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Posts Tagged ‘Health Care’

In the grand scheme of things, the most important development in health policy is the pending Supreme Court case revolving around whether subsidies can be provided to people obtaining health insurance from the federal exchange, even though the law explicitly says handouts are only available to people getting policies via state exchanges.

If the Court rules correctly (unlike, ahem, the last time the Justices dealt with Obamacare), it will then be very important that congressional reformers use the resulting mess to unwind as much of the law as possible.

That will be a challenge because statists already are arguing that the “only” solution is to re-write the law so that subsidies are also available via the federal government. For what it’s worth, my colleague Michael Cannon outlines the right strategy in Cato’s newly released Policy Priorities for the 114th Congress.

But let’s set aside that issue because we have a great opportunity to review another example of how government-run healthcare is a miserable failure.

Our topic for today is government-dictated electronic health records (EHRs). Dr. Jeffrey Singer is on the front lines of this issue. As a physician in Arizona, he deals with the real-world impact of this particular mandate.

And he’s so unhappy that he wrote a column on the topic for the Wall Street Journal.

Starting this year, physicians like myself who treat Medicare patients must adopt electronic health records, known as EHRs, which are digital versions of a patient’s paper charts. …I am an unwilling participant in this program. In my experience, EHRs harm patients more than they help.

By way of background, he explains that EHRs were part of Obama’s failed “stimulus” legislation and they were imposed on the theory that supposed experts could then use the resulting data to make the system more efficient and effective.

The federal government mandated in the 2009 stimulus bill that all medical providers that accept Medicare adopt the records by 2015. Bureaucrats and politicians argued that EHRs would facilitate “evidence-based medicine,” thereby improving the quality of care for patients.

But Dr. Singer says the real-world impact is to make medical care less effective and more expensive.

Electronic health records are contributing to two major problems: lower quality of care and higher costs. The former is evident in the attention-dividing nature of electronic health records. They force me to physically turn my attention away from patients and toward a computer screen—a shift from individual care to IT compliance.The problem is so widespread that the American Medical Association—a prominent supporter of the electronic-health-record program—felt compelled to defend EHRs in a 2013 report, implying that any negative experiences were the fault of bedside manner rather than the program. Apparently our poor bedside manner is a national crisis, judging by how my fellow physicians feel about the EHR program. A 2014 survey by the industry group Medical Economics discovered that 67% of doctors are “dissatisfied with [EHR] functionality.” Three of four physicians said electronic health records “do not save them time,” according to Deloitte. Doctors reported spending—or more accurately, wasting—an average of 48 minutes each day dealing with this system.

Here’s what he wrote about costs.

The Deloitte survey also found that three of four physicians think electronic health records “increase costs.” There are three reasons. First, physicians can no longer see as many patients as they once did. Doctors must then charge higher prices for the fewer patients they see. This is also true for EHRs’ high implementation costs—the second culprit. A November report from the Agency for Healthcare Research and Quality found that the average five-physician primary-care practice would spend $162,000 to implement the system, followed by $85,000 in first-year maintenance costs. Like any business, physicians pass these costs along to their customers—patients. Then there’s the third cause: Small private practices often find it difficult to pay such sums, so they increasingly turn to hospitals for relief. In recent years, hospitals have purchased swaths of independent and physician-owned practices, which accounted for two-thirds of medical practices a decade ago but only half today. Two studies in the Journal of the American Medical Association and one in Health Affairs published in 2014 found that, in the words of the latter, this “vertical integration” leads to “higher hospital prices and spending.”

Last but not least, Dr. Singer explains that electronic health records don’t reduce errors or increase efficiency, notwithstanding the claims of advocates.

The EHR system assumes that the patient in front of me is the “average patient.” When I’m in the treatment room, I must fill out a template to demonstrate to the federal government that I made “meaningful use” of the system. This rigidity inhibits my ability to tailor my questions and treatment to my patient’s actual medical needs. It promotes tunnel vision in which physicians become so focused on complying with the EHR work sheet that they surrender a degree of critical thinking and medical investigation. Not surprisingly, a recent study in Perspectives in Health Information Management found that electronic health records encourage errors that can “endanger patient safety or decrease the quality of care.” America saw a real-life example during the recent Ebola crisis, when “patient zero” in Dallas, Thomas Eric Duncan, received a delayed diagnosis due in part to problems with EHRs.

Wow, not exactly an uplifting read.

Indeed, Dr. Singer’s perspective is so depressing that I hope he’s at least partially wrong. Maybe after a couple of years, and with a bit of luck, doctors will adapt and we’ll get some benefits in exchange for the $20 billion-plus of taxpayer money that has been plowed into this project (not to mention all the time and expense imposed on the medical profession).

But the big-picture lesson to be learned is that planners, politicians, and bureaucrats in Washington should not be in charge of the healthcare system.

Which brings us to the real challenge of how to put the toothpaste back in the tube.

Government intervention is so pervasive in the healthcare sector that – with a few rare exceptions – normal market forces have been crippled.

As such, we have a system that produces higher and higher costs accompanied by ever-rising levels of inefficiency.

Amazingly, the statists then argue that more government is the only solution to this government-caused mess. Sort of Mitchell’s Law on steroids.

But that path leads to single-payer healthcare, and the horror stories from the U.K. should be enough to show any sensible person that’s a bad outcome.

The only real solution is to restore a free market. That means not only repealing Obamacare, but also addressing all the other programs and policies which have caused the third-party payer crisis.

P.S. Just like yesterday, I want to finish a grim column with something uplifting.

Here’s a sign that will irk statists driving through one part of Pennsylvania.

Now take the IQ test for criminals and liberals and decide whether this means more crime or less crime.

If you’re having trouble with the answer, here’s a hint from Chuck Asay.

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My Cato Institute colleague Michael Tanner has produced some first-rate substantive research on issues.

He produced a study showing that personal retirement accounts would have been a better deal than Social Security even for people who retired at the depth of the financial crisis and stock-market collapse.

He authored another study showing that overly generous welfare systems in most states make productive work relatively unattractive compared to government dependency.

And I’ve also cited his analysis and commentary on issues such as Obamacare and obesity.

Today, I want to cite him for the simple reason that I admire his cleverness.

For those of us who suffered through President Obama’s State of the Union address, you may recall that the President proposed a thawing of America’s relationship with Cuba on the basis that if something “doesn’t work for 50 years, it’s time to try something new.”

Since I’m not a foreign policy person, I didn’t pay close attention to that passage.

But perhaps I should have been more attentive. It turns out that Obama created a big opening.

Writing for National Review, Tanner decided to hoist Obama on his own petard.

During his State of the Union address last week, President Obama defended his Cuba policy by pointing out, “When what you’re doing doesn’t work for 50 years, it’s time to try something new.” As it happens, I agree with the president on Cuba. But it seems to me that his advice should be applied to a number of other issues as well

Mike starts with the ill-fated War on Poverty.

Lyndon Johnson declared war on poverty in January 1964, just three years after the start of the Cuban embargo. Since then we’ve spent more than $20 trillion fighting poverty. Last year alone, federal and state governments spent just under $1 trillion to fund 126 separate anti-poverty programs. Yet, using the conventional Census Bureau poverty measure, we’ve done nothing to reduce the poverty rate. …And, whatever success we’ve achieved in making material poverty less uncomfortable, we’ve done little to help the poor become independent and self-supporting.

He then points out the utter failure of the War on Drugs.

The War on Drugs has been going on even longer than the War on Poverty, with a similar lack of success. …in the last ten years alone we have spent some $500 billion fighting this “war,” and arrested more than 16 million Americans for drug offenses. The vast majority of arrests have been for simple possession, not sale or other drug crimes. While filling our prisons with nonviolent offenders, destabilizing countries like Mexico and Colombia, wrecking our own inner cities, and making the cartels rich, the drug war has failed to reduce either violence or drug use.

Mike also reminds us that we’ve had five decades-plus of government-run healthcare.

…we’ve suffered from government-run health care in this country for more than 50 years as well. Medicare and Medicaid started in 1965. Others would point out that we are still suffering the consequences of the IRS decision in 1953 to make employer-provided insurance tax-free, while individually purchased insurance has to be paid for with after-tax dollars. No matter how you want to measure the starting point, the government now pays for roughly 52 percent of U.S. health-care spending, and indirectly subsidizes another 37 percent. The result has been steadily rising health-care costs, a dysfunctional insurance market, and a growing shortage of physicians. …a study out of Oregon suggests that being on Medicaid provides no better health outcomes than being uninsured. Meanwhile, Medicare is running up more than $47.6 trillion in unfunded liabilities. And let us not forget the VA system and its problems.

And his article merely scratches the surface.

One could go on and on. Fannie and Freddie? Social Security and its almost $25 trillion in unfunded liabilities? Stimulus spending? Green energy? We won’t even mention the National Weather Service’s apparent inability to accurately predict snowstorms. If we are looking for lessons to learn from the last 50 years, here is one: Bigger government has not brought us more security, more freedom, or more prosperity. Yet, President Obama still sees the answer to every problem, no matter how small, as more government, no matter how big. …President Obama not only seems unable to learn from history, but apparently doesn’t even listen to his own speeches. If big government hasn’t worked for 50 years, 100 years, or for that matter pretty much the whole of human history, maybe it’s time to try something else.

The final sentence in that passage is not just a throw-away line.

I have my own two-question challenge for leftists, which is basically a request that they identify a nation – of any size and at any time – that has prospered with big government.

Mike does something similar. He basically points out that big government has an unbroken track record of failure, and not just for the past 50 years.

I suppose the question to ask is whether any big-government program can be considered a success? In other words, what has any government done well, once it goes beyond the provision of core public goods such as enforcing contracts, protecting property rights, and upholding the rule of law?

To be fair, there are some nations, such as Switzerland, that have enjoyed very long periods of monetary stability and peace. And jurisdictions such as Hong Kong and Singapore have experienced decades of prosperity and tranquility.

In all of those jurisdictions, I think government is too big, but they are considered small-government by modern-world standards.

In any event, the point I’m making is that some governments seem semi-competent, but there also seems to be a relationship between the size and scope of government and the failure of government.

It will be interesting to read the comments.

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Way back in 2010, immediately after Obamacare was rammed down our throats, I put together four guiding principles for a counter-offensive.

One of my goals was to help people understand that the problem was far greater than Obamacare. Indeed, the so-called Affordable Care Act was merely another step on a long (and very bad) journey to healthcare statism.

The way to think of Obamacare is that we are shifting from a healthcare system 68 percent controlled/directed by government to one that (when all the bad policies are phased in) is 79 percent controlled/directed by government. Those numbers are just vague estimates, to be sure, but they underscore why Obamacare is just a continuation of a terrible trend, not a profound paradigm shift.

Two years ago, I elaborated on this thesis and even put together a couple of charts to emphasize the point.

Obamacare was enacted in 2010, and it was perceived to be a paradigm-shifting change in the healthcare system, even though it was just another layer of bad policy on top of lots of other bad policy. Immediately after the legislation was approved, I offered a rough estimate that we went from a system that was 68 percent dictated by government to one that was 79 percent dictated by government. …all of the same problems still exist, but now they’re exacerbated by the mistakes in Obamacare.

My numbers were just vague approximations, of course, but I think the basic premise was spot on.

And my theory is still accurate. But you don’t have to believe me.

Writing for the Washington Examiner, Philip Klein makes the critical point that repealing Obamacare wouldn’t result in a free-market system.

Instead, we’d be stuck with the pre-Obamacare system that was decrepit because of already-existing programs, mandates, regulations, and other forms of intervention.

…repeal is not enough. Even if simple repeal were politically obtainable, Americans would still be left with a broken healthcare system. Government regulations would still be stifling competition and individual choice and government healthcare programs would still be driving the nation’s unsustainable long-term debt problem. If Republicans achieved repeal without agreeing on a way to reform healthcare along free market lines, it’s inevitable that Democrats would eventually lead another overhaul of the system that would grant even more power to the federal government.

Philip is totally correct.

Before Obamacare, we had a system that didn’t work very well because of government. But in a horrifying example of Mitchell’s Law, many people decided that more government was the solution to the problems already caused by government.

Hence, we got so mis-named Affordable Care Act.

But if Obamacare is repealed, we’ll simply be back in the same unstable situation. And Philip is right that the statists will then simply argued for a different type of government expansion. Probably single payer, notwithstanding all the horror stories from places such as the United Kingdom.

Some may argue at this point that it doesn’t really matter because Obama is in the White House with a veto pen, so critics have a couple of years to figure out their next step.

Maybe, but it’s also possible that the Supreme Court will (for a change of pace) make the right ruling on a key Obamacare case later this year. And this would probably force policy makers to re-open the law.

…a Supreme Court decision expected by late June could invalidate Obamacare subsidies for millions of Americans. If Republicans don’t have an alternative ready, congressional leaders will be under tremendous pressure to pass a simple “fix” that would allow the subsidies to continue to flow, thus further entrenching Obamacare before a Republican president theoretically is able to act in 2017. For these reasons and many others it’s important for Republicans to unite around an alternative to Obamacare.

Philip (who has an entire book on this issue) then proceeds to categorize Obamacare critics as being in three different camps on the issue of how to proceed.

The first approach comes from those who believe that fully repealing Obamacare is probably unrealistic, but who still see an opening to reform the overall healthcare system in a more market-oriented direction. I call this the Reform School. The second approach comes from a crowd that believes full repeal is a necessity, but can only occur if opponents of the law create a market-friendly alternative with enough financial assistance to make health insurance widely available to those Americans who want to purchase it. I call this the Replace School. And finally, there is a third approach, which advocates repealing the law, returning to pre-Obamacare levels of taxes and spending, and then using that clean slate as the basis to overhaul the system in a free market manner to bring down costs. I call this the Restart School.

Since I focus on fiscal policy issues rather than healthcare, I don’t know if there are substantive – or merely strategic – differences among these three groups.

But I will say (assuming you actually want to solve the problem) that at some point you have to deal with the government programs and interventions that have given us a third-party payer crisis.

So I will reiterate what I wrote back in 2010 as part of my proposed counter-offensive.

The only way to fix healthcare is to restore the free market. That means going back to a system where people pay out-of-pocket for most healthcare and use insurance to protect against genuine risk and catastrophic expenses. The time has come to reduce the size and scope of government. …Change Medicare into a system based on personal health accounts and shift all means-tested spending to the states. …the flat tax is ideal from a healthcare perspective since it gets rid of the healthcare exclusion in the tax code as part of a shift to a tax system with low rates and no double taxation.

This video, narrated by Julie Borowski for the Center for Freedom and Prosperity, looks at the Obamacare/third-party payer issue.

And if you want to examine some of the component issues of healthcare reform, we have videos on Medicaid, Medicare, and tax reform.

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One of the good things about working at the Cato Institute is that there’s never any pressure to put your thumb on the scale to help any political party.

Our loyalties are to libertarian principles, many of which are reflected in the Constitution, so we’re free to criticize or praise politicians based on their ideas rather than their partisan affiliation.

That’s why we criticized President Bush’s pro-centralization No Child Left Behind education scheme just as much as President Obama’s pro-centralization Common Core education scheme.

It’s also why I criticized Bush for being a big spender like Obama (indeed, Bush was a bigger spender, even for domestic programs!).

I’m giving this background because today I’m going to say something nice about Obamacare.

Not because I like the overall law, but because honesty is the best policy.

Regular readers know that our healthcare system is screwed up by bad government policy. More specifically, spending programs such as Medicare and Medicaid, combined with tax preferences and regulations that encourage over-insurance, have created a giant third-party payer problem.

Only 11 percent of health care spending in America is directly financed by consumers. The rest is paid for by taxpayers, insurance companies, and other third parties.

This has eviscerated the normal working of a competitive market. When people are spending their own money, they are careful and prudent. When they spend other people’s money, however, they are not overly concerned about cost.

As a result, we have a needlessly expensive system. And because third-party payer requires lots of administration and paper work, bad government policies also have caused absurd levels of inefficiency.

Well, there’s one small piece of Obamacare that actually is helping to mitigate this problem. The law includes a so-called Cadillac tax that caps the special tax preference for fringe benefits (if your employer provides you a health insurance policy as part of your compensation, that type of income isn’t taxed, unlike your cash wages).

And that reform is having a positive impact. Here are some passages from a Bloomberg story.

Large employers are increasingly putting an end to their most generous health-care coverage as a tax on “Cadillac” insurance plans looms closer under Obamacare. Employees including bankers at JPMorgan Chase & Co. (JPM) and college professors at Harvard University are seeing a range of moves to shift more costs to workers. …The tax takes effect in 2018, and employers are already laying the groundwork to make sure they don’t have to pay the 40 percent surcharge on health-insurance spending that exceeds $27,500 for a family or $10,200 for an individual. Once envisioned as a tool to slow the nation’s growing health-care tab, the tax has in practice meant higher out-of-pocket health-care costs for workers.

The last sentence in the excerpt, by the way, is economically illiterate.

The Cadillac tax will restrain health spending because it means higher out-of-pocket costs for consumers. They are going to have more authority and responsibility of how to spend their own money.

Think of this analogy. Will you eat more if I give you $25 to buy a meal or if I give you a pre-paid voucher for a $25 all-you-can-eat buffet?

If you’re a normal person, you’ll take the $25 cash, buy a meal for less than that amount, and save the extra money for something else.

But if you’re given a pre-paid voucher for the buffet, you’ll pig out because there’s no additional cost for consuming more items.

And the Bloomberg story includes evidence that giving consumers more control over their income is having the predicted positive effect.

The tax on Cadillac plans — named after the luxury vehicle to denote their lavishness — is one reason the growth in health-care premiums has slowed since the Patient Protection and Affordable Care Act took effect in 2010. …The tax “is having the effect that was intended, which is the cost of these plans are being reduced,” Christopher Condeluci, a former Senate Republican aide who helped design it, said in a phone interview. …Premium increases for employer-provided health insurance, which covers about 48 percent of Americans, “slowed markedly” in 31 states since 2010, the year the Affordable Care Act became law, the New York-based Commonwealth Fund reported today. Nationally, premium growth fell by about a percentage point after the law, to 4.1 percent a year on average, the report said.

By the way, I should hasten to add that I’m not happy about the way the Cadillac tax was adopted, for a major reason and a minor reason.

The major reason is that it was part of a law that is otherwise a very expensive disaster.

The minor reason is that, for reasons of both good tax policy and good health policy, I want to eliminate loopholes and tax preferences only if we can use every penny of revenue to finance lower tax rates.

And that’s exactly what you get with a flat tax, which is a system where you don’t even need a Cadillac tax because there’s no healthcare exclusion.

Under Obamacare, by contrast, the Cadillac tax limits the healthcare exclusion, but politicians used the money to finance bigger government.

Now let’s say something bad about Obamacare.

John Goodman of the Independent Institute has a column in today’s Wall Street Journal. He points out that the law is hurting many of the people it was supposed to help.

…the law is already hurting some of the people it was intended to help. By this time next year, we may find that many workers who earn within a few dollars of the minimum wage have less income and less insurance coverage (as a group) than they did before the mandate began to take effect.

How does John justify these assertions?

Because he did some real-world research, surveying 136 fast-food restaurants with 3,500 employees.

The results are not encouraging, at least for the workers.

Before 2014 about half the employees were “full time” as defined by ObamaCare; that is, they worked 30 hours or more a week. The potential cost to the employers of providing mandated health insurance to their full-time staff would have been about $7 million a year. But by the time the employers took advantage of all their legal options they were able to reduce their cost to less than 1% of that amount. The first step was to make all hourly workers part time. …workers in the survey whose hours were reduced to part time…can get subsidized insurance through an exchange, but they will be asked to pay up to 9.5% of their income for what is unattractive coverage. Some of them previously had mini-med plans, but this kind of insurance is no longer available to them. …Those few remaining full-time employees will get mini-med insurance for themselves, but they are unlikely to be able to afford coverage for any dependents they have. They will not get an ObamaCare bronze plan unless they fork over about one-tenth of their take-home pay, and they won’t be able to get bronze coverage for other family members unless they forfeit more than half their income. Out of 3,500 employees, only one that we know of got the kind of insurance that the architects of the Affordable Care Act wanted everyone to have.

One out of 3,500? Sounds like the typical success rate for a government program.

But we shouldn’t joke. It’s not funny that low-income workers are being hurt. Just like it’s not funny that young adults, retirees, and kids are being disadvantaged by Obamacare as well (on the other hand, it is somewhat amusing that politicians, IRS agents, and Harvard professors are upset about the law).

The bottom line is that an overwhelming percentage of Obamacare provisions make the healthcare system more expensive and less effective.

Yes, there are some positive effects of the Cadillac tax, but those are easily offset by all the features of the law that increase the size and scope of government.

P.S. Since I mentioned that third-party payer has messed up our healthcare system and caused prices to rise, I should point out that there are a few sectors where consumers are still in charge. And in those areas, such as cosmetic surgery and abortion, prices are falling in relative terms.

P.P.S. The folks at Reason TV put together a must-watch video on how a hospital can be more efficient and affordable in the absence of third-party payer.

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Shortly after Obamacare was enacted, I began to maintain a list of groups that were victimized by the law. But after listing kids, low-income workers, and retirees, I quickly realized this was a senseless exercise because virtually everyone in the country was going to be hurt by this expansion of government power and control.

So I then began to put together a different type of list. I call it the “least sympathetic victims” of Obamacare. These are groups that are being hurt by the law, but I think you’ll agree with me that they don’t deserve tears of support. At least not real ones.

Some politicians and staffers of Capitol Hill are very upset about the prospect of being subjected to the law that they inflicted on the rest of the country.

The bureaucrats at the IRS are agitated about the possibility of living under Obamacare, even though the IRS got new powers as a result of the law.

We now have a new group to add to the list. It appears that the faculty of Harvard University aren’t happy about some of the changes imposed by Obamacare. Even though many Harvard professors helped Obama design and promote the law!

Here are some passages from a New York Times report.

Members of the Faculty of Arts and Sciences, the heart of the 378-year-old university, voted overwhelmingly in November to oppose changes that would require them and thousands of other Harvard employees to pay more for health care. The university says the increases are in part a result of the Obama administration’s Affordable Care Act, which many Harvard professors championed. …“Harvard is a microcosm of what’s happening in health care in the country,” said David M. Cutler, a health economist at the university who was an adviser to President Obama’s 2008 campaign. …In Harvard’s health care enrollment guide for 2015, the university said it “must respond to the national trend of rising health care costs, including some driven by health care reform,” in the form of the Affordable Care Act. …Mary D. Lewis, a professor who specializes in the history of modern France and has led opposition to the benefit changes, said they were tantamount to a pay cut. …The president of Harvard, Drew Gilpin Faust, acknowledged in a letter to the faculty that the changes in health benefits — though based on recommendations from some of the university’s own health policy experts — were “causing distress” and had “generated anxiety” on campus.

Distress and anxiety on campus? Oh, the horrors.

I guess it’s perfectly acceptable to impose harm on the peasants in flyover country, but these Harvard elitists obviously don’t want to live under the policies that they recommend for the rest of us.

P.S. I gather Harvard and Massachusetts Institute of Technology view each other as rivals. Well, since Jonathan Gruber (the guy who was caught on tape admitting that Obamacare was based on lies) is a professor at M.I.T. and Harvard professors are the ones getting very agitated, maybe we should simply view Obamacare as a really clever school-against-school prank? It’s just unfortunate that the rest of the country is suffering collateral damage.

P.P.S. By the way, one of the reasons that Harvard professors are unhappy is because of the so-called Cadillac tax, which actually is one of the few parts of Obamacare that may have some positive effect since it’s designed to reduce over-insurance and mitigate the third-party payer problem.

P.P.P.S. Let’s close with some political humor.

This Michael Ramirez cartoon captures President Obama as a precocious school kid.

You can see why readers voted Ramirez as the best political cartoonist.

P.P.P.P.S. And here’s a very clever video about terrorists and the Transportation Security Administration.

For more TSA humor, see this, this, this, this, and this. And if you want more terrorist humor, click here, herehere, and here (at the end of the post).

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Four years ago, I put together some New Year’s Day Resolutions for the GOP.

Three years ago, I made some policy predictions for the new year.

But since I obviously don’t control Republicans and since I freely admit that economists are lousy forecasters, let’s do something more practical to start 2015.

Let’s simply look at three very important things that may happen this year and what they might mean.

1. Will the Republican Senate support genuine entitlement reform?

One of the best things to happen in recent years is that House Republicans embraced genuine entitlement reform. For the past four years, they have approved budget resolutions that assumed well-designed structural changes to both Medicare and Medicaid.

There were no real changes in policy, of course, because the Senate was controlled by Harry Reid. And I’m not expecting any meaningful reforms in 2015 or 2016 because Obama has a veto pen.

But if the Republican-controlled Senate later this year approves a budget resolution with the right kind of Medicare and Medicaid reform, that would send a very positive signal.

It would mean that they are willing to explicitly embrace the types of policies that are desperately needed to avert long-run fiscal crisis in America.

I don’t even care if the House and Senate have a conference committee and proceed with actual legislation. As I noted above, Obama would use his veto pen to block anything good from becoming law anyhow.

My bottom line is simple. If GOPers in both the House and Senate officially embrace the right kind of entitlement reform, then all that’s needed is a decent President after the 2016 elections (which, of course, presents an entirely different challenge).

2. Will there be another fiscal crisis in Greece (and perhaps elsewhere in Europe)?

The European fiscal crisis has not gone away. Yes, a few governments have actually been forced to cut spending, but they’ve also raised taxes and hindered the ability of the private sector to generate economic recovery.

And the spending cuts in most cases haven’t been sufficient to balance budgets, so debt continues to grow (in some cases, there have been dramatic increases in general government net liabilities).

Sounds like a recipe for further crisis, right? Yes and no.

Yes, there should be more crisis because debt levels today are higher than they were five years ago. But no, there hasn’t been more crisis because direct bailouts (by the IMF) and indirect bailouts (by the ECB) have propped up the fiscal regimes of various European nations.

At some point, though, won’t this house of cards collapse? Perhaps triggered by election victories for anti-establishment parties (such as Syriza in Greece or Podemos in Spain)?

While I’m leery of making predictions, at some point I assume there will be an implosion.

What happens after that will be very interesting. Will it trigger bad policies, such as centralized, European-wide fiscal decision-making? Or departures from the euro, which would enable nations to replace misguided debt-financed government spending with misguided monetary policy-financed government spending?

Or might turmoil lead to good policy, which both politicians and voters sobering up and realizing that there must be limits on the overall burden of government spending?

3. If the Supreme Court rules correctly in King v. Burwell, will federal and state lawmakers react correctly?

The Supreme Court has agreed to decide a very important case about whether Obamacare subsidies are available to people who get policies from a federal exchange.

Since the law explicitly states that subsidies are only available through state exchanges (as one of the law’s designers openly admitted), it seems like this should be a slam-dunk decision.

But given what happened back in 2012, when Chief Justice Roberts put politics above the Constitution, it’s anybody’s guess what will happen with King v Burwell.

Just for the sake of argument, however, let’s assume the Supreme Court decides the case correctly. That would mean a quick end to Obamacare subsidies in the dozens of states that refused to set up exchanges.

Sounds like a victory, right?

I surely hope so, but I’m worried that politicians in Washington might then decide to amend the law to officially extend subsidies to policies purchased through a federal exchange. Or politicians in state capitals may decide to set up exchanges so that their citizens can stay attached to the public teat.

In other words, a proper decision by the Supreme Court would only be a good outcome if national and state lawmakers used it as a springboard to push for repeal of the remaining parts of Obamacare.

If, on the other hand, a good decision leads to bad changes, then there will be zero progress. Indeed, it would be a big psychological defeat since it would represent a triumph of handouts over reform.

I guess I’m vaguely optimistic that good things will happen simply because we’ve already seen lots of states turn down “free” federal money to expand Medicaid.

P.S. Let’s close with some unexpected praise for Thomas Piketty. I’m generally not a fan of Monsieur Piketty since his policies would cripple growth (hurting poor people, along with everyone else).

But let’s now look at what France 24 is reporting.

France’s influential economist Thomas Piketty, author of “Capital in the 21st Century”, on Thursday refused to accept the country’s highest award, the Legion d’honneur… “I refuse this nomination because I do not think it is the government’s role to decide who is honourable,” Piketty told AFP.

It’s quite possible, perhaps even likely, that Piketty is merely posturing. But I heartily applaud his statement about the role of government.

Just as I applauded President Hollande when he did something right, even if it was only for political reasons.

But let’s not lose sight of the fact that Piketty is still a crank. His supposedly path-breaking research is based on a theory that is so nonsensical that it has the support of only about 3 percent of economists.

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Exactly one year ago, we looked at the best and worst policy developments of 2013.

Now it’s time for a look back at 2014 to see what’s worth celebrating and what are reasons for despair.

Here’s the good news for 2014.

1. Gridlock - I’ve been arguing for nearly three years that divided government is producing better economic performance. To be sure, it would have been difficult for the economy to move in the wrong direction after the stagnation of Obama’s first two years, but heading in the wrong direction at a slower pace is better than speeding toward European-style statism.

Indeed, the fact that policy stopped getting worse even boosted America’s relative competitiveness, so there’s a lot to be thankful for when politicians disagree with each other and can’t enact new laws.

David Harsanyi explains the glory of gridlock for The Federalist.

Gross domestic product grew by a healthy 5 percent in the third quarter, the strongest growth we’ve seen since 2003. Consumer spending looks like it’s going to be strong in 2015, unemployment numbers have looked good, buying power is up and the stock market closed at 18,000 for the first time ever. All good things. So what happened? …the predominant agenda of Washington was doing nothing. It was only when the tinkering and superfluous stimulus spending wound down that fortunes began to turn around. …spending as a percent of GDP has gone down. In 2009, 125 bills were enacted into law. In 2010, 258. After that, Congress, year by year, became one of the least productive in history. And the more unproductive Washington became, the more the economy began to improve. …Gridlock has caused an odd, but pervasive, stability in Washington. Spending has been static. No jarring reforms have passed — no cap-and-trade, which would have artificially spiked energy prices and undercut the growth we’re now experiencing. The inadvertent, but reigning, policy over the past four years has been, do no harm.

Amen. Though I should hasten to add that while gridlock has been helpful in the short run (stopping Obama from achieving his dream of becoming a second FDR), at some point we will need unified government in order to adopt much-needed tax reform and entitlement reform.

The key question is whether we will ever get good politicians controlling both ends of Pennsylvania Avenue.

2. Restrained Spending - This is the most under-reported and under-celebrated news of the past few years, not just 2014.

Allow me to cite one of my favorite people.

In fiscal year 2009, the federal government spent about $3.52 trillion. In fiscal year 2014 (which ended on September 30), the federal government spent about $3.50 trillion. In other words, there’s been no growth in nominal government spending over the past five years. It hasn’t received nearly as much attention as it deserves, but there’s been a spending freeze in Washington. …the fiscal restraint over the past five years has resulted in a bigger drop in the relative size of government in America than what Switzerland achieved over the past ten years thanks to the “debt brake.” …The bottom line is that the past five years have been a victory for advocates of limited government.

And this spending restraint is producing economic dividends, though Paul Krugman somehow wants people to believe that Keynesian economics deserves the credit.

3. Limits on Unemployment Benefits - Although the labor force participation rate is still disturbingly low, the unemployment rate has declined and job creation numbers have improved.

The aforementioned policies surely deserve some of the credit, but it’s also worth noting that Congress wisely put a stop to the initiative-sapping policy of endlessly extending unemployment benefits. Such policies sound compassionate, but they basically pay people not to work and cause more joblessness.

Phil Kerpen of American Commitment elaborates, citing recent research from the New York Fed.

According to empirical research by the Federal Reserve Bank of New York: “most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility.” Those benefits finally ended at the end of 2013, triggering a sharp rise in hiring… Specifically, they found that the average extended unemployment benefits duration of 82.5 weeks for four years had the impact of raising the unemployment rate from 5 percent to 8.6 percent. …Good intentions are not enough in public policy.  It might seem kind and compassionate to spend billions of taxpayer dollars on “emergency” unemployment benefits forever, but the effect is to keep millions of people unemployed.  Results matter.

Phil’s right. If you pay people not to work, you’re going to get foolish results.

But the three above stories are not the only rays of sunshine in 2014. Honorable mention goes to North Carolina and Kansas for implementing pro-growth tax reforms.

I’m also pleased that GOPers passed the first half of my test and told the Democrat appointee at the Congressional Budget Office that he would be replaced. Now the question is whether they appoint someone who will make the long-overdue changes that are needed to get better and more accurate assessments of fiscal policy. That didn’t happen when the GOP had control between 1995 and 2007, so victory is far from assured.

And another honorable mention is that Congress has not expanded the IMF’s bailout authority.

Now let’s look at the three worst policy developments of 2014.

1. Obamacare Subsidies – Yes, Obamacare has been a giant albatross for the President and his party. Yes, the law has helped more and more people realize that big government isn’t a good idea. Those are positive developments.

Nonetheless, 2014 was the year when the subsidies began to flow. And once handouts begin, politicians get very squeamish about taking them away.

This is why I wrote back in 2012 that Obamacare may have been a victory (in the long run) for the left, even though it caused dozens of Democrats to lose their seats in the House and Senate.

I think the left made a clever calculation that losses in the last cycle would be an acceptable price to get more people dependent on the federal government. And once people have to rely on government for something like healthcare, they are more likely to vote for the party that promises to make government bigger. …This is why Obamacare – and the rest of the entitlement state – is so worrisome. If more and more Americans decide to ride in the wagon of government dependency, it will be less and less likely that those people will vote for candidates who want to restrain government.

Simply stated, when more and more people get hooked on the heroin of government dependency, I fear you get the result portrayed in this set of cartoons.

2. Continuing Erosion of Tax Competition - Regular readers know that I view jurisdictional competition as a very valuable constraint on the greed of the political class.

Simply stated, politicians will be less likely to impose punitive tax policies if the geese with the golden eggs can fly away. That’s why I cheer when taxpayers escape high-tax jurisdictions, whether we’re looking at New Jersey and California, or France and the United States.

But this also helps to explain why governments, either unilaterally or multilaterally, are trying to prevent taxpayers from shifting economic activity to low-tax jurisdictions.

And 2014 was not a good year for taxpayers. We saw further implementation of FATCA, ongoing efforts by the OECD to raise the tax burden on the business community, and even efforts by the United Nations to further erode tax competition.

Here’s an example, from the Wall Street Journal, of politicians treating taxpayers like captive serfs.

Japan could become the latest country to consider taxing wealthy individuals who move abroad to take advantage of lower rates. The government and ruling party lawmakers are considering an “exit tax”… Such a rule would prevent wealthy individuals moving to a location where taxes are low–such as Singapore or Hong Kong… some expats in Tokyo are concerned the rule could make companies think twice about sending senior professionals to Japan or make Japanese entrepreneurs more reluctant to go abroad.

My reaction, for what it’s worth, is that Japan should reduce tax rates if it wants to keep people (and their money) from emigrating.

3. Repeating the Mistakes that Caused the Housing Crisis - A corrupt system of subsidies for Fannie Mae and Freddie Mac, combined with other misguided policies from Washington, backfired with a housing bubble and financial crisis in 2008.

Inexplicably, the crowd in Washington has learned nothing from that disaster. New regulations are being proposed to once again provide big subsidies that will destabilize the housing market.

Peter Wallison of the American Enterprise Institute warns that politicians are planting the seeds for another mess.

New standards were supposed to raise the quality of the “prime” mortgages that get packaged and sold to investors; instead, they will have the opposite effect. …the standards have been watered down. …The regulators believe that lower underwriting standards promote homeownership and make mortgages and homes more affordable. The facts, however, show that the opposite is true. …low underwriting standards — especially low down payments — drive housing prices up, making them less affordable for low- and moderate-income buyers, while also inducing would-be homeowners to take more risk. That’s why homes were more affordable before the 1990s than they are today. … The losers, as we saw in the financial crisis, are borrowers of modest means who are lured into financing arrangements they can’t afford. When the result is foreclosure and eviction, one of the central goals of homeownership — building equity — is undone.

Gee, it’s almost as if Chuck Asay had perfect foresight when drawing this cartoon.

Let’s end today’s post with a few dishonorable mentions.

In addition to the three developments we just discussed, I’m also very worried about the ever-growing red tape burden. This is a hidden tax that undermines economic efficiency and enables cronyism.

I continue to be irked that my tax dollars are being used to subsidize a very left-wing international bureaucracy in Paris.

And it’s very sad that one of the big success stories of economic liberalization is now being undermined.

P.S. This is the feel-good story of the year.

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