Reasons for Pessimism

Some of my conservative friends have suggested a couple of reasons not to be utterly depressed by the passage of health care reform:

  1. Voters will angrily sweep Republicans into power.
  2. Republicans will rally the country around repealing health care reform.
  3. We now have an actual bill that voters can evaluate, and the bill will create its own opposition.

I always have to ask my friends whether they are being sarcastic, or actually delusional.

Republican resurgence is miserably insufficient to comfort anyone who opposed health care reform on principle, so we can breeze on to the second point. Though, I am generally skeptical that Americans really oppose these reforms, or that conservatives will control government in 2014!

Republicans don’t actually oppose health care reform. They pretend to. But ask them why they dislike Obamacare, and they generally recite something incomprehensible about big government or socialism. Then they advocate something identical – like the conservative Heritage Foundation, which sponsored the same reforms in Massachusetts alongside Republican Governor Mitt Romney. Damningly, most conservatives – notice Republican Senator John Cornyn- still consider prohibitting insurers from denying coverage to already sick patients to be “uncontroversial”. Yet this “reasonable reform” inevitably leads to every major item in the Democrats’ health care legislation. More on this anon.

Which brings us to the final argument. How, exactly, are people supposed to be able to evaluate the effects of this bill? As far as I can tell, they can’t. Most people today get their health care through their employer. This cuts into their wages, but they don’t know how much it costs because their employer never tells them. The reforms will not change this. People will continue to mainly receive insurance through their employer. Insurers will now be forced to cross-subsidize and offer more strictly defined plans. This could increase price and decrease choice, but employees will never see these changes. Their employer will still make the major choices for them.

Low income individuals who will be offered subsidized insurance through pseudo-market health care “exchanges” will see a fairly large change. But why should they complain? They lose a bit of freedom by being forced to buy insurance, but likely gain from the subsidies. Do we really expect them to revolt against another quasi-welfare program? Hardly – the fact that Democrats have built a party around buying votes with entitlement programs suggests that it is a successful political strategy.

The strongest arguments for or against health care reform have always been the long run counterfactuals. Progressives argue that the reforms will “bend the curve” of health care cost increases by taxing insurance into submission (other even more mystical-sounding claims are also made). Reform opponents counter that the bill will slow innovation in medicine and delivery systems by further delinking consumers from the costs of health care. I side with the opponents, of course, but the general public can’t appraise these arguments merely by watching the legislation work its magic. That’s why the arguments are counterfactuals. There is no alternative reality that we can compare our world to.

Finally, there are the taxes. Nobody likes them. But every spending program has come with new taxes. Social Security and Medicare have much more visible taxes linked to them. Yet no major spending program, to the best of my knowledge, has ever been repealed because of taxes. Occasionally the taxes themselves have been lowered. Then they have been raised again. But the spending remains. The taxes, in this case, aren’t even that important: health care reform does most of its damage through regulations and cross-subsidies born directly by the insurance companies and their customers.

In the end, no bill ever gets a careful examination after its passage. People have too much going on in their real lives to waste their time figuring out whether any particular piece of legislation is good (or just). Even if they did, there is little or no information with which to make a “practical” judgment. Expect even the “experts” to be debating the effects of this bill a decade from now. The only people who will care are those that derive a large benefit from the program – like the senior citizens who defend Medicare tooth and nail. 2014, the earliest the bill could be repealed by Republican lawmakers, is a lifetime away for our rationally apolitical electorate. If voters still remember health care reform, even if they still dislike it, they probably just won’t care that much. But reform comes with a built in interest group – the medical profession – that stands to gain access to new, paying patients. We can expect them – doctors, insurers, and hospitals – to loudly defend this legislation with the false moral clarity of other people’s money.

Bread and Circuses

Looks like there won’t be any Victor David Hanson column by this title, so I’ll go ahead and use it myself.  Over lunch, my ex-coworkers and I tried to predict what crowing headline Drudge would use to celebrate Chicago’s defeat.  Turns out the winner is “The Ego has Landed / World Rejects Obama: Chicago out in First Round”.  All in bright red caps, of course.

I’m glad that President Obama has been denied more political capital to advance his plans on health care (though I wonder how Brazil will fare in its own battle against socialism).  I do worry that Drudge’s obsessive coverage of this story has somewhat legitimized the “President as patron” model that Obama seems to have been following.  But it’s only appropriate that Obama should suffer for failed patronage when he had sought to benefit from its success.

Capitalism and Socialism are Opposites, Not “Two Complementary, Good Ideas”

The following was originally written for Americans for Tax Reform, where I am an intern:

Perhaps the most frustratingly incoherent part of Obama speech Wednesday was his repeated portrayal of the market and government planning as just two possible, non-exhaustive, mutually-reinforcing “solutions” to the current health care “crisis”.

There are those on the left who believe that the only way to fix the system is through a single-payer system like Canada’s — (applause) — where we would severely restrict the private insurance market and have the government provide coverage for everybody.  On the right, there are those who argue that we should end employer-based systems and leave individuals to buy health insurance on their own…. I have to say that there are arguments to be made for both these approaches.

Obama likes to present his plan as a sort of third way between government-run health care and the market, incorporating, as he said, “the best ideas of both parties together”. This is essentially nonsense. Our health care system cannot be made “more free market” and “more government-regulated” simultaneously.

The free market and government planning are exhaustive opposites. Every health care choice is either made freely by consumers selecting their most favored option, or it is chosen for them by government mandates. Under a market system, for example, consumers can either choose to buy health insurance through their employer or on the individual market. In a planned economy, by contrast, the government may order them to buy through their employer.

President Obama leaves little doubt as to which direction he will take our health care system:

Now, even if we provide these affordable options, there may be those — especially the young and the healthy — who still want to take the risk and go without coverage.  There may still be companies that refuse to do right by their workers by giving them coverage.

And that’s why under my plan, individuals will be required to carry basic health insurance — just as most states require you to carry auto insurance.  (Applause.)  Likewise — likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers.

But we can’t have large businesses and individuals who can afford coverage game the system by avoiding responsibility to themselves or their employees.  Improving our health care system only works if everybody does their part.

Obama’s plan, at its heart, requires that consumers be deprived of their free choice, so that the government can micromanage insurance premiums based on arbitrary notions of “just cost distributions”. This is, at its heart, socialism.

Obama Punts on Cost Reductions

The following post was originally written for Americans for Tax Reform, where I am an Associate (intern):

“I understand that the politically safe move would be to kick the can further down the road — to defer reform one more year, or one more election, or one more term. “

- President Obama, September 9, 2009, in his address to Congress

In his speech last night, Obama tried to imitate a man concerned by the costs of his health care proposal. Obama promised that his bill would be deficit neutral:

I will not sign it if it adds one dime to the deficit, now or in the future, period.  And to prove that I’m serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don’t materialize.

Obama’s “serious” promises lack substance. As previously argued, pledging “not to sign” a bill is meaningless: the President must veto a bill to block its passage. But the “promised savings” suggestion is even more insidious. Such a provision merely promises to delay any budgetary solution until a crisis has actually arrived. As Obama would say, it kicks the can further down the road to defer reform one more year, one more election, or one more term.

What faith should people have that actual budget cuts will be made at this future point, when they cannot be made now? Congress would have to actively draft specific cuts – cuts that hurt special interests eager to preserve their spot at the public trough. Congress would retain all power to break this non-binding promise. So how likely is it that Congressmen would take up arms against their campaign contributors, instead of raising taxes or taking on more debt?

If Obama were really interested in proposing a fiscally responsible bill, he would be proposing conditional spending, not conditional spending cuts. He would propose subsidies that took effect after his “savings” were realized, not unspecified spending cuts after the savings proved illusory. “Trust me” is not a cost-cutting reform worth $900 billion – or any amount.

Obama’s unserious proposals force us to choose between two conclusions. Either he doesn’t know what he’s doing, or he is insincere.  Given his eloquence, education, and the vast resources of his office, the former seems precluded.

The Fundamental Incoherence of Obama’s Health Care Crisis Claims

This piece was originally written for Americans for Tax Reform’s blog, where I am an Associate (intern):

In his speech to Congress last night, President Obama grounded his health reform plans two contradictory claims. First, President Obama insisted that health insurers were increasingly denying health care to their clients. Then, he argued that America was suffering from a crisis of rising health care expenditures.

More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won’t pay the full cost of care.  It happens every day.

Then there’s the problem of rising cost.  We spend one and a half times more per person on health care than any other country, but we aren’t any healthier for it.  This is one of the reasons that insurance premiums have gone up three times faster than wages.

Obama’s argument betrays either ignorance or a willful disregard for economic reasoning. If insurers engaged in wholesale jettisoning of their most expensive customers, their costs would fall. An insurance company with lower costs would be able to capture more market share from its rivals by lowering its prices. Those rivals would be forced to compete either by matching the new lower premiums or competing in quality – i.e. by indulging in less rescission!

Health care premiums are rising, so we can safely assume that more, not less, health care is being delivered by insurers. To argue that both costs and rescissions are increasing simultaneously is to deny the basic reality of free market competition. Radical overhauls of the health care system should not be grounded in this populist fantasy.

“Trust Me” is Not a Cost-Cutting Reform

This post was originally written for Americans for Tax Reform’s Blog, where I am an Associate (intern).

This weekend, the CBO shot down another hollow Obama administration “savings” proposal.  Obama’s budget director Peter Orszag endorsed an Independent Medicare Advisory Council (IMAC), which would have transferred some authority to the executive to reduce Medicare expenses (probably by reducing payments to doctors).

Savings might not be realized at all because the proposal specifies a process without specific goals for savings or a “fall-back” plan for ensuring spending reductions if the combination of annual IMAC recommendations and Presidential approval does not produce hoped-for savings.

To translate for the CBO: “Trust me” is not a savings proposal.  IMAC is a vague promise to figure out, at some unspecified date in the future, some unspecified way of generating an unspecified amount of savings.  Congress and Obama might as well just admit that they don’t want to deal with the hard, important stuff now.  To be nice, CBO scored the proposal for just $2 billion in savings over the next ten years.

Democrat policy cheerleaders like Ezra Klein have complained that Americans aren’t paying enough attention to supposed-cost control measures.  There’s a good reason Americans aren’t impressed.  The cost-cutting reforms just aren’t serious and the draft health care bills prove it.  The Democratic “reform” proposals are larded with massive subsidies that cost hundreds of billions of dollars a year.  Why?  Because if they smother the health care industry with money they can make costs look like they are decreasing – for a while.

If Democrats believed their proposals actually cut costs, they wouldn’t need the subsidies.  Alternatively, if they were confident that measures like IMAC actually produced budgetary savings, they could make subsidies floating and dependent on CBO measurements of actually attained savings.  Until the subsidies go away or are linked to attained savings, it is reasonable to assume that Democrats don’t take their own reforms seriously.  With the stakes this high, “trust me” is not an option.

ATR: Obama’s Health Care Bait and Switch

I have a new post up on ATR’s blog on “Obama’s Health Care Bait and Switch”.  A clip:

If you want more of something, subsidize it. If you want less of something, tax it. Obama’s plan to provide an “affordable” (read: subsidized) public insurance option is guaranteed to increase health care spending. His plan to tax the wealthy is just as sure to discourage entrepreneurship and prolong the recession.

Disclosure: I am currently an ATR Associate (intern).

Iranian Election/Revolution

I’ve been scouring Andrew Sullivan’s blog for information on the turmoil in Iran.  It’s apparently the best source for news/rumor about the protests.

Like Sullivan, I’m hopeful that Ahmadinejad and Khamenei have bitten off more than they can chew.  It will be a great moment for freedom and democracy if their regime falls – hopefully in a way that yields a stable representative government.  I worry that Sullivan’s coverage is a little bit Pollyanna-ish.  On his blog every twitter-reported protest seems millions strong and the police stand aside like lambs.  But there are also plenty of videos where the police do beat protesters, and there has been at least one large pro-Ahmadinejad demonstration in Tehran, so we’ll have to wait and see.

If Ahmadinejad falls, the main question in the US will likely be – which party gets credit?  It’s probably mostly nonsense to talk in the short-term about credit for a country’s internal politics, but it’s likely nonsense.  The leftist position seems pretty clear: Obama, by offering to negotiate with Ahmedinejad, undermined his hostile rhetoric and created space for more dovish politicians.  By contrast, neoconservatives will argue that the close proximity to Iraq’s less managed democracy sharpened Iranians’ hunger for the real thing.  Which argument is better?  Check your political affiliation and decide accordingly.

Iranian Elections: Now What?

The elections in Iran look like a fraud.

Before the election, some commentators on the left like Matthew Yglesias mused that the vigorous debate in Iran proved that Obama’s attempts at detente were yielding fruit:

This is one of the virtues of expressing a clear desire for an improved relationship with Iran. Doing so lowers the temperature over there and opens up political space for disagreement about foreign policy objectives. It also clarifies that there’s a real upside to responsible behavior, and a real downside to pushing the envelope on nuclear issues.

One could certainly question his logic.  After all, if Ahmadinejad’s opponents are arguing that Iran’s foreign policy has isolated the country, won’t Obama’s conciliatory rhetoric just undermine their position?

But now we have to deal with a more fundamental problem.  We cannot work with the democratic opposition, because the recent election demonstrates that there is still no real democracy in Iran.  Perhaps the fundamentalist regime will crumble in the face of a democratic uprising.  If not, we are ratcheting down external pressure at the exact moment that the regime is poised to bulldoze internal dissent.  And if the regime crushes the street protests – as I think likely – do we really want to legitimize  Ahmadinejad with presidential conferences and a grand diplomatic bargain?  Is there a way forward with Iran, or are we just giving up?

Obama DOJ Supports California’s Prop 8

Apparently the Obama DOJ is moving to dismiss constitutional objections to California’s Proposition 8.  Dale Carpenter elaborates:

More bluntly put, the Obama DOJ is saying that DOMA doesn’t discriminate against gays and lesbians because they are free to marry people of the opposite sex. No “homosexual” is denied marriage so homosexuals qua homosexuals suffer no hardship. Gay man? Marry a woman, says the DOJ. Lesbian? There’s a nice boy across the street. It’s identical in form to the defense of Texas’s Homosexual Conduct law in Lawrence v. Texas: a law banning only gay sex doesn’t discriminate against gays because it equally forbids homosexuals and heterosexuals to have homosexual sex and because it equally allows homosexuals and heterosexuals to have heterosexual sex. This sort of formalism has incited howls of laughter over the years when made by religious conservatives. Now it’s the official constitutional position of the Obama administration.

I expect some of my formalist conservative friends will be pleased.