A meandering manifesto

One line of argument (loosely speaking) that I’ve seen popping up around the Internet consists of supporters of ObamaCare accusing those who are currently insured in the individual market and are complaining about ObamaCare making their situations worse, of being selfish. Or, as one commenter at that recent Megan Mcardle post put it, we’re “hard hearted” for ignoring the “thousands - maybe hundreds of thousands - who can’t get health insurance preACA, who can now”.

It took a few iterations of this for me to realize that I was starting to feel defensive and guilty for wanting to buy what I prefer with my own money. Once I did realize it, I got exasperated with myself and wrote in response to that commenter:

I absolutely support doing something to help people who are too poor to afford health care. (Pre-existing conditions are a little trickier. In some circumstances, yes, I support providing help. However, if an adult who could have afforded health insurance decided to gamble and not get it, I don't think other policy holders should have to pay for her treatment when she gets sick and *then* decides she needs health insurance.) If you had asked me 3 years ago if I'd throw an extra $1000 in the pot every year to help poor people get health care, I would have said yes. But the ACA asks me and many more like me to throw extra money in the pot and get worse (for me) health insurance and have fewer choices in health insurance and pay a fine/tax if I don't want to spend the extra money for worse health insurance. Not being a saint, I'm angry about that. Not being a supporter of government coercion, I'm opposed to that.

I'm especially opposed to it because there are much better (and much simpler) ways to have helped the uninsured and the people who passed this bill decided against all of them and went the ACA route instead. I'm especially angry about it because a lot of the people who think I should be happily willing to get a worse deal to help others have employer-sponsored health insurance and, oddly, don't seem eager to opt out of that insurance and buy on the individual market in order to help with the helping out.

In retrospect, I would have left off the first three sentences. They’re everything up through "I would have said yes." That's absolutely true for me but they give it gives too much legitimacy to the idea that other people, who don’t want to spend money to help the poor buy health insurance, are, in fact, selfish or hard-hearted. They aren’t. They’re just people who would rather spend their money on something else and there’s nothing wrong with that. It’s their money, after all.

Also, after writing that comment, I realized that there was nothing stopping me three years ago - or 30 years ago - from putting together a group of like-minded people, having each of us throw $1000 in the pot each year, and helping poor people buy health insurance. That realization, and the fact that I did nothing of the kind, brought home to me just how much I tend to see government action as the appropriate way to handle issues like this - notwithstanding my shift from leaning Left to leaning Right.

It took the very personal fall-out from ObamaCare for me to truly understand how and why getting the government involved should always be a rare move of last resort rather than a default position. And for helping me generalize my difficulties with ObamaCare to the larger picture, I’m indebted to two men.

First, Grim for this comment to a post over at the Hall:

If it makes you feel any better, this stomping of the social contract in the name of "Progress!!!" isn't unique. It's a persistent feature of the project. Ask the people whose land is underneath TVA reservoirs. It didn't matter what they wanted, or that their ancestors' graves were laid there. It didn't matter that they'd be reduced from free farmers on their own land to some other way of life they had reason to hate. Their land was in the way of water and power, and whatever it cost them they'd have to move.

For that matter, ask the Apache. How do you live with these people again? I'm not sure they've figured it out yet.

Second, Kevin D. Williamson. I re-read his book, The End Is Near and It’s Going to Be Awesome, and realized I’d pretty much totally missed the point of the book the first time around. I originally read it thinking he had some interesting policy prescriptions. The second time, primed by my close encounter with ObamaCare, I realized he had some interesting ideas about what people might do as individuals or in groups if we are able to - or forced to - stop thinking in terms of government-imposed, fully-specified, one-size-fits-all policies.

Many years ago - 40 or more - I heard a news story about some poor Third World country. The government had decided it needed men to mine something or plant something or build a road or whatever. The government sent troops to a small village out in the middle of nowhere and scooped up all the men and boys who were the right age to do the work. The soldiers left with their captives and no one left in the village knew where the men and boys had been taken or if they would ever come home again.

I was horrified and heart-broken. That government, I was sure, was made up of cruel men who cared nothing for their fellow citizens. It never occurred to me that those men undoubtedly believed that they were doing the best thing for the country as a whole; that the suffering of a few was a fair price to pay for the betterment of many; and that those who opposed them were short-sighted and, quite possibly, selfish and hard-hearted to complain about the plight of a few when so many would benefit.

The damage from ObamaCare is not on the same scale as the damage from that Third World government’s policies, of course, but the shape of it is the same, as it is for the people displaced by the TVA, as it is for all the people whose lives have been disrupted or damaged in the name of progress or the greatest good for the greatest number or simply because those in our government are convinced they know what’s best for every man, woman, and child in the country. The intentions may have been good but the reality is that the government doesn’t know what’s best; the greatest good for the greatest number is an illusion; and progress is something people do, not something government creates. And you know what they say about the road to Hell.

This shift in my outlook feels very odd to me because so much of my blogging has been about what policies I think the government should be imposing. It will take a while for me to rearrange my thinking now that I understand that the lesson of ObamaCare is that the answer to the question, “What’s the best government health care policy, government education policy, government agricultural policy, government energy policy, government whatever policy?” is almost always going to be, “As close to none as possible”.

And if I’m no longer arrogant enough to believe I know what everyone else should be doing, what the heck am I going to blog about? All the people who still are that arrogant?

The Williamson Rule

From an interview Kathryn Jean Lopez did with Kevin D. Williamson (emphasis mine):

LOPEZ: Why is it important to consider politics and government — Barack Obama and the NYPD officer — one and the same?

WILLIAMSON: All politics is force. It’s more obvious when you are dealing with the police and the military, because they carry guns. But those guns are used only to enforce policies mandated by people who do not carry guns themselves. My general rule is: If you are not willing to put a gun to your neighbor’s head over the issue, then you should not be willing to vote to have somebody else put a gun to your neighbor’s head over the issue. Which puts cowboy-poetry festivals, getting monkeys high on cocaine, and other government-sponsored shenanigans into a very different perspective.

I don’t have anything in particular to hang on this; I just think the Williamson Rule is a useful lens through which to view proposed policies. However much I may like a proposed government activity, is it important enough to me to put a gun to someone’s head to implement the activity? If not, then maybe I need to think again before asking the government to do just that.

The Lifelong Endowment

T99 over at Grim's Hall recently put up a post called "The wages of consent". It points out that:

A welfare state threatens to become a system in which the most valuable service some voters can offer the market is to elect a politician who will drain resources from those who didn't elect him.  The politician pays for this service by routing a fraction of the loot back to his loyal voters.  The welfare state differs from our earliest attempts at state-administered charity in that the politician no longer is commandeering and redistributing only a small fraction of the nation's wealth to a small number of the most desperately needy.  Now he's commandeering from 49% of voters and redistributing to 51%.  Once the politician realizes that that's the path to staying in office (where he makes a handy living by skimming off the top of the redistributed funds), we are well on our way back to a command economy, one in which a centralized power directs where most of the resources shall be routed.  That way lies poverty for everyone.

and asks:

How do we stop a pernicious system of votes for hire?

I believe the ship has sailed as far as ever getting back to a system where people in the United States don't expect money to be taken from some of us to and given to others of us, so the fact that T99 is not asking, "How can we convince 51% of the people that wanting money to be redistributed to them is a Very Bad Thing?" seems to me to be a step in the right direction. That is, she is not asking how we can do the impossible but, rather, whether there's a way to do the maybe-perhaps-possible. There may be.

Quite a while back, someone who read my blog emailed me about a plan he had to address this very issue. Called the Lifelong Endowment*, the plan takes the government out of the equation by setting up a direct transfer of money from those who have more to those who have less. The plan document** detailing the Lifelong Endowment summarizes it thusly:

It assesses sixteen percent of all personal income and retained corporate earnings on a monthly basis, and distributes the full proceeds in equal shares to each adult citizen and quarter shares to minor citizens. Neither the assessment paid nor the benefit received is subject to federal income tax. [snip] Two pieces of companion legislation complete the proposal. The first eliminates the Social Security Old Age, Survivors, and Disability Insurance program (OASDI), and returns all employer and employee payroll taxes to the employee as wages. It also guarantees beneficiaries a total Lifelong Endowment benefit not less than the total OASDI benefit they would otherwise receive. The second measure is a corporate income tax rate reduction sufficient to make the proposal revenue-neutral for corporations.

The math here is simple and lovely. The Lifelong Endowment is:

- Flat in assessment: everyone pays the same percent.
- Flat in distribution: each adult gets the same as every other adult; each child gets the same as every other child
- Perfectly redistributive in effect: the poorer you are, the greater your net positive; once you become rich enough, the effect is a net negative

Thinking about this approach does require that we accept the inevitability of some kind of redistribution and turn our attention to minimizing its ill effects. Anyone who is still attempting to eliminate redistribution itself will not find this approach helpful. I encourage everyone, however, to think about how various scenarios would play out under this approach. When I did that, I usually found that this approach worked quite well even in those situations where I was sure I could find a fatal flaw.

How does the Lifelong Endowment "stop a pernicious system of votes for hire"? By getting the Federal government out of the redistribution business. This happens first because the sixteen percent assessment does not flow to the Federal government. Rather:

The collection of the tax and the apportionment of its receipts occur monthly. It is administered through accounts provided and maintained for that purpose by the banks of the United States, the choice among which is made according to the convenience of each individual.

The government has no control over this money and is unable to "make a handy living by skimming off the top of the redistributed funds". It "has no role other than to enforce [the plan's] operation". There is no reason to offer votes in exchange for loot since the politician has no loot to give. There are thus no special interest groups arguing for greater support for their group.

Second, because they have no control over the money, the government and its employees and sub-contractors also have no control over recipients of the money. In speaking of those who currently "look to … [government programs] to satisfy basic needs", the plan document says:

They must accept the definitions and priorities set by the [government program] for the problems that they face and for the solutions to those problems; but these and all other aspects of the [government program] emerge from public-choice processes that reflect interests unrelated to their own. They must forego productive activity on their own behalf in order to meet program eligibility requirements, but attend without fail to unproductive dealings with executive bureaucracies. Both the [government program] and the relationship of citizens to it depend solely on public-choice and resulting political factors that again reflect interests other than their own; but the possible (or threatened) loss of their [government program]-client status can command their support for those interests nonetheless. Through a combination of requirements, prohibitions, and incentives, current assistance programs are thus destructive of the personal, economic, and political liberties of those who must rely on them.

The Lifelong Endowment removes this power from the government. The money is distributed to everyone equally with no intervention from or direction by the government. Recipients need not adopt or forego specific behaviors in order to be "allowed" to receive this money; they need not support policies they don't like in order to elect the politicians who will continue to "give" them the money they need to keep body and soul together:

Citizens are not beholden for their benefit to the patronage of a political faction, but rely instead on the general prosperity that both their own efforts and the genius of their shared civic endeavor help to create.

The Lifelong Endowment also means that people who need financial assistance but would like to support themselves don't have to worry about losing the assistance when they start trying to help themselves. A young mother can take an entry level job without worrying that she'll lose subsidized day care: she goes right on getting her share of the Lifelong Endowment. Even if a big chunk of her salary goes to pay for child care her family is no worse off than it was before and she has her foot in the door of the work world. If a man with an injury that makes it hard for him to work 40 hours a week at his previous well-paid job finds an easy, low-paying job 15 hours a week, he doesn't have to worry he'll lose his disability payment:

All citizens alike can exercise and develop their personal autonomy, defining and ranking the challenges of life in accordance with their own perceived interests. All citizens have the identical incentive to pursue their economic self-interest through productive and voluntary market exchange.

The Lifelong Endowment has effects beyond interrupting what T99 calls "a pernicious system of votes for hire". One of the most important is that it undercuts the idea of a limited pie where more for the rich somehow means less for the not rich. Instead we are all tied together: the more money the Koch brothers make, the more money we all get. Everyone now has a rooting interest in policies which encourage making money. The Lifelong Endowment does this by:

… tying the benefit amount directly to national prosperity. It thereby enlists the self-interest of citizens toward the prosperity of their neighbors, and thus toward creating a nation where both they and their neighbors can prosper.

In other words, once the Lifelong Endowment is in place, proposing a plan that would limit the prosperity of anyone in the country would mean limiting the prosperity of everyone in the country. When a politician starts railing against those who are making too much money, everyone in the country can do simple arithmetic to figure out how much of that "too much money" will flow into the Lifelong Endowment and thence to them - and can see clearly that if that "too much money" flows into the government tax coffers instead, everyone will see far less direct benefit from it.

Although the plan document does not mention it, there is another aspect of the Lifelong Endowment I think is important. It brings into sharp focus the question, "How much of my income am I willing to give to other people?" That, after all, is really what's happening with all Federal income support programs: Social Security; disability payments; unemployment benefits; welfare; food stamps; housing subsidies. All of it. I am giving some of my income to other people: I get taxed; you get money. However, the Rube Goldberg contraption that funnels my taxes to your wallet is so opaque that the connection between the two simply can't be grasped. This makes it very easy to agree to an increased benefit for Person A because it appears to have virtually no impact on Person B's taxes - even if Person B is me. If we extend unemployment benefits for another six months, it may cost each of us, I don't know, $1 a year. That seems like a small price to pay to help those who need assistance. But $1 here and $1 there and before you know it you're talking either confiscatory tax rates or a multi-trillion dollar deficit.

WIth the Lifelong Endowment, we're starting from the other end. We aren't asking, "How much money do we want the needy to have?" but "How much money are we wiling to ante up?" If 16% seems like a lot to be assessed but we run the numbers and it turns out that the government is already redistributing the amount of money that a 16% assessment will provide, well, guess what? That means someone somewhere is already chipping in at least 16% to provide that money. Or, more likely, our grandchildren will be doing so here shortly. In other words, this approach also brings into sharp focus the realization that money given to people must be coming from somewhere and that somewhere is other people, either currently existing or soon to be born into crushing debt.***

I do have some concerns about the Lifelong Endowment as currently proposed. First, the plan leaves intact existing Federal income support programs. Since the Lifelong Endowment would leave most of the people currently receiving them above the means-testing line, the idea is that those programs would be unused without ever being repealed. I have serious reservations about this. I believe eventually the poverty line for participating in those programs would simply be raised and we would end up with a Lifelong Endowment and massive Federal income support programs. (The framework for that is already in place with the trend toward redefining poverty from an absolute condition to a relative one.) I would prefer that the existing income support programs be discontinued.****

That said, the plan document is not just about defining the Lifelong Endowment: it is also about building a coalition to pass it. Leaving the existing Federal income support programs in place may be necessary to build that coalition:

… the continuing availability of current aid programs … serve[s] to reassure voters that their support of the proposal carries little risk.

I am also hesitant about the proposed distribution formula; I lean toward simply giving each adult a full share and children no share. My concern here is about children being seen as little ATMs, whether we're talking about families getting more money the more children they have or divorcing couples whose child custody fights suddenly get much uglier. However, I can see the appeal of providing shares for children so I go back and forth on this issue.

Then there is the assessment on retained corporate earnings. I am leery of corporate income taxes in general so this makes me uncomfortable. However, again, the plan is designed to build a coalition to actually enact the Lifelong Endowment. It may be that the assessment on corporations is necessary to make the Lifelong Endowment large enough to be embraced by a "hyper majority" and/or that requiring corporations to "pay their fair share" may be required to garner support on the Left. Furthermore, the plan envisions an offsetting income tax reduction so the effect on corporations is neutral. We should be aware, however, that once we go this down this road it will probably be impossible to ever remove the Lifelong Endowment assessment against corporations. That means we will always have, a minimum corporate income tax (at least one retained earnings) of 16%.

Finally, what keeps the same "pernicious system of votes for hire" from kicking in and resulting in politicians increasing Lifelong Endowment assessment from 16% to 18%, then 20%, then 25%?

Nothing. Which is why it would be nice to set this up as a Constitutional amendment if possible.***** The plan's author takes the long view here:

The proposal envisions that some variant of a Lifelong Endowment would eventually be adopted as a constitutional amendment. An effort to curtail government powers rather than expand them has the advantage of tactical flexibility: this and other restrictions of government spending can proceed at first through legislation, and their effects can be studied and debated, before the more difficult task of adopting a constitutional remedy is ever attempted.

My own shorter view is that while this type of assessment creep will be a danger if the Lifelong Endowment is enacted through legislation, I believe it is less of a danger when how much is really being paid for a benefit is front and center. It can sound very reasonable to say, "Poor people need more money. Let's increase everyone's food stamp allowance." It can sound even more reasonable to say, "Poor people deserve better food. Let's loosen up requirements for food stamps on top of Lifelong Endowment shares." It should sound pretty unreasonable, however, to say, "Getting 16% of your money isn't enough; poor people need 20%." And if that doesn't sound unreasonable, we're pretty much toast anyhow.

So. Comments, questions, problems, screams of outrage?

*****

Notes:

* I like the name "Lifelong Endowment" because it removes the word "redistribution" and the word "entitlement". It emphasizes the idea that we are all in this together. It removes the stigma of government handouts. It also removes the implication of charity which is a serious consideration if a plan is going to garner support from the Left.

** The Lifelong Endowment plan does not exist in a website although a summary of it can be found in this comment to a PJ Media post. When I quote the plan, I am quoting with the author's permission from our correspondence, including an approximately thirty-page document detailing the plan. Throughout this post, I have snipped specific dollar calculations and amounts when I quote from the plan document. They are not the focus of my post and they are based on older data and need to be updated.

*** I disagree with the statement by Fabius Maximus here that "Proposals like this are dross unless we see the numbers". If the plan is a way out of our current situation then we figure out if the numbers can work. If it causes more problems than it solves then the numbers are irrelevant.

**** I believe health care/insurance issues must be handled separately so I would treat Medicare and Medicaid separately.

***** In the form of the plan outlined at the comment to a PJ Media post, the author proposed a variable rate, set by an independent board. This proposal was not part of the plan document I have. I am extremely leery of a variable rate since such rates seem to travel in only one direction.

A [fill in desirable health care/insurance outcome] in every pot

[I wrote this in March of 2010. I was going to junk it - I’m cleaning up my computer files - but part of it still resonates so here it is with a nice new footnote.]

Movin’ Meat has up a post in which he cites the case of Anthem Blue Cross Blue Shield paying claims late and says:

Actually, that's pretty much SOP for most insurers: deny and delay at will, and dare providers/consumers/regulators to punish them. Fines (when there are any) just go back to the insureds as increased premiums, and any time the providers/consumers are fatigued out of demanding the insurers actually pay, that's pure profit for the insurance company.

Pass. The. Damn. Bill.

As I said in the comments there, I don’t see how any of the three (perhaps soon to be four) health care reform bills that might be passed would eliminate this issue. The bills don’t get rid of insurance companies so the business models for the companies won’t change and bad insurance companies won’t suddenly become good ones. I suppose supporters can argue that Federal law will be better at regulation than State law but in rebuttal I would simply mention the Great Financial Crisis of Twenty-Aught-Eight. Whoever was at fault in that Crisis, no one can argue that having the Federal government regulating the financial industry made companies behave in a saintly manner. Incentives are incentives even for the best companies in any industry and every industry has some bad apples. All the Federal law in the world won’t change that.

What intrigues me about this is that it’s representative of a firm belief in some quarters: passing Obamacare will make all the problems with our health care and our health insurance magically disappear. Movin’ Meat believes Obamacare will make insurance companies stop delaying claim payments. Yet Obamacare doesn’t get rid of health insurance companies. Similarly, at the health care summit, Representative Louise Slaughter said:

I have a constituent that you won’t believe and I know you won’t, but her sister died, this poor woman had no dentures. She wore her dead sister’s teeth which of course were uncomfortable and did not fit. Do you believe that in America that’s where we would be?

Yet according to The New Republic:

The Senate and House health reform bills are relatively silent about dentistry. (The word "dentist" appeared once in the 1,502-page Senate Finance committee draft bill.) Child coverage has been expanded. Provisions are included to strengthen the dental work force and to address other infrastructure concerns. Yet these bills do relatively little to ensure adult access or to apply a careful delivery reform lens to dental services. (The status of stand-alone dental plans within proposed insurance exchanges raises delicate concerns, for example.)

Based on that analysis, I don’t know why Slaughter would think Obamacare would magically produce dentures for her constituent.

A week ago, Movin’ Meat was claiming that we had to pass the health care bills in order to eliminate rescission. Yet the House health care bill still allows for rescission in the case of “clear and convincing evidence of fraud” subject to third-party review. The Senate bill is even more gentle, allowing for rescission in the case of fraud or intentional misrepresentation; this is not an improvement over most State regulations and existing Federal regulations. When the Exchanges are up and running in 2014, everyone will have to buy health insurance so there will presumably be no conditions under which rescission can happen. But until then passing Obamacare will not eliminate rescission.

This is really just another version of what puzzles me so terribly about the Left’s support of Federal government health care reform. The Left believes the Federal government constantly and chronically fails in its regulatory, moral, and fairness obligations: the financial crisis; the environment; the Wars; Guantanamo; enhanced interrogation; restricting campaign financing; hate crimes; education; lifting people out of poverty; protecting the rights of women and minorities; and on through the endless list. Yet the complaints that our national government is failing us at every turn are always accompanied by demands that the Federal government do more. How does this make sense? If the Federal government is doing things so badly, why will increased action on their part make things better?

My belief is that if the Federal government is doing something badly then either this is not a task that the government should be attempting or that imperfection is the best we can hope for. In the former category, I put education: the Federal government has no business in education. In the latter category, I put Guantanamo: it’s the best of a whole armful of lousy options. Sadly, my belief does not appear to be widely shared.*

My impression is that a lot of people never even consider that doing something badly means either that the Federal government shouldn’t be doing that thing or that doing it badly is sometimes the best we can do. Instead they cling to the conviction that if government is doing something badly then either it isn’t trying hard enough or it isn’t run by the right people. They seem to believe the government can do anything and do it very well, perhaps perfectly. All that is required to turn the government’s poor performance into perfection is more money, more effort, more laws, more regulation; the right people running things (this is crucial); and a way to make everyone else do what they’re supposed to. Reality-based, my foot.

If Obamacare passes, it will be interesting to see what happens to all the stories about people who suffer from denied claims, delayed claims, lack of dental care, and being dropped by their insurers because they left something off their applications. I don’t believe the problems will magically cease. I do believe it will no longer be those on the Left who are talking about them.

*****

Afterword

Except for polishing my concluding language, I wrote this post yesterday. This morning I read a letter from the Red Queen to President Obama (Via Blue Lyon). The whole letter is worth reading (language warning) but what struck me was the contradiction I see between the first and last sentences in this fragment:

Thank you, President Obama, for destroying any hope (or should I say delusion) that I had about our government's efficacy.

Thanks for giving me the change (and by change I mean the spare change I'm going to start asking for on street corners) I can believe in.

I am just one little person in a sea of millions of little people all drowning in this financial crisis. I do not have the clout that say a few "savvy" banksters do. I'm just a mom, with no income, no health insurance and a kid who has a toothache and can't go to the dentist.

And what I need from my government is for it to work for me.

*****

Footnote:

* In the year since I’ve written this, it’s been interesting to watch the Left’s position on Guantanamo now that it’s Barack Obama’ baby. They seem to either be ignoring it (no links, obviously) or still criticizing it (Glenn Greenwald is the obvious link here). Now, I can see that Greenwald’s continuing criticism of Guantanamo could be a sign of admirably steadfast principle. But I do wonder why no one on the Left is looking at the similarities between what the George W. Bush Administration did in the Global War on Terror and what the Obama Administration is doing in that same conflict, and saying to themselves:

Hmm. If two Presidents with such dissimilar world views are both doing the same things, maybe it’s the best we can manage to do.

Disputing with Taraka

In a comment, Figment and Reality has pointed to HIPAA and COBRA as mechanisms for attempting to provide continuity of coverage. Read his comment and the link he provides to HowStuffWorks to get a sense of these programs. He’s right when it comes to group policies and Heaven knows I’ve benefitted from both HIPAA and COBRA. But however laudatory laudable the goals of both programs they are examples of a problematic relationship between government and corporations.

HIPAA and COBRA force private companies to serve societal goals - without society stepping up to pay the bill. It may all come out in the wash for insurers with regard to cost but it is another step down the road to private corporations acting as agents of the government rather than as independent entities. A road, obviously, that the health reform bills under consideration take us even further down.

I'm enthusiastically in favor of reasonable government regulation of corporations and I know the line where regulation becomes an unholy alliance is not clear and bright. Still I think it's important to remember the line exists and to understand when we are walking near it.

Why unholy? A private business should seek profit above all; in order to do so it must please its customers and compete with other firms. Those activities hold some of its more predatory urges in check. Government’s role should be to use regulation wisely to control the predatory urges that are not sufficiently controlled by market mechanisms.

Once a private business becomes an arm of the government, it no longer needs to please its customers and compete with other firms to make a profit; rather it needs to convince government to act in ways that make its business profitable. It will thus use every means at its disposal to persuade government to guarantee it market share by limiting competition from other firms and by making its customers captive. Government is inclined to go along with this because the firm is carrying out the government’s policies and it is in the government’s interest to insure the firm remains able to do so.

Now we have the worst of both worlds. We have a profit-driven firm that does not need to deliver a decent product in order to remain profitable and we have a government with no interest in checking the excesses of a private firm it now considers an arm of the government. Each party has contaminated the other.

Furthermore when the government forces private industry to serve government purposes doing so allows society to hide from itself the cost of a desired policy - even though knowing the cost of a government policy should be an important part of deciding whether to implement it. When New Jersey requires health insurance companies to provide excellent coverage the costs appear on insureds’ bills rather than on taxpayers’ returns. The costs of instituting the government policy were not openly borne by taxpayers through a government mechanism. Instead the costs were hidden in increased insurance costs for everyone who buys - or would like to buy - health insurance.

COBRA and HIPAA are the same thing although almost certainly with a smaller individual impact. As a society we can congratulate ourselves that we’ve forced insurance companies to provide more coverage and it hasn’t cost anything. It’s true that it hasn’t caused our taxes to go up (at least directly) but it must have caused a small increase in health insurance premiums. We don’t see that increase as driven by governmental fiat; we see it as a price increase by a private business and thus we can deceive ourselves about what we’ve done.

As I said, there is no hard and fast rule about when government regulation of business becomes an alliance of government and business. But we do ourselves no favors if we let government use private business to achieve ends more honestly achieved through direct government action. Neither do we do ourselves any favors if we let businesses use government intervention to achieve the profit that should come from fair competition in the marketplace.

*****

Notes:

On an - I think - unrelated note, what’s particularly odd about COBRA and HIPAA is that the government could have achieved the same goal more straightforwardly by simply allowing anyone who would be covered under COBRA or HIPAA to enroll in Medicaid and pay a premium. There was no need to force private insurers to provide the desired coverage.

The title of this post comes from Roger Zelazny’s Lord of Light. A (mostly) human man is possessed by Taraka, a powerful demon. The man eventually finds himself infected by Taraka’s evil, “disputing with Taraka” over which woman is most desirable, raising the wine cup or the dungeon whip by his own will. The analogy works nicely whether your ideology inclines you to assign the role of Taraka to private companies or to the government.

A place for everything

Enough tinkering at the margins, practicing the art of the possible, pussyfooting around. Here’s what I’d really like to do: cut the size (read “budget”) of the Federal government by at least 50%. I’d start by getting the Federal government out of areas that can be handled perfectly well by the States. This is not a complete list by any means but let’s start with:

Eliminate whole Cabinet departments: Education, gone; Agriculture, gone; Labor, gone; Housing and Urban Development, gone; Energy, gone. Then eliminate programs within the remaining departments: Medicaid, gone; welfare, food stamps, stuff like that, gone. Let’s take a look at all the parks, sites, monuments, and so on that are “national”. Sure some of them should stay that way but based on what I see just around here there are a number of them that would be better off under State or local control and responsibility.

The Federal government has no role in Education or Housing and Urban Development. If it has any role in Agriculture, Labor, or Energy it shouldn’t be a big enough role to justify an entire Cabinet Department. What needs to be done in these areas should be done at the State level not at the national level.

Programs like Medicaid and welfare are bizarre hybrids of State and Federal involvement that appear to either encourage the States to enroll more people in the programs or leave the States in financial hot water or both. These functions should go back to the States entirely; leave the Federal government out of it.

As the Federal government eliminates Departments and programs it should cut taxes accordingly. The Education Department has a budget of $13.4 billion (2006 number). We should eliminate that Department and cut Federal income taxes by $13.266 billion - 99% of the money saved at the Federal level. The States can then turn around and impose higher taxes on their residents to make up for the loss of Federal money if they want to continue to fund the eliminated programs. The one percent of taxes that isn’t cut will gradually help bring the deficit down.

If eliminating all the Federal Departments and programs that can be handled by the States doesn’t reduce the size of the Federal government enough, then we start across the board cuts. The first year we cut 5% from every remaining Department and program. Congress is free to decide on a different formula - perhaps preserving the entire Department of Defense budget while cutting more from the Department of State (or vice versa) - but if they fail to make sufficient cuts, then an automatic 5% across the board it is. The next year we cut 5% of the current budget and so on until we get to the size we want. Each cut in budget is accompanied by a corresponding income tax cut, again 99% of the money removed from the Federal budget.

Eventually we'll have a small Federal government, the deficit will be reduced, and each State can decide for itself what services it wants to provide.

There. I feel much better now.

Blue laws

Commenter Beard has left a long response to my recent post “Weeping, wailing, gnashing, and clueless”. I - as usual - started responding and ended up with a post-length response.

Beard begins by saying:

From this comment, I assume that you'd prefer the government to keep out of the anti-trust business as well. Right?

The whole point of capitalism is for there to be a competitive marketplace, in which sellers compete for the attention of buyers by improving value of their product. Right? This means that if a company, or a small group of companies, figures out a way to game the system and maximize profits without improving value, then they are violating the reason why we are so fond of capitalism. Anti-trust laws were created for exactly this reason. By leveling the playing field, the government can ensure that the capitalist system is a competitive one, not a collusive one that simply exploits the customer and maximizes profits.

He (I’m making a gender assumption here based on handle) then goes on to discuss how insurance companies make a profit - taking in more revenue than they pay out - and how they can game the system by selling health insurance only to healthy people and by refusing to pay claims if their insured have the temerity to actually become ill. He goes on:

Given the structure of corporations, if not prevented by law, they will do these things, just like a 2-year-old will try to swipe candy from the supermarket if you don't make him put it back.

Therefore, we need to level the playing field, establishing rules by which insurance companies must play. Limiting the government's role in the health care process is like unleashing the 2-year-old in the candy store with no rules. This will not end well.

He then notes that customers can also game the system and concludes by advocating a single-payer system.

So let’s begin. My wanting to limit the government’s role in the health care process is not equivalent to my wanting to eliminate the government’s role in the health care process. I believe capitalism is the best engine ever devised for improving people’s material well-being. I also believe that unrestrained capitalism is a nightmare. Thus I’m a big fan of anti-trust regulation for the same reason Beard supports it: to level the playing field.

The issue of how much government regulation is necessary to produce that level playing field is an ongoing one and is one of the continuing points of dispute between the Left (which usually believes more is better) and the Right (which supposedly believes less is better but also has a Main Street segment that looks unfavorably on Big Business that is too big). It seems to me that the trick is to have enough government regulation to keep the playing field level while avoiding regulation that itself tilts the field (this is the crux of Zingales’ distinction between being pro-market and being pro-business) or that shuts down the game completely (makes doing business so difficult the industry dies).

So I have no objection to government (at some level) regulating the health insurance industry. However, the belief that the regulations embedded in health care/insurance reform are benign government moves designed solely to level the playing field is not shared by all observers. Furthermore, we must consider that the proposals embedded in various health care/insurance reform proposals go far beyond mere government regulation. In those proposals we also see:

- government protection of and/or support for some industries. Under the Baucus bill some health care industries suffer from excise taxes on their products while others do not. In the Rich article I reference in my original post, Rich points specifically to a lobbyist’s success in convincing the government to protect drug prices. These are hardly examples of anti-trust regulation designed to level the playing field.

- government competition with industry. This is what the Public Option explicitly is. We can have endless discussions about whether the Public Option will compete fairly against private insurers (Greg Mankiw’s points still need addressing) but even if through some miracle it does compete fairly, it is still competition. Similarly, the government -initiated and backed co-ops are competition and there is no pretense they will compete fairly. Government competing with private industry goes far beyond field-leveling regulation.

- government destruction of an industry. The Single-Payer plan will destroy the private health insurance industry. Under the Single-Payer bill I know of, private health insurance companies will be restricted to providing insurance for non-essential medical care:

SEC. 104. PROHIBITION AGAINST DUPLICATING COVERAGE.

(a) In General- It is unlawful for a private health insurer to sell health insurance coverage that duplicates the benefits provided under this Act.

(b) Construction- Nothing in this Act shall be construed as prohibiting the sale of health insurance coverage for any additional benefits not covered by this Act, such as for cosmetic surgery or other services and items that are not medically necessary.

I am unable to figure out how an insurance company could make money selling policies to cover face-lifts.

Even if we assume a Medicare For All that allows people to buy supplemental insurance - that is, the government provides a certain menu of health services and private insurers provide the rest - I hold out little hope for the private health insurance industry. Assuming government health insurance is decent there would be little room for private insurers. Perhaps a very small industry could survive by selling policies that allow access to unproven and very expensive treatments but I doubt it.

On the other hand, it is true that we could consider the destruction of an entire industry an example of leveling the playing field. A bit scorched earth, perhaps, but leveling nonetheless.

So those are my thoughts on how the proposed health care/insurance reforms don’t exactly fall into the realm of government regulation for anti-trust purposes designed to achieve a level playing field. The other point I want to make is that my post was about the Federal government’s role in the health care process. Insurance companies are already regulated, primarily at the State level. Some States - like my New Jersey - regulate them very heavily. Others regulate them very lightly. I see no reason why insurance company regulation needs to move to the Federal level. Nor do I see any reason why government provision of health insurance - through a Public Option, government-initiated co-ops, or a Single-Payer system - needs to be implemented at the Federal level. If State A wants a Single-Payer system, they should develop one. Similarly, State B may want a Public Option; State C may want individual mandates; State D may want pre-existing condition exclusions removed; State E may want government-backed co-ops; and State F may want the wild, wild west when it comes to insurance company regulation. There’s no reason to impose a one size fits all policy across all 50 States and 300 million or so people.

In his health care speech on September 9, Obama referenced Alabama:

So let me set the record straight. My guiding principle is, and always has been, that consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company. Without competition, the price of insurance goes up and the quality goes down. And it makes it easier for insurance companies to treat their customers badly – by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates.

My basic reaction to his claims about Alabama is “so what”. Alabama has a democratically elected State government. The citizens of Alabama, via their State government, can decide if they want to use government resources to provide competition via a public option or to provide incentives for other insurance companies to enter the market; they don’t need the Federal government to tell them health insurance is being mishandled in their State. Furthermore, the Great State of Alabama - like the Great State of New Jersey - can decide what type of regulation it wants to impose on the health insurance companies operating within its borders. State governments are just as capable as the Federal government of outlawing practices like cherry-picking and overcharging. Obama’s statement is, at bedrock, a remarkable display of arrogance: States (perhaps especially “backward” States like Alabama) are not competent to manage their own affairs and must be both chastised and assisted by the Federal government.

Finally, I want to consider Beard’s final words:

... it is far more straight-forward to simply go to the SIngle Payer system, covering everyone by law, and just pay for it with taxes. Good example of taxes paying for tangible value for every taxpayer.

I have no reason to believe that a Single-Payer system will provide me with tangible value. I am very happy with my health insurance and my health care; I have never had a procedure so much as questioned much less denied. Since it is impossible for my health insurance to get any better, I am virtually assured that under a Single-Payer system I will receive an inferior product. So while I am perfectly willing to throw some tax money in the pot to help those who cannot afford health care and/or health insurance purchase it, I am not willing to jeopardize my health care to do so. Considering the reportedly high levels of satisfaction with health care in this country, I don’t imagine I’m the only person who feels that way.

*****

Reading:

The Reality Check - Raises some interesting points about the difference between a business being insured by a health insurer and that business being self-insured and merely using a health insurer to do the paperwork. Now that’s a whole other can of worms in this debate.

Blue Cross a good monopoly - Some further information - good and bad - about Alabama Blue Cross Blue Shield. It’s worth nothing that Alabama Blue is a non-profit. You know - like the Public Option and the government-initiated co-ops.

Fact-Checking the President on Health Insurance - Some info about Alabama Blue among other things.

Phony capitalism

Luigi Zingales’ article, “Capitalism After The Crisis”, should be required reading for everyone. I’m relatively new to thinking seriously about the most desirable relationship between government and business so this article helped me understand the absolutely crucial distinction between being pro-market and being pro-business. As Zingales makes crystal clear the two positions are far from the same and in fact should more properly be understood as opposing each other.

It’s hard to pick just one quote from an article which needs to be quoted in entirety but in keeping with the theme of my immediately preceding post I chose this paragraph:

When the government is small and relatively weak, the way to make money is to start a successful private-sector business. But the larger the size and scope of government spending, the easier it is to make money by diverting public resources. Starting a business is difficult and involves a lot of risk — but getting a government favor or contract is easier, and a much safer bet. And so in nations with large and powerful governments, the state tends to find itself at the heart of the economic system, even if that system is relatively capitalist. This tends to confound politics and economics, both in practice and in public perceptions: The larger the share of capitalists who acquire their wealth thanks to their political connections, the greater the perception that capitalism is unfair and corrupt.

Via Greg Mankiw of course.

Weeping, wailing, gnashing, and clueless

This opinion piece by Frank Rich is almost a month old - someone sent me a link to it while I was on hiatus. Rich’s points are interesting but in his hand-wringing over the insidious influence of corporate interests on lawmakers and law-making why does it never occur to him - or apparently to most such hand-wringers on both sides of the aisle - that the easiest way to reduce the impact of corporate interests on government is to have government less involved in everything from soup to nuts?

Pundits like Rich weep and wail and gnash their teeth as they desperately search for ways to keep corporate interests from deforming the kind of health care the Federal government is going to provide to all of us. Instead of struggling to limit corporate interests’ role in the law-making process, how about if we take a step back and see if we can limit the Federal government’s role in the health care process?

Spinning soda into gold

They’re talking about taxing sodas again. TigerHawk doesn’t sound happy; Conor Clarke asks what the big deal is. To me, the big deal is that I hate all sales and consumption taxes - actually all individual taxes except the income tax. If I assume, however, that the government is bound and determined to levy some kind of tax on “unhealthy” food and drink then what becomes important to me is making sure we understand what we should be taxing and why we’re taxing it.

Clarke has up an interesting chart that shows the results of asking people who and what they would be willing to tax “to help pay for health care reform and provide coverage for more of the uninsured.” Soda and soft drinks were a less popular target than (in order of popularity) cigarettes; families making more than $250,000 a year; wine and beer; and unhealthy snack foods. Clarke is puzzled about the unpopularity of taxing soda. I’m not.

It does seem illogical to support taxes - higher taxes - on cigarettes, wine, and beer while not also supporting taxes on “unhealthy snack foods” and “soda and soft drinks”. But it’s not surprising: relatively few people smoke and I suspect that relatively few people drink enough to make raising taxes on wine and beer an issue. (Plus we can all just start drinking bourbon instead. Although I like mine with Coke so I may be out of luck anyway.) An awful lot of people, however, like a cold Coke on a hot day at least occasionally. And since the survey didn’t specify only non-diet sodas, it’s not just those of us who are addicted to the real thing who are going to resist a soda tax.

Also, people are aware that cigarettes, beer, and wine are already subject to significant taxes so the idea that’s it’s “normal” to tax those products is firmly implanted in most people’s brains. Similarly, cigarettes and alcohol are firmly filed under “Vice” while snack foods and sodas are equally firmly filed under “Treat”. Finally, while people may agree with Clarke that soda isn’t good for people’s health, I don’t think most people think of soda as being bad for you in the same way that cigarettes are and alcohol can be.

One issue that Clarke gives weight to is where to draw the line in defining what is and is not a “soda and soft drink” and he bemoans the lack of a bright line to distinguish what would and would not be taxed. On that score, I have a suggestion. Well, two suggestions, actually.

Let’s start by looking at the rationale behind taxing sodas: sodas cause obesity and obesity is a big health problem so if we tax sodas we will improve health by reducing consumption and raise money for other health-related improvements. Interestingly, the Wall Street Journal article cited by both TigerHawk and Clarke does not provide any links to any evidence of the causal relationship between sodas and obesity. The WSJ article does identify The Center for Science in the Public Interest as the moving force behind the idea of taxing sodas to pay for health care reform so I checked their Website and found a one-page memo proposing the soda tax. The memo states - without hyperlink, citation, or footnote - that:

More bad news comes from researchers who are finding that soft drinks are especially good at making people gain weight. In fact, soft drinks are the only beverage or food that has been linked to a greater risk of obesity.

Perplexed but undaunted, I did a quick Google search for “soda causes obesity” and found the top hits dated from 2006 or earlier. An article in The San Diego Union-Tribune seems to sum up the state of play pretty fully. It presents four arguments advanced to support the causal link between soda and obesity.

Argument 1: While soft drink consumption was rising between 1977 and 1997 so was obesity. Somewhat haphazardly lumped into the same argument is a reference to two studies that found obesity increased in schoolchildren and nurses when they consumed more sodas.

The first part of this argument presents correlation but not causation. The second part is somewhat tautological: as students and nurses consumed more calories they gained weight. None of this answers the really important questions: Why did soft drink consumption rise and why does soda consumption apparently occur on top of existing calorie consumption rather than replacing it? In other words, when the students and nurses drank more soda why didn’t they cut back on calories from other sources? Answers to those questions are contained in the second argument.

Argument 2: Soda is sweetened with high fructose corn syrup (HFCS) which does not act the same way other carbohydrates do to reduce appetite. Thus while consuming “real food” causes the body and brain to figure out that they’ve eaten, consuming HFCS does not. (This is a remarkably sloppy section. It begins by talking about HFCS then cites evidence from a study of “caloric beverages”. One is left to assume without evidence that the caloric beverages were sweetened with HFCS.)

Unfortunately, Argument 2 is presented in such a way as to only address the question about why people who consume soda don’t reduce calories from other sources. A little thought, however, reveals that the problems with HFCS can shed even more light on Argument 1. If high fructose corn syrup doesn’t produce feelings of satiety, perhaps that’s why soda consumption rose from 1977 to 1997 - a period that matches up nicely with the introduction of HFCS into sodas:

HFCS was rapidly introduced to many processed foods and soft drinks in the U.S. from about 1975 to 1985.

In other words, this suggests that the causal relation is not between soda and obesity but between HFCS and obesity. Soda may be an intermediary - HFCS in soda causes increased soda consumption which causes obesity - but since HFCS is found in so many foods I'm not even convinced we can say that. Take away people's sodas and they will still be consuming a lot of HFCS. So if HFCS is the problem, people deprived of soda may simply increase calorie consumption from other sources in a continuing vain attempt to achieve satiety.

Argument 3: People who consume soda are more likely to eat less healthily across the board. There is absolutely no evidence - none, zip, zilch, nada - that consuming soda causes people to eat more fast food and fewer vegetables. It makes just as much sense to say that people who eat fast food are more likely to consume soda simply because it’s the most readily available beverage at fast food places. Or that people who are careful to eat healthily are more likely to avoid high-calorie beverages. Or that rich people eat vegetables and drink water while poor people go to McDonalds a lot.

Argument 4: I don’t even know how to describe this argument. The article says:

Many different types of studies link sugary drinks and weight gain or obesity. Some even show a “dose-response” relationship – as consumption rises, so does weight.

There’s that tautology again: as people consume more calories their weight goes up. And there’s that question again: why does soda consumption apparently occur on top of existing calorie consumption rather than replacing it? And notice the sloppy use of the word "sugary" when what's almost certainly meant is "HFCS-y". Argument 4 is just a restatement of Argument 1 with the addition of the words “[m]any different”.

As I said above, what I derive from this review of the evidence is not that soda causes obesity but that if there is any causal relationship at all it’s between high fructose corn syrup and obesity. So here’s my first suggestion. If the government is going to go ahead with this tax, don’t levy it on soda (or “unhealthy snack foods”): levy it on high fructose corn syrup. And since we don’t know whether HFCS’ bastard child, crystalline fructose, is any better, let’s tax that also. Think of the benefits. First, HFCS is in everything; the government will make a fortune in revenue. Second, since a HFCS Tax will advantage manufacturers who use real sugar in their products we can expect fewer items with HFCS and more items with real sugar. This will result in a real-life field test of the idea that HFCS is messing with our appestats and making us all fat.

My second suggestion is that the government tax artificial sweeteners also. There is research linking the consumption of diet sodas to obesity so if the goal is to reduce weight as well as raise revenue, there’s no logical reason not to tax artificial sweeteners right along with HFCS. People who cannot eat sugar, like diabetics, can submit their receipts for the purchase of artificially sweetened items along with a form signed by their doctor and get their taxes refunded.

And there you are. Tax high fructose corn syrup, crystalline fructose, and artificial sweeteners. Americans will become slender and thus healthy and the government will make a fortune in revenue. Er, or not. Actually you can only have one of those two outcomes. In order for people to become thin, they will have to eliminate the taxed items from their diet. But in order for the government to rake in the dough, people will have to continue to eat the taxed items. You can’t have it both ways. Which means that when The Center for Science in the Public Interest says:

The Obama administration needs to mount a comprehensive anti-obesity campaign, and slashing non-diet-soda consumption should be front and center. We need to get soda out of schools, install millions of water fountains across the country, require warning labels on soda containers, and sponsor a media campaign to counter the soda industry’s billion-dollar-a-year effort to maximize sales.

As it turns out, the quickest, most effective way to put a lid on soda sales would also give the government the money to do all that and more: slap a tax on carbonated and non-carbonated soft drinks.

what they really mean is either “We’re incapable of logical thinking” or “We don’t care about improving people’s health. We just want the government to have more money.”

First, do no harm

When I was in my mid-teens I heard a report on the news about some small, underdeveloped country somewhere - probably Africa or South America - where the government needed workers for some project. To fill their needs they had entered a remote village, rounded up all the able-bodied men and boys and marched them off to work. Their families did not know where they had gone or when - if ever - they would be back. I believed passionately that that story was horrible. The world is full enough of dangers and disasters that separate family members from each other: it was utterly unconscionable that a government would deliberately set out to do something so cruel to its own people. A government’s first and most important function, after all, is to protect its citizens to the very best of its ability.

In my 20s I read Ayn Rand’s We The Living - or at least I attempted to. I found the book so sad and so upsetting that I could not finish it. Unfortunately I have never been able to forget the part of the book where the heroine and her beloved end up living in one room because the government has decided that is all they need or deserve.

Now comes the news of the suicide of David Kellerman, CFO of Freddie Mac. I do not believe Mr. Kellerman killed himself solely because of his job: he - unlike the villagers in that original news story and unlike Rand’s fictional heroine - had other options and if his only problems were his work problems he would have taken one of them. Furthermore I’ve never been all that enamored of the idea of a slippery slope: surely rational human beings can decide to go just so far and no further.

Nonetheless, reading this story, it’s hard to ignore that my government - my government - was delighted to have Mr. Kellerman work around the clock to help it out while at the same time inciting the populace to hate him for his “outrageous” compensation. My government - my government - bullied Mr. Kellerman to violate not just his professional ethics but his fiduciary duty while at the same time reserving the right to decide - in its infinite wisdom - how much of his promised salary it would allow - allow - him to receive for the work he’d already done. No, it’s not on a par with dragging him off to a work camp or confining his living space to one room. But it’s not exactly an example of the government protecting its own either. And it is most emphatically not how I want my government to operate.

A five-year-old daughter, for God’s sake. Why didn’t Mr. Kellerman just tell them all - all the dishonest Obamas and Geithners; all the malign Franks and rats-in-the-belly Schumers and other criminally irresponsible, grandstanding Congressmen; all the sleazy regulators and pitchfork wielding villagers - to go to Hell?

This little piggy

In my recent post about the fight against earmarks in the Omnibus bill, I identified three types of spending that could be in that bill (or any other appropriations bill):

1) What we can call “normal” appropriations which appropriate money for ongoing government operations. Through this, for example, the Federal Department of Transportation is given a certain amount of money which it can spend directly or allocate to State Departments of Transportation as provided in existing laws and guidelines. This type of spending accounts for about 98% of the Omnibus bill.

2) Non-pork earmarks which appropriate money for a specific purpose that can reasonably be claimed to benefit the country as a whole or to benefit people across the country. I have not seen any claims that there are these types of earmarks in the Omnibus bill although there may be.

3) Pork-barrel earmarks which appropriate money for a specific purpose that can not reasonably be claimed to benefit the country as a whole or to benefit people across the country. Instead, pork-barrel earmarks benefit mostly a particular State or Congressional district or a particular interest group whose benefit is not also a benefit nationally. Presumably the entire $7.7 billion worth of earmarks that so many people are inveighing against consists of these pork-barrel projects.

I also identified four arguments that could be used to oppose non-pork earmarks and normal appropriations:

1) There is no true benefit to the spending.

2) The cost of the spending outweighs the benefit to be derived.

3) The benefit outweighs the costs but we simply cannot afford it.

4) Federal spending should be cut, period.

If we now turn to pork-barrel earmarks these same four arguments could be used to oppose them but it is usually the first argument - no true benefit - that is employed, primarily by pointing out how ridiculous a particular earmark is or at least sounds. In a fabulous stroke of luck the Omnibus bill contains some literal pork we can use as an example of how the arguments about these types of earmarks usually go:

- Congressman introduces pork-barrel earmark; for example, $1.791 million for swine odor and manure management in Iowa

- Fiscal watchdog groups, the entire opposing party, and every media outlet outside of his own State take him to task for it

- The Congressman and others who understand the need for the requested project explain why is is important; often the explanation is within hailing distance of reasonable (in the case of swine manure it is more than reasonable) and even if it’s not supporters can always point out that this earmark is no more preposterous than other earmarks (water taxis, tattoo removal, etc.)

- The discussion degenerates into an argument over how reasonable the pork-barrel earmark really is and basically becomes, “Is too, Is not”.

If we’re really lucky we eventually get to the “we cannot afford it” argument. Although we should then be able to rationally balance the urgency of the proposed project against the financial condition of the government and the country this is difficult with pork-barrel earmarks because they always look crucial to the proposers and usually look trivial to the opposition.

So much for how things usually go. There are also three other arguments that can be marshaled against pork-barrel earmarks. First, the claim that earmarks are corrupt. This argument is laid out nicely here:

Earmarking in and of itself is not corrupt, although McCain and other critics point to a series of earmark-related scandals that resulted in the prosecution of Congress members. But it does give powerful lawmakers a way to fund projects that they deem priorities without going through the normal appropriations procedure. Some high-powered lobbyists actively seek earmarks for clients, and the lack of public scrutiny fuels fears of shady deals.

In other words, pork-barrel earmarks create the opportunity for sin. This is an argument that makes sense generally but except in the most egregious cases it is difficult to levy a charge of corruption against a Congressman who is requesting something that looks worthwhile. (Hence the frequent reliance on mockery.) In the case of the Omnibus bill, opponents were not successful even in what looks like it may well be an egregious case.

In short, the corruption argument makes sense if you understand that part of keeping a system honest is not providing situations that allow - much less encourage - dishonesty. But it is a hard charge to make stick on a case by case basis and it never plays as well as pointing and laughing.

Second, pork-barrel earmarks are illogical. Recall Weisman’s claim from the prior post:

It’s not that the Congress is piling on additional spending. It’s just carving out the spending that would already be there.

It used to be that a huge pot of money would just go to, say, the Department of Transportation. Then the Department of Transportation would farm that out to State Departments of Transportation or local road authorities and they would decide how to spend the money. It simply would give the bureaucracy more power in deciding how to spend that money.

There are two problems with this. For one, I’m not sure I believe it. Weisman is claiming that the normal appropriations process decides that Bill X will appropriate some amount of money to the Federal Department of Transportation which will in turn give whatever amount is legal and appropriate to the New Jersey State Department of Transportation. One of New Jersey’s Senators decides he wants a pork-barrel earmark of, say, $10 million to repave Route 3. The Appropriations Committee pulls out the White-Out, reduces the Federal Department of Transportation’s funding by $10 million, and slaps on a little sticky note that reads: Give NJ $10M less than you planned. Color me skeptical.

Even if the process really does work this way, I question whether a Congressman sitting in Washington is really better able to prioritize the use of transportation funds in his State than is the State’s Department of Transportation which, presumably, gets paid to know what needs doing now and what can be delayed. According to The Economist, this is McCain’s:

really basic argument: no spending bill should have earmarks for spending that would be better doled out by local authorities.

These two aspects work together to provide a compelling argument. If the amount of money going to a State does not increase due to earmarks then give all the State money in the usual legal manner and let the appropriate State agency decide how to spend it. If earmarks do mean a State gets more money than it would through the normal appropriations process then that is not fair to States which are not in a position to slide earmarks into an appropriations bill. Which brings us to the third argument that can be made against pork-barrel earmarks.

The country as a whole should not be paying for projects that totally or disproportionately benefit a single State. Swine manure management is almost certainly crucial for Iowa but taxpayers in New Jersey shouldn’t have to pay for it. Volcano management is a big deal for Alaska but taxpayers in Iowa shouldn’t have to pay for it. Fruit fly research is essential for Hawaii but taxpayers in Alaska shouldn’t have to pay for it. Preserving part of Old Tiger Stadium is near and dear to every Detroiter’s heart but taxpayers in Hawaii shouldn’t have to pay for it. And College Avenue in New Brunswick, New Jersey, may well need a redesign but why on earth should taxpayers in Michigan pay for it?

Projects that benefit one State should not be funded by taxpayers across the country. I would go further and argue that even projects that benefit multiple States should not necessarily be funded by the entire country. Swine manure management can become a joint venture of Iowa, North Carolina, and Minnesota; together they account for more than 50% of hog revenues in the United States (or did in 2004). Alaska could join with States in the Pacific Northwest to study volcanoes and I imagine California would have as much interest in fruit flies as Hawaii. (I’m afraid Michigan and New Jersey will have to go it alone.)

The argument that taxpayers across the country should not pay for one State’s benefit seems to me to be a matter of basic fairness but since most Congressmen utilize earmarks to benefit their districts, it’s one they may be reluctant to make. More dangerously, this argument has implications for more government spending than just earmark pork-barrel projects. Let’s go back to Weisman’s point: if a State is going to get that money anyhow, why not let the Congressional delegation have some say in how it’s spent? If you accept that one State’s tax dollars should not pay for another State’s sole benefit, the answer is that the premise of the question is invalid: the State should not be getting that money in the first place.

Why is the Federal Department of Transportation handing money to the States? Why should taxpayers in Nebraska pay to maintain the roads in Texas? One could make a reasonable argument that the Federal government should maintain the interstate road system but I cannot imagine a reasonable argument that work on local streets is properly a Federal task. And even the interstate system argument is weak. If you’ve seen the freeways around Houston lately, you realize they have little to do with national evacuation routes and much to do with commuting to work.

When I discussed non-pork earmarks and normal appropriations, I argued that the best way to oppose increases in those was by arguing in favor of a small Federal government. Similarly, I believe the best way to oppose pork-barrel earmarks is by arguing that States should themselves fund the projects which benefit them, not expect the rest of the country to do so. The two ideas complement each other: a smaller Federal government means less Federal spending which means lower taxes which means the States can - if their residents so desire - increase State taxes to fund projects formerly supported by the Federal government whether through normal appropriations or earmarks.

In the end all this comes down to a matter of principles or perhaps ideology. Do you believe that huge government spending, regardless of the impact on the deficit, is the solution to an economy in crisis or do you favor a bare minimum of government assistance? Do you believe taxpayers in one State should pay for projects that benefit taxpayers in another State or do you believe that if a project is really crucial for a State then its own taxpayers will - and should - fund it? And, ultimately, do you favor a large, strong Federal government and weak, dependent States or do you favor a system closer to “dual federalism” in which:

the national and state governments are split into their own spheres, and each is supreme in its respective sphere ... [and] ... there are certain limits placed on the federal government.

There are a number of reasons opponents of the Omnibus bill (and the Stimulus bill before it) have had trouble gaining traction, including Obama’s popularity and the general feeling of fear over the economy. Furthermore, opponents allowed themselves to be distracted by the 2% of spending contained in earmarks.* However, I believe the fact that opponents either do not possess or cannot convincingly articulate a coherent political philosophy in opposition to these bills is a huge part of their problem.

Without basic principles about Federal spending and State’s responsibilities (and, yes, rights) arguments about all spending - normal appropriations, non-pork earmarks, and pork-barrel projects - devolve into “Is not, is too” squabbles over whether or not the spending is needed. This results in the opponents looking wholly negative with no alternative to offer. With those basic principles those saying “no” can offer a different view of the right path instead of just an insistence that we’re on the wrong path which is - let’s face it - less than helpful.

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*There are some indications opponents are increasingly focusing on the size of the bill as a whole and not just on the earmarks. One of the problems of focusing on earmarks - besides not seeing the forest for the trees - was that since both Democrats and Republicans indulge in pork-barrel earmarks it was difficult for either party to present itself as a plausible opponent of earmarks.

This is not an insurmountable problem incidentally. As long as earmarks exist any Congressmen who does not attempt to bring home the bacon is disadvantaging the people in his district vis-a-vis people in other districts as well as disadvantaging himself in elections. Thus the appropriate stance for someone who benefits from earmarks but nonetheless opposes them would be that he wants the system to change but until it does he will continue to do his best for his constituency.

Parenthetically, I’ve always thought the handling of earmarks was one of the great failures of the Republican Presidential campaign. John McCain’s “no earmarks” message was undercut by the vast number of earmarks from Alaskan Congressmen. Sarah Palin - or her handlers - tried to counter this by citing Palin’s opposition to specific earmarks like the Bridge to Nowhere. Even leaving aside whether Palin opposed the Bridge in a timely fashion, this was the wrong argument. The right argument was that as long as earmarks exist any state that does not get them is disadvantaging its own residents and that Palin would have been remiss as governor in doing so.

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Sources and reading:

Coburn Highlights Billions of Wasteful Spending in Generational Theft Act AKA Senate Stimulus - As the title says, Coburn is talking about the Stimulus bill not the Omnibus bill but this paragraph is in line with my argument about basic fairness in transferring national money to individual States:

We are transferring the irresponsibility we have had over the last 6 years in this Congress--or last 8 years in this Congress--to the States because what we are telling them is: You do not have to be fiscally responsible. You do not have to live within your means because Uncle Sam is going to bail you out. That is what this bill says. We are going to bail them out.

So for the States, such as my State, that were smart enough and wise enough to create a rainy day fund and live within their means, we are going to ask all the taxpayers of all the States that have done that to pay for the exorbitant spending and growth in Government in all the rest of the States.

Do read the whole thing. It’s a fabulous rant.


Obama’s Stunted Economic Stimulus - In an article which approves of a large stimulus, Robert J. Samuelson argues that Obama’s Stimulus bill doesn’t measure up. Part of the reason:

Yet, the stimulus package offers only modest relief [for state and local governments]. ... Congress might have done more by providing large, temporary block grants to states and localities and letting them decide how to spend the money. Instead, the stimulus provides most funds through specific programs. There's $90 billion more for Medicaid, $12 billion for special education, $2.8 billion for various policing programs. More power is being centralized in Washington.

In other words, much stimulus funding to the States is, well, earmarked.

Forests, trees, and earmarks

The battle over the Omnibus Appropriations Act, 2009
(H.R. 1105, hereinafter “the Omnibus bill”) is shaping up as a fight against earmarks. Considering that the Omnibus bill has a price tag of $410 billion and the earmarks amount to about $7.7 billion*, this seems a clear case of missing the forest for the trees. It’s true the earmarks make a handy stick with which to beat President Obama as John McCain did when he quoted this pledge by then-candidate Obama:

We need earmark reform and when I'm president, I will go line by line to make sure we're not spending money unwisely.

It’s also true that the earmarks make much more interesting theater than the rest of the bill. How can funding for the humdrum, day-to-day aspects of government compete with earmarks like those for Swine Manure Research, Tattoo Removal, and preserving parts of Historic Tiger Stadium. Whatever the political reality, however, the financial reality is that eliminating all the earmarks would still leave a massive spending bill and I think the size of the bill as a whole is what deserves attention.

Having said that, I must nonetheless confess that I was mesmerized by the list of earmarks and then by the realization that while the word “earmark” was thrown around quite freely I wasn’t entirely sure what it meant. So I decided to poke (heh, heh) around a little and see exactly what earmarks are, whether they are always a bad thing, and - when they are bad - how to most effectively argue against them.

Wikipedia’s definition of “earmark” seems somewhat out of date but the relevant portions read:

The federal Office of Management and Budget defines earmarks as funds provided by Congress for projects or programs where the congressional direction (in bill or report language) circumvents Executive Branch merit-based or competitive allocation processes, or specifies the location or recipient, or otherwise curtails the ability of the Executive Branch to manage critical aspects of the funds allocation process. [snip]

Earmarking differs from the broader appropriations process, defined in the Constitution, in which Congress grants a yearly lump sum of money to a Federal agency. These moneys are allocated by the agency according to its legal authority and internal budgeting process. With an earmark, Congress has given itself the ability to direct a specified amount of money from an agency's budget to be spent on a particular project, without the Members of the Congress having to identify themselves or the project.

Obviously the anonymity aspect of earmarks has long since gone by the board. What’s important here is that instead of the Legislative Branch just handing money to the Executive Branch to spend in accordance with existing laws and procedures, the Legislative Branch gets into the nitty-gritty and directs specific money to go to specific projects. So, for example, instead of the Federal Department of Transportation simply getting $1 million more this year than last to spend as it believes proper and legal, Congress gives the Department $1 million and says, “Spend it on this particular project.”

Since “earmark” is often used interchangeably with “pork-barrel project” or “pork”, I checked Wikipedia’s definition of “pork” also (emphasis mine):

Typically, "pork" involves funding for government programs whose economic or service benefits are concentrated in a particular area but whose costs are spread among all taxpayers. Public works projects, certain national defense spending projects, and agricultural subsidies are the most commonly cited examples. [snip]

Pork-barrel projects, or earmarks, are added to the federal budget by members of the appropriation committees of United States Congress. This allows delivery of federal funds to the local district or State of the appropriation committee member, often accommodating major campaign contributors. To a certain extent, a member of Congress is judged by their ability to deliver funds to their constituents. The Chairman and the ranking member of the U.S. Senate Committee on Appropriations are in a position to deliver significant benefits to their States.

Does this mean earmarks and pork are the same thing? Not necessarily. Consider this discussion from a 2008 NPR show:

BOB GARFIELD: But [earmarking] is, historically and ultimately, a legitimate legislative mechanism, isn't it?

JONATHAN WEISMAN: Absolutely. You know, the Iraq Study Group, that bipartisan group, was earmark. It was created as [LAUGHS] a little, what we would call a pet project by a congressman from Virginia, Republican Frank Wolf. Most research into breast cancer is done through earmarks.

Earmarks are the method by which members of Congress can exact policy. [snip]

Well, let's put it this way. If you didn't do these earmarks you’re probably going to have little to no effect on the federal budget. It’s not that the Congress is piling on additional spending. It’s just carving out the spending that would already be there.

It used to be that a huge pot of money would just go to, say, the Department of Transportation. Then the Department of Transportation would farm that out to State Departments of Transportation or local road authorities and they would decide how to spend the money. It simply would give the bureaucracy more power in deciding how to spend that money.

There’s a balance here to be struck between the prerogative of Congress and the ability of bureaucrats, basically, to set their own their priorities.

As Weisman makes clear, there is a distinction between an earmark and a pork-barrel project. An earmark is a targeted expenditure outside the normal Executive Branch spending guidelines. If it benefits solely (Old Tiger Stadium) or mostly (swine manure) one State, it’s pork. If it benefits the nation as a whole (the Iraq Study Group) or people across the country (breast cancer research), it’s not pork. This is not cut and dried, of course. An earmark that funds breast cancer research can look pretty porcine if all the funds go to one research center in one Congressional district. Conversely, an apparent pork-barrel project may initially benefit only one State but have clear benefits for the entire country. Military bases are the classic example of this: a particular State benefits from the construction and then from the presence of military consumers but the entire country benefits from the military and the bases have to go somewhere. Despite occasional fuzziness, however, I think the distinction between earmarks and pork is useful. Why? Because it tells us we have three different types of spending in the Omnibus bill:

1) What we can call “normal” appropriations which appropriate money for ongoing government operations. Through this, for example, the Federal Department of Transportation is given a certain amount of money which it can spend directly or allocate to State Departments of Transportation as provided in existing laws and guidelines. This type of spending accounts for about 98% of the Omnibus bill.

2) Non-pork earmarks which appropriate money for a specific purpose that can reasonably be claimed to benefit the country as a whole or to benefit people across the country. I have not seen any claims that there are these types of earmarks in the Omnibus bill although there may be.

3) Pork-barrel earmarks which appropriate money for a specific purpose that can not reasonably be claimed to benefit the country as a whole or to benefit people across the country. Instead, pork-barrel earmarks benefit mostly a particular State or Congressional district or a particular interest group whose benefit is not also a benefit nationally. Presumably the entire $7.7 billion worth of Omnibus bill earmarks that so many people are inveighing against consists of these pork-barrel projects.

In terms of whether they should be opposed and if so how, I don’t see any difference between non-pork earmarks and normal appropriations. They are both spending that can be reasonably claimed to benefit the entire nation. If someone wants to oppose instances of these types of spending, there are three obvious arguments he can use: there is no true benefit; the cost outweighs the benefit; or the benefit outweighs the cost but we simply cannot afford it. The first is usually in the eye of the beholder while the second should be calculable but often is not. It is the third argument that is most interesting right now.

One side of this argument holds that given the terrible financial condition of the Federal government, it should be attempting to spend less. The other side - which currently holds sway in Washington - claims that precisely because the financial situation of the country as a whole is so terrible the Federal government should be spending more. Democratic Senator Evan Bayh, with his call for austerity and belt-tightening on the part of the Federal government, is an excellent example of the spend less side; President Obama, with his vast array of spending proposals, personifies the spend more side.

There is, however, a fourth argument that can be made against normal appropriations and non-pork earmarks: Federal spending should be cut, period. This is not the same as Bayh’s argument. In fact, he explicitly says (emphasis mine):

The omnibus increases discretionary spending by 8% over last fiscal year's levels, dwarfing the rate of inflation across a broad swath of issues including agriculture, financial services, foreign relations, energy and water programs, and legislative branch operations. Such increases might be appropriate for a nation flush with cash or unconcerned with fiscal prudence, but America is neither.

In other words, if we could afford it this huge increase in the Federal budget might be fine; it’s only because we can’t afford it that it’s problematic. Similarly Republican Senator Tom Coburn when criticizing the Stimulus Package spoke of the increase in debt and of the need “to lessen the waste, fraud, and abuse, the inefficiency, and to make choices on what is more important.” What he did not do was suggest that perhaps Federal spending was too large even aside from waste, fraud, abuse, and inefficiency. He did not suggest that perhaps there are some functions the Federal government should not be doing.

As everyone surely knows by now, Rahm Emanuel said that a crisis is “an opportunity to do important things that you would otherwise avoid” and the Democrats have taken his words to heart by arguing that economic disaster is the perfect climate for huge spending both through enlarging existing programs and through creating new programs like universal health care and green energy. Perhaps the Republicans - assuming any of them are still in favor of a small Federal government - should also adopt Emanuel’s approach and use the crisis to argue that far from being the time for more Federal spending this is a perfect opportunity to start figuring out what functions - and therefore costs - we don’t need from Washington. In other words, mount an opposition to the massive increase in normal spending that isn’t based on claiming this is not a good time for such expansion but is instead based on insisting there is never a good time for it.

Next up: The wrong way and the right way to oppose pork-barrel earmarks
March 10, 2009: This is now up.

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* The price tag for earmarks seems to vary depending on who is adding it up. Democrats are - or were -
estimating $3.8 billion. The Heritage Foundation says nearly $13 billion. My $7.7 billion number came from Taxpayers for Common Sense and is the number I’m seeing most often. Their link discusses why their number differs from the one the Democrats came up with. A lot of that disparity is because:

the Appropriations Committee chooses not to include earmarks from project-based accounts in their totals, despite the fact that they were not requested by the administration. For example, the Corps of Engineers budget is made up of hundreds of projects that add up to the agency total. These numbers are not included in the committee totals or in their reduction predictions. In addition, the committee ascribes many operations and maintenance projects to the President when they were not actually requested as part of the FY09 budget.

They also “found a lot of ‘looks like earmark, talks like an earmark’ provisions in the bill that we tally as ‘undisclosed’ earmarks” and seem to believe there are more to be found.

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Sources and reading:

Coburn Corruption and Waste Elimination Amendments - This focuses on provisions Senator Tom Coburn (R, OK) opposes but the pdf links in the “Related Resources” section lets you see all the earmarks in the Omnibus bill.


Jamie Dupree is a blogger at WSB Radio in Atlanta who is happily slicing and dicing the data on earmarks. Skim through his archives but the posts I found particularly interesting were:

Omnibus Earmarks, Part 1 - This is a partial list of earmarks in the Omnibus bill. It’s much of the same data you can find at Coburn’s site but it’s nicely formatted and easily searchable.

More On Omnibus Earmarks - This is a list of solo earmarks.

Even More Omnibus Data - Lists earmarks by Senator

Senatorial Pork Barrel - Talks about how pork comes from both sides of the aisle.