projects that those two entitlements eventually will become a bigger burden on taxpayers than Social Security.

And since our goal should be to minimize the long-run burden of government spending, that suggests that it’s more important to reform the healthcare entitlements.

But which program should be fixed first?

There’s certainly a strong case to deal with Medicare. The health program for the elderly already is very expensive and it’s going to become even more of a budget buster because of demographic changes.

Moreover, shifting to a “premium support” system would be good for seniors since they would have the ability to pick a plan best suited to their needs. Basically the same type of system now available to members of Congress.

All things considered, though, I would deal first with Medicaid. There are three reasons why I would target the health program designed to supposedly help the poor?

  1. Medicaid is hugely expensive today and will become even more costly over time.
  2. The block-grant reform proposal is a good first step for restoring federalism.
  3. Obamacare can be partly repealed by block-granting the exchange subsidies as part of Medicaid reform.

For more information, here’s my video explaining how to reform the program.

I’m not going to cry – or even complain – if politicians instead decide to fix Medicare or Social Security. Just so long as they’re taking steps in the right direction, I’ll be happy.

What I don’t want to see, however, is a gimmicky plan such as Simpson-Bowles that merely papers over the underlying problems for a couple of years. The wrong type of entitlement reform is probably worse than doing nothing.

Read Full Post »

This election season has seen lots of talk (and demagoguery) about whether investors, entrepreneurs, and small business owners should be hit with class-warfare tax policy.

And there’s also been lots of sturm and drang about the best way of averting bankruptcy for Medicare, which is the federal government’s health care program for the elderly.

But there’s been surprisingly little discussion so far about the issue of Medicaid, which is the federal government’s health program for poor people.

I’m not prone to optimism, but I can’t help but wonder if this is because even statists grudgingly accept that the program needs to be reformed.

If so, the right approach is block-granting the program back to the states. Here’s some of what Paul Howard and Russell Sykes had to say about the issue in the Wall Street Journal.

Medicaid, America’s safety-net program for more than 62 million low-income uninsured Americans, is broken. It’s broken at the state level, where program costs are swamping state budgets. It’s broken for federal taxpayers, as Medicaid waste, fraud and abuse drain tens of billions of dollars from federal coffers every year. …The best hope for Medicaid reforms that can improve care for low-income enrollees, reduce fraud, and put the program on a sustainable trajectory is to cap federal spending to the states by using block grants. Block grants would offer states a predictable source of federal funding in return for broad state flexibility in Medicaid administration, benefits and copays.

Howard and Sykes explain that the federalism approach already has been tried with welfare reform, which was very successful.

We know that well-designed block grants can work and attract bipartisan support. The best example is the successful 1996 Temporary Assistance for Needy Families program for welfare reform, which helped move millions of women and children out of poverty and into the workforce. Critics of Medicaid block grants argue that they would leave insufficient funds to cover new state expenses, creating a “race to the bottom” as states slashed funding on services for the poor. But such objections were also raised about block-granting welfare, and they turned out to be wrong.

They also reveal some very useful and interesting information about a test program in Rhode Island that shows the benefits of shifting health care decisions to the state level.

In 2009, Rhode Island accepted a five-year cap on combined state and federal Medicaid spending as part of a waiver from the federal government. ..To date, Rhode Island projects that by various new measures—focusing on community-based care that keeps seniors out of expensive nursing homes, for instance, and medical supervision that can keep children and adults out of emergency rooms—the state has saved $100 million. The flexibility to plan care has also helped reduce its projected Medicaid spending rate to 3% from 8% annually.

It’s worth noting, by the way, that Rhode Island is a very left-leaning state. Indeed, one of the reasons why I’m semi-optimistic about Medicaid reform is that governors and state legislatures – regardless of partisan affiliation – know that the current Medicaid system is unsustainable.

For more information, here’s my video explaining why block grants and federalism are the right way of dealing with Medicaid.

Since I’m not used to being optimistic, let me also give you a nightmare scenario for how this issue could evolve. My greatest fear is that a future president (perhaps Romney!) will decide to impose a value-added tax. In normal circumstances, that might upset state politicians since it would complicate their efforts to impose sales taxes.

But if a future President promised to have the federal government take over 100 percent of Medicaid financing, I suspect state politicians would jump at the trade.

So we would get the worst of all worlds. A giant new tax and more centralization.

P.S. Here’s the full three-part video series on entitlement reform.

Read Full Post »

I’m never guilty of being an optimist, but two items caught my attention today that suggest the tide may be turning on entitlement reform.

We’ll start with something from the New York Times.

Regular readers know that I’ve criticized that paper on a few occasions.

Sometimes it’s because of silly editorializing, such as this bit of amateur political analysis by Thomas Friedman, this foolish look at international taxation by the editors, and this laughable column arguing that America should copy Italy’s fiscal policy.

I also hit them for ignorant reporting, such as the story implying that things are free when they’re financed by government, this column that inadvertently makes the opposite point from what was intended, and this story mis-characterizing tax reform.

Paul Krugman, needless to say, is in a league of his own. I’ll just cite this beatdown about Estonia and leave it at that.

But it’s also important to cite good journalism when it occurs, and a new story in the New York Times on healthcare is a prime example. It’s straightforward and unbiased. And it shows the benefits of even small steps in the direction of markets. Here’s some of what Robert Pear wrote.

Even as President Obama accuses Mitt Romney and Representative Paul D. Ryan of trying to privatize and “voucherize” Medicare, his administration crows about the success of private health plans in delivering prescription drug benefits and other services to Medicare beneficiaries. More than a quarter of the 50 million beneficiaries receive coverage through private Medicare Advantage plans, mostly health maintenance organizations, and Medicare’s drug benefits are delivered exclusively by private insurers, subsidized by the government. …“Medicare Advantage premiums down 7 percent on average, enrollment up 10 percent,” the administration announced in February, and it said the quality of care under Medicare Advantage was improving. This month the administration reported the results of competitive bidding for 2013: “Medicare prescription drug premiums to remain steady for third straight year.” Federal spending on Medicare drug benefits has been about 30 percent lower than the Congressional Budget Office predicted when the drug legislation was passed in 2003. Mr. Ryan, a Wisconsin Republican who is the chairman of the House Budget Committee, said the drug program “came in below cost projections because it harnessed the power of choice and competition.”

Pear’s article raises an interesting issue about incremental reform. Proponents of liberty and markets obviously don’t like government-financed healthcare, but there are very-bad ways of doing the wrong thing and there are less-bad ways of doing the wrong thing.

That’s never an argument for doing something bad, but if bad policies already are implemented, then it does make sense to grab any opportunity to make those policies less destructive.

Ideally, we should restore free markets overnight. But given the constraints of the political system, I’ll gladly take the modest reforms that Paul Ryan is proposing for Medicare and Medicaid.

Here’s a back-on-the-envelope image I created to show the spectrum of healthcare policy. It’s obviously very simplified, but I think the overall point about Ryan’s reforms being very incremental is correct.

One final point about the political implications. President Obama clearly wants to scare seniors into thinking that the Ryan reforms are radical, but this is why the New York Times article is significant. It shows that Ryan isn’t proposing anything unusual, and it shows that the incremental reforms being proposed have a successful track record.

This may be why we’re now seeing some remarkable poll results.

Despite a furious onslaught of negative ads and harsh rhetoric, neither President Obama nor Mitt Romney has much of an advantage on critical issues heading into the fall campaign. …On Medicare — long considered a political vulnerability for Romney and his running-mate Paul Ryan — 49 percent of likely voters say Obama would handle the issue better while 48 percent prefer Romney. On health care, voters are just as divided — with 49 percent favoring Obama’s policies and 48 percent favoring Romney.

P.S. Since I’m favorably commenting on an article from the New York Times, allow me to remind you that the paper does publish good material every so often. They allowed this great column on tax sovereignty on their editorial pages, this powerful expose of IRS abuse by a business columnist, and this great graphic on the connection between big banks and government bailouts in Europe.

Read Full Post »

The honest answer is that it probably means nothing. I don’t think there’s been an election in my lifetime that was impacted by the second person on a presidential ticket.

And a quick look at Intrade.com shows that Ryan’s selection hasn’t (at least yet) moved the needle. Obama is still in the high 50s.

Moreover, the person who becomes Vice President usually plays only a minor role in Administration policy.

With those caveats out of the way, the Ryan pick is mostly good news.

Here are the reasons why I’m happy.

Here are two reasons why I’m worried.

  • Both Romney and Ryan are somewhat sympathetic to a value-added tax. My worst-case scenario is they win the election, but then can’t get a good budget approved because of some squishy Republican senators who put self interest above national interest. Romney and Ryan then decide that this European-style national sales tax is the only way – on paper – of making the budget balance. In reality, of course, we’ll suffer the same fate as Europe since the VAT revenues will be used to finance ever-larger government.
  • Ryan has some very bad votes in his past, including support for TARP, the auto bailout, the no-bureaucrat-left-behind education legislation, and the reckless Medicare prescription drug entitlement. Everyone says to ignore those votes because Ryan knew he was voting the wrong way, but if he’s already made some deliberately bad decisions for political reasons, what’s to stop him from making more deliberately bad decisions for political reasons?

But as I said above, don’t read too much into Ryan’s selection. if Republicans win, Romney will be the one calling the shots.

Though this does give Ryan a big advantage the next time there’s an open contest for the GOP nomination – either 2016 or 2020.

P.S. I suspect putting Ryan on the ticket will shift Wisconsin into the GOP column. Based on my last prediction, that would be enough to defeat Obama. But I’ll have to contemplate whether the pick hurts Romney’s chances in another state. You’ll have to wait until September 6 for my updated election prediction.

P.P.S. For those who care about politics, some are saying that selecting Ryan was risky because it gives Obama and his allies an opportunity to demagogue the GOP ticket about entitlement reform. I disagree. Even if Romney picked Nancy Pelosi, that demagoguery was going to happen. Heck, they’ve already accused Romney of causing a woman’s death, so I hardly think they’ll be bashful about throwing around other accusations.

Read Full Post »

The Social Security Board just released its Trustee’s Report, and it’s generated the usual hand wringing about the program’s long-term demise – much of which is perfectly appropriate for reasons I’ve already discussed.

But I’m usually unhappy about the press treatment of this issue.

Here’s some of what Stephen Ohlemacher and Ricardo Alonso-Zaldivar wrote for the Associated Press.

Social Security is rushing even faster toward insolvency, driven by retiring baby boomers, a weak economy and politicians’ reluctance to take painful action to fix the huge retirement and disability program. The trust funds that support Social Security will run dry in 2033 – three years earlier than previously projected – the government said Monday. …Unless Congress acts – and forcefully – payments to millions of Americans could be cut. …Potential options to reduce Social Security costs include raising the full retirement age, which already is being gradually increased to 67, reducing annual benefit increases and limiting benefits for wealthier Americans. Policymakers could also increase the amount of wages that are subject to Social Security taxes. Social Security is financed by a 6.2 percent tax on the first $110,100 in workers’ wages. It is paid by both employers and workers.

There are two flaws with what’s written in this story. One is a sin of commission, failing to expose the government’s dishonest accounting. The other is a sin of omission, analyzing the issue solely through the lens of government finances.

1. The sin of commission is that the story assumes the Social Security Trust Fund is real, when it is nothing but a collection of IOUs. When extra Social Security taxes are collected, the Treasury keeps those monies and spends them on other programs. In exchange, it engages in a bookkeeping exercise and credits the Social Security Trust Fund with some government bonds.

When one part of the government owes another part of the government some money, it is a wash. There’s no pile of assets to finance benefits. Those bonds simply represent a claim on future taxpayers.

This is why politicians can play dishonest games, such as approving a payroll tax holiday and declaring – by waving a magic wand – that this won’t affect the amount of IOUs in the Trust Fund. Just in case you think I’m joking, the AP story notes that “Congress temporarily reduced the tax on workers to 4.2 percent for 2011 and 2012, though the program’s finances are being made whole through increased government borrowing.”

Needless to say, that’s phoniness on top of phoniness. I guess the next step is for politicians to enact legislation adding several zeroes to all the existing IOUs. They can then declare that Social Security is solvent. Problem solved…other than the itsy-bitsy problem that there’s still no money.

2. The sin of omission in the story is that it focuses on the government’s finances and overlooks the implications for households. It is possible, at least on paper, to “save” Social Security by cutting benefits and raising taxes. But such “reforms” force people to pay more and get less – even though Social Security already is a very bad deal, particularly for younger workers.

My video on Social Security reform explains that personal retirement accounts are the only way to simultaneously deal with government finances and household finances in a constructive fashion.

Sadly, neither Obama nor Romney seem interested in this type of pro-growth reform.

By the way, I don’t mean to pick on the Associated Press. The report excerpted above simply happened to be the first one I read. You ‘ll find the same myopic analysis in the Wall Street Journal and Bloomberg, to cite just two of many examples.

In closing, Social Security reform is actually the least important of the entitlement reforms. The long-term fiscal problems caused by Medicare and Medicaid are much larger. This three-part video series looks at the reforms that could address all three programs.

Read Full Post »

Last year, I narrated this video making the case for Medicaid reform. The proposal is very simple: Replicate the success of the welfare reform of the 1990s by block granting the program and giving states full autonomy to figure out how best to provide health care to low-income people.

Medicaid reform is critical to save the nation from Greek-style fiscal collapse, especially if it is part of a comprehensive modernization of entitlement programs, and I was very impressed that the House of Representatives actually adopted a version of this reform last year as part of the Ryan budget.

But with the Senate refusing to enact a budget and Obama opposed to reform, the proposal languished.

In this case, though, languish is not the same as die. Led by Congressman Rokita of Indiana, reformers on Capitol Hill have introduced a new proposal to block grant Medicaid.

As you can see from the chart they prepared (click to enlarge), the proposal will cap outlays for the block grant at the current level of Medicaid spending. This policy will save $1.8 trillion over the next 10 years, when compared to leaving the program on autopilot.

Writing about the proposal, Emily Miller of the Washington Times opined.

At the state level, Medicaid is the biggest expenditure, growing at a faster pace than even Medicare. Making matters worse, Obamacare mandates will increase the Medicaid rolls by an estimated 17 million to 25 million people. In order to give states flexibility to deal with this, the House rank-and-file GOP would eliminate the one-size-fits-all mandates for the federal funds. This also would provide better care.

The Washington Examiner also is impressed by the new proposal.

Medicaid represents a federal mandate that forces state governments to shoulder as much as half of the program’s annual costs but allows them virtually no say in how it is run. Even if Washington permitted the states some flexibility, there is little incentive for them to figure out more efficient ways to operate Medicaid, since the federal subsidy is paid with only incidental concern about performance. And thanks to Obamacare, unless Medicaid is reformed before 2014, the burdens it imposes on the states will only grow more severe. That’s when Obamacare requires state governments to spend an estimated $118 billion more of their own money in order to extend Medicaid coverage to an additional 17 million to 25 million people. Four House Republicans want to change all of that by converting the federal government’s share of Medicaid and Children’s Health Insurance Program funding into a single block grant with none of the strings that now prevent state officials from improving the way the program is managed.

These are all good points. The bottom line is that failure to reform entitlements guarantees that politicians eventually will impose a value-added tax. Or they’ll push red ink to unsustainable levels. Actually, based on what’s happened in Europe, where higher taxes simply meant higher spending and more debt, we’ll get both.

Simply stated, Medicaid reform is good health policy and good fiscal policy.

Read Full Post »

I have a new article for National Review about the fallout from the Supercommittee.

Among the points I make are:

o We were lucky to dodge a tax hike.

o There’s still a threat of a tax hike if big-government Republicans side with the so-called rational left in favor of a tax-increase proposal, such as Gang of Six, Simpson-Bowles, and Domenici-Rivlin.

o The sequester is a good outcome.

o Republicans who accept a tax hike to get entitlement cuts will wind up with bad policy that crowds out needed reforms.

I want to focus on this last point because it is critically important, but doesn’t get much attention. Here’s what I wrote for NRO.

…many Republicans (regardless of the no-tax-hike pledge) are susceptible to a deal so long as something is being done to address entitlement costs and so long as the tax hikes are not based on class-warfare ideology. …the real challenge for fiscal conservatives is figuring out how to adopt something akin to the Ryan budget. That means no tax increases, genuine spending cuts, and real entitlement reforms (i.e., not the policies promoted by the rational Left, such as unsustainable price controls or back-door tax hikes via means testing). Sadly, there is no way for such a budget to be enacted in 2011 or 2012. And it may not happen in the four years after that. That would be both frustrating and worrisome — particularly since every year of delay brings us closer to European-style fiscal chaos. But for fiscal conservatives there is no possible compromise with either the hard Left or the rational Left. Both of those camps want bigger government. Both want higher taxes. And both oppose real entitlement reform.

To elaborate, not all entitlement reform is created equal. As I explained in this set of videos, good reform means putting individuals back in charge and restoring market forces. It means personal retirement accounts for Social Security. It means vouchers for Medicare. And it means block-granting Medicaid back to the states.

To the Washington establishment, however, entitlement reform means price controls such as the infamous “doc fix.” The problem with this approach is that price controls are notoriously ineffective and politically unsustainable.

The political elite also thinks that means-testing is entitlement reform. But this policy basically means that people who save and invest during their working years wind up losing eligibility. This approach isn’t as bad as price controls, but it does impose high implicit marginal tax rates on those who save and invest, which almost certainly will have a negative impact on capital formation.

I realize that giving advice to the GOP is about as useful as sticking my arm into a garbage disposal, but the lesson of all this is that there’s no point in trying to strike a deal with Obama or congressional Democrats. Simply stated, there is no way they would agree to good policies.

Moreover, any agreement would be interpreted as a “solution” and therefore kill any chance of real reform in 2013.

Read Full Post »

Most people have a vague understanding that America has a huge long-run fiscal problem.

They’re right, though they probably don’t realize the seriousness of that looming crisis.

Here’s what you need to know: America’s fiscal crisis is actually a spending crisis, and that spending crisis is driven by entitlements.

More specifically, the vast majority of the problem is the result of Medicaid, Medicare, and Social Security, programs that are poorly designed and unsustainable.

America needs to fix these programs…or eventually become another Greece.

Fortunately, all of the problems can be solved, as these three videos demonstrate.

The first video explains how to fix Medicaid.

The second video shows how to fix Medicare.

And the final video shows how to fix Social Security.

Regular readers know I’m fairly gloomy about the future of liberty, but this is one area where there is a glimmer of hope.

The Chairman of the House Budget Committee actually put together a plan that addresses the two biggest problems (Medicare and Medicaid) and the House of Representatives actually adopted the proposal.

The Senate didn’t act, of course, and Obama would veto any good legislation anyhow, so I don’t want to be crazy optimistic. Depending on how things play out politically in the next six years, I’ll say there’s actually a 20 percent chance to save America.

Read Full Post »

This new video from the Center for Freedom and Prosperity explains why Medicaid should be shifted to the states. As I note in the title of this post, it’s good federalism policy and good fiscal policy. But the video also explains that Medicaid reform is good health policy since it creates an opportunity to deal with the third-party payer problem.

One of the key observations of the video is that Medicaid block grants would replicate the success of welfare reform. Getting rid of the federal welfare entitlement in the 1990s and shifting the program to the states was a very successful policy, saving billions of dollars for taxpayers and significantly reducing poverty. There is every reason to think ending the Medicaid entitlement will have similar positive results.

Medicaid block grants were included in Congressman Ryan’s budget, so this reform is definitely part of the current fiscal debate. Unfortunately, the Senate apparently is not going to produce any budget, and the White House also has expressed opposition. On the left, reducing dependency is sometimes seen as a bad thing, even though poor people are the biggest victims of big government.

It’s wroth noting that Medicaid reform and Medicare reform often are lumped together, but they are separate policies. Instead of block grants, Medicare reform is based on something akin to vouchers, sort of like the health system available for Members of Congress. This video from last month explains the details.

In closing, I suppose it would be worth mentioning that there are two alternatives to Medicaid and Medicare reform. The first alternative is to do nothing and allow America to become another Greece. The second alternative is to impose bureaucratic restrictions on access to health care – what is colloquially known as the death panel approach. Neither option seems terribly attractive compared to the pro-market reforms discussed above.

Read Full Post »

The Chairman of the House Budget Committee, Congressman Paul Ryan of Wisconsin, will be unveiling his FY2012 budget tomorrow. Not all the details are public information, but what we do know is very encouraging.

Ryan’s plan is a broad reform package, including limits on so-called discretionary spending, limits on excessive pay for federal bureaucrats, and steep reductions in corporate welfare.

But the two most exciting parts are entitlement reform and tax reform. Ryan’s proposals would simultaneously address the long-run threat of bloated government and put in place tax policies that will boost growth and improve competitiveness.

1. The long-run fiscal threat to America is entitlement spending. Ryan’s plan will address this crisis by block-granting Medicaid to the states (repeating the success of the welfare reform legislation of the 1990s) and transforming Medicare for future retirees into a “premium-support” plan (similar to what was proposed as part of the bipartisan Domenici-Rivlin Debt Reduction Task Force).

2. America’s tax system is a complicated disgrace that manages to both undermine growth and promote corruption. The answer is a simple and fair flat tax, and Ryan’s plan will take an important step in that direction with lower tax rates, less double taxation of saving and investment, and fewer distorting loopholes.

One potential criticism is that the plan reportedly will not balance the budget within 10 years, at least based on the antiquated and inaccurate scoring systems used by the Congressional Budget Office and Joint Committee on Taxation. While I would prefer more spending reductions, I’m not overly fixated on getting to balance with 10 years.

What matters most is “bending the cost curve” of government. Obama’s budget leaves government on auto-pilot and leaves America on a path to becoming a decrepit European-style welfare state. Ryan’s budget, by contrast, would shrink the burden of federal spending relative to the productive sector of the economy.

Along with other Cato colleagues, I’ll have more analysis of the plan when it is officially released.

Read Full Post »

One of my presentations at CPAC addressed America’s long-term entitlement crisis. I was part of a panel organized by the National Taxpayers Union, and I discussed how to solve the long-run fiscal problems caused by Social Security, Medicare, and Medicaid.

The lighting and focus leave something to be desired, but hopefully my message is crisp and clear.

Read Full Post »

Follow

Get every new post delivered to your Inbox.

Join 2,398 other followers

%d bloggers like this: