This commentary was first published in the Minnesota Free Market Institute Weekly Update. For your free subscription, click here.
Neal McCluskey of the Cato Institute (”Feds in the Classroom“) alerts us to a truly disturbing consequence of the federal government’s intervention in education. The U.S. Constitution provides no grant of authority for federal involvement in education. As the founders recognized, a government that has no moral authority to mandate how people worship has no moral authority to indoctrinate people as to how or what to think. The commonality of freedom of religion and freedom of education, blurred by the No Child Left Behind Act, is about to be obliterated by President Obama’s September 8 address to the nation’s school children.
The president’s speech is not simply an extended public service announcement encouraging students to work hard and stay in school, a message most of us would agree is worthwhile for any president to deliver and every student to hear. The president’s speech is the point of the spear in a concentrated campaign that exposes the dangers of a monopoly system of government-run education.
Irrespective of who controls the White House, an education system manipulated by the president and the Department of Education is not in keeping with the principles of a free society.
As a prelude to the President’s speech, the taxpayer-funded U.S. Department of Education (remember when Americans took seriously the idea that Department of Education should be abolished?) has sent detailed lesson plans for grades pre-K-6 and 7-12 to schools nationwide. The lesson plans, “developed by and for teachers,” outline ways to capitalize on the message of the president’s speech – how to support the president and his goals – not the educational opportunity to teach critical thinking and analysis.
In a letter anticipating the president’s address, Secretary of Education Arne Duncan flatters teachers by noting that their work is “critical to…our social progress.” As McCluskey notes, Duncan’s statement strongly suggests – “as many educators have held and continue to hold” – that it is the job of public schools to impose values, often collectivist, on students. The lesson plans sent out by Duncan do little to dispel that idea.
Pre-K-6 kids are encouraged to make posters setting out “community and country” goals. The lessons encourage schools to teach that it is important to listen to “the President and other elected officials.” Even more than just listen is guidance that is explicitly designed to glorify the office of the presidency and Barack Obama specifically. Teachers are encouraged to ask students how President Obama will “inspire” them in his speech before he gives it, and how they were inspired after he has spoken.
Again, let me be clear: This idea of a “cult of the presidency” is being exploited in the extreme by the Obama administration, but it is a bipartisan malady. As I wrote during the presidential campaign, both Obama and Sen. John McCain campaigned for a presidency that is nowhere to be found in the Constitution – as is constitutional authority absent for a federal role in education.
The thrust of McCluskey’s work in general points out the inherent dangers of government controlling education (again irrespective of who controls the White House). Power corrupts, and ultimately politicians will use power over education to indoctrinate children, something completely antithetical to a free society. And this is just the starkest manifestation of the inherent problem with government control of education. Every day, writes McCluskey, free people are pitted against one another in defense of their freedom and basic values because they all have to support a single system of government schools.
“Evolution vs. creationism. Prayer in school. Books with offensive material in schools libraries. Decisions over whose history will be taught, and whose won’t. The curtailment of freedom goes on and on when government takes everyone’s money and provides schools with it,” writes McCluskey. “Which is why the only system of learning compatible with a truly free society is a system of school choice – public education, not schooling - in which the public assures that all people can access education, but parents are free to choose their children’s schools, and educators are free to educate how they wish.
Andrew Coulson, also of the Cato Institute, notes the irony of the president saying nice things about kids staying in school and graduating while his own actions and policies are having the opposite effect. Although there is copious scientific research showing that private schools have higher graduation rates than public schools, and that their graduates are more likely to go on to college and complete college, and the president’s own Department of Education found that the DC voucher program is producing significantly better academic results than DC public schools (and at a quarter of the cost), the President Obama has chosen to kill the DC voucher program rather than grow it, and he opposes private school choice programs at the state level that would bring these better educational outcomes within reach of all children.
“So kids, here’s your lesson for next Tuesday,” he writes. “The guy talking at you from the television set may say a lot of nice sounding things, but he is not doing what is best for you. He is letting some combination of ideology and political self-interest trump what is best for you. That’s politics. And that’s one reason why we need limited government and educational freedom.
It’s unfortunate that some opponents of federal government-directed health care jumped on the ‘Death Panel’ metaphor instead of the substance of the proposed legislation. Whether the federal legislation intends it or not, a government-directed plan necessarily requires bureaucrats to make life and death decisions that are more far-reaching and more complex than the hyperbolic ‘pulling the plug on grandma.’
No matter how wealthy we are as a nation, the government will never be able to provide health care for all AND provide all of the health care everyone would want. Trade-offs are inevitable; if universal access is a given, then the amount and quality of delivered medical treatment must necessarily be negotiable.
To understand the complexity and God-like power the feds are proposing to invest in some poor civil servants, let’s allow grandma to peacefully nap and consider the other end of the life spectrum, infant mortality. Imagine yourself charged with managing the cost of care for newborn infants under the government program. Here’s the situation you would face.
The U.S. has an infant mortality rate of approximately 7 deaths per 1,000 live births, compared with 5 deaths in other developed countries; in Norway, infant mortality is a mere 4.1. Race, geography, income and education all factor into those numbers, but irrespective of its genesis, low birth weight is a primary factor in infant mortality.
Low birth weight occurs in about 7 percent to 8 percent of all live births, but 40 percent to 70 percent of all infant deaths can be attributed to low birth weight (depending on how one defines “low”). When compared to normal weight infants (more than 5.5 lbs), infants with “moderate” (less than 5.5 lbs), “very low” (less than 3.3 lbs) and “extremely low” (less than 2.2 lbs) birth weights have 40, 200 and 600 times greater risk than normal weight infants, respectively.
According to the journal “Pediatrics,” 8 percent of 4.6 million infant hospital stays (2001 data) included a preterm/low-birth-weight diagnosis, accounting for 47 percent of the costs for all hospitalizations ($5.8 billion) and 27 percent of all pediatric stays. The average cost of the hospital stay (12.9 days) was $15,100 compared with $600 (1.9 days) for uncomplicated births. For infants less than 2.2 lbs, the average cost of hospitalization was $65,600.
Advances in medical technology have significantly improved the survival chances of infants with extremely low birth weights (without complications), but at a high cost. Complications, however, are common in infants with low birth weights, often requiring intensive, expensive care; still, the mortality rates remain relatively high.
What do you do? Here’s more data.
A study by the Rand Corporation found that 69 percent of infants who die during their initial hospital stay did so within one day of birth. Those infants were the least expensive to treat, an average of $6,310. For infants who died during the remainder of their initial hospitalization, average treatment was $58,800. Infants at “extremely low” birth weights, in aggregate, create the most costs; technology keeps them alive past the first day, but despite the extra effort and added cost, infants born weighing less than 2.2 lbs have the lowest initial hospitalization survival rate.
More data to consider: The aggregate annual incremental costs among low-birth-weight children ages birth to 15 have been estimated at $5.4 billion per year, not including long-term care, special services and special education often correlated with low-birth-weight children. All that said, remember, those are aggregate statistics; many low-birth-weight children grow into healthy, happy adults with no unusual health problems – you just don’t know who they will be.
So, were you tasked with managing the public newborn-care option, what would you do? Should the public health plan allow spending billions of tax dollars on technology and treatment attempting to save low-birth-weight infants when that practice has a high probability of complications yielding a relatively low survival rate with a high probability of ongoing medical and other expenses associated with survival?
Access, quality and cost — you cannot reduce costs if your promise is equal effort for every low-birth-weight child using whatever technology and treatment is available. In Switzerland, a country often cited for a lower infant mortality rate than the United States, infants weighing less than 2.2 lbs. at birth who die are designated stillborn, whether measures are taken to help them survive or not. Problem solved?
Infant mortality highlights the underlying question of the health care reform debate: How can individuals deal with unpredictable, unaffordable expenses? Neither the regulated, privately managed care approach we have today nor the government-run managed care proposals being debated in Congress provide an acceptable answer. A free market system where patients control the money, health care providers set prices for services, and private insurers are free to develop policies that convert unpredictable and unaffordable events into affordable and predictable premiums, could well be the best way to optimize (not perfect) health care resources.
Unfortunately, in the progressive rush to birth a government-run solution, the free-market solution is designated “stillborn.”
This commentary originally appeared in the St. Paul Pioneer Press, Friday August 28.
Photo Caption: Neonatalogist Jonathan Muraskas places his hand next to Rumaisa Rahman, known to be the smallest baby in the world to survive birth (8.6 ounces). Rumaisa was born at Loyola University Medical Centre in Chicago. Photo: Reuters
In my Pioneer Press column of July 17, I did some follow-up on the budget story du jour, the testimony of state economist Tom Stinson to the effect that the unallotment proposals made by Gov. Tim Pawlent would cost the state between 3,000 to 4,700 jobs while a $1 billion tax increase would result in an estimated 1,000 jobs lost. The media portrayed Stinson’s testimony as a comparison between the governor’s unallotment proposal and the bill passed by the legislature and vetoed by the governor may. I talked with Stinson, and he, very carefully, characterized that report as “not entirely accurate” and the interpretation of his research as “simplistic.”
Putting aside the political ramifications of the way Stinson’s research is being characterized, from a market-oriented perspective the partisan spin battle over tax increases versus unallotment is missing the point in a way that does not do justice to the citizens of Minnesota. In every policy decision there are trade-offs, and for either side to deny there are trade-offs is ignorant at best and disingenuous at worst. Stinson’s research is one data point in the budget discussion that highlights a number of trade-offs facing the governor and legislators going forward.
In a response to the column, Dave Mindeman on the mnpACT! blog falls into the partisan trap with the “so what” argument that figures don’t lie and the choice facing legislators is tax increases or unallotment and clearly Stinson’s research clearly shows unallotment is bad. To give Mr. Mindeman credit, in between insults he makes the Keynesian economic argument, but he ignores the point of my column, or more accurately, disrespects the idea of reform – an interesting position for a “progressive.” He more or less denies the concept of tradeoffs, or at best he minimizes it. So, let’s look at the Keynesian argument and the tradeoffs it entails.
First, let’s answer Mr. Mindeman’s direct question regarding the hypothetical $1 billion tax increase versus the actual legislative bill that was vetoed. He asks, “Help me out here…. is there some substantial difference in outcomes? A hypothetical $1 billion or an itemized $1 billion is still going to have the same effect.”
Indeed, there are significant differences in out comes from various forms of taxation. The fact that Stinson modeled a hypothetical $1 billion income tax increase, not the actual bill passed by the legislature is significant. The legislative bill included a pass-through tax on credit card interest on rates over 15 percent and a pass though tax on alcohol profits. A $1 billion dollar income tax increase ($500 million in each of two years) does not create the same distortions in the market place as proposals that would raise the cost of credit and decrease the availability of credit or fundamentally alter he pricing structure of an industry. Moreover, at what level and at what individual rate the hypothetical income tax is implemented makes a difference in the efficiency of the tax measured by how much tax revenue is lost by activity at the margin – how much tax revenue is lost by individuals changing their behaviors as a result of the tax.
In general, board-based, low-rate taxes are less responsive to rate changes and produce a more stable source of revenue than do narrowly focused, high rate taxes that at the margins are highly sensitive to rate changes. Broad-based taxes therefore create less distortion in the market place. A pass-through tax like the proposed tax on credit card company revenue, for example, is a highly distortive tax, which would have had significant ramification for credit card customers and on the availability of credit had it passed. So, yes, Mr. Mindeman, the oncoming ramification of different types of taxes produces substantial difference in outcomes beyond the short-term job loss numbers.
Mr. Mindeman goes on to quote Keystone Research Center (Pensylvania) labor economist Mark Price channeling economist Eugene Stiglitz:
“Every dollar in state budget cuts reduces a full dollar of economic activity. Individuals, especially higher-income earners, save a portion of their income, so tax increases remove less than a full dollar of economic activity. As a result, tax increases do not hit the economy dollar-for-dollar like budget cuts do.”
So, here we have our first trade-off. The decision between spending cuts and tax increases involves a trade-off between immediate economic activity and encouraging saving. In the Keynesian view, spending is a good thing. A perfect example is the recent statement by vice president Joe Biden that the country is going bankrupt and the only way to save it is to spend more money. (The VP must also drive faster when the fuel gage reads empty so he can get to a service station before he runs out of gas.) The flip side of the coin is that one of the significant causes of the housing collapse is that the “cheap money” credit policies of the federal government created a demand for housing that was not supported by adequate consumer saving. Keynesians believe that to grow the economy, one must stimulate demand; the flip side is that without available capital to finance production, there is no capability to produce product irrespective of the demand. The tradeoff simply put is between short-term job loss and long-term economic growth.
Stiglitz goes on to say in the work I assume Price is referencing –
“For states interested in the impact only on their own economy rather than the national economy, the arguments made above [for tax increases] are even stronger. In particular, the government spending that would be reduced if direct spending programs are cut is often concentrated among local businesses. (This can cause distortions in the long run, but it bolsters the local economy in the short run.) By contrast, the spending by individuals and businesses that would be affected by tax increases often is less concentrated among local producers — since part of the decline in purchases that would occur if taxes were raised would be a decline in the purchase of goods produced out of state. Thus, more of the reduction in purchases that results from tax increases than from government budget cuts falls on out-of-state goods (relative to in-state goods), lessening the adverse impact of a tax increase on the state economy. Reductions in direct government spending consequently could have a larger adverse impact on a state’s economy than tax increases, which have a stronger adverse impact on out-of-state goods and services.”
In that paragraph, Stiglitz himself parenthetically defines the trade-off: “(This can cause distortions in the long run, but it bolsters the local economy in the short run.)” He also sets the context of his remarks: “For those interested in the impact only on their own economy rather than the national economy ….” We have another tradeoff.
Applying Stiglitz observation to Minnesota, the tradeoff is between Gov. Pawlenty “kicking the can down the road” by delaying deficit issues through across the board unallotment and tax shifts rather than solving structural budget problems and Stiglitz “kicking the can” to the overall economy. Indeed, Stigliz, in noting the “problem” is state requirement for a balanced budget, a nod to Keynesian predilection for deficit spending, writes “Given the existence of balanced budget rules at the state level, some form of federal fiscal relief to states is therefore warranted.”
Again, we have a tradeoff between the seen versus the unseen economic consequences of an action. If we focus strictly on the Minnesota economy, we can see the visible benefit of people employed because of government spending; what we cannot see (but can anticipate) is the unseen “distortions” (as Stiglitz notes) and job losses that result from things like excessive federal borrowing making investment capital more expensive and harder to get and the consequences of inflation.
Mr. Mindeman is correct when he “screams” that the governor and the legislature “STILL HAVE TO CHOOSE.” He ignores that they put themselves in that postion, each side fighting for an idealogical point while ignoring economic reality. Mr. Mindeman’s blind spot is his sole criterion for making the policy choice for tax increases is impact on short-term job loss. He, like partisans on both sides of the budget debate, doesn’t argue for the tradeoffs that are the consequences of his policy. Mr. Mindeman doesn’t acknowledge or make a case why the short-term economic view (something he rails against when the short-term view is corporate quarterly profits) is better for Minnesota than the long-term economic growth perspective. He disrespects the notion of structural reform – moving from an inefficient tax system to more effective taxation and redefining the role of government, which is necessary to stabilize spending.
And that was the point of my column – neither accounting shifts and arbitrary unallotment, cutting a little bit here and a little bit there nor tax increases that permanently make Minnesota a high-tax state at a disadvantage in a competitive global market solves the structural budget issues of this state. The irony is, the “conservative” position of tax and spending reform is the policy that demands change and progress, while the “progressive” position of tax increases as the single solution to Minnesota’s budget woes argues for continuation of the status quo. Who really is kicking the can down the road here?
The headline in the Pioneer Press seemed to tell the story: ‘DFL budget plan would have cost fewer jobs, state economist says.’
Indeed, before the Legislative Advisory Commission, state economist Tom Stinson estimated Gov. Tim Pawlenty’s spending cuts will cost Minnesota 3,000 to 4,700 jobs. He also modeled the impact of a tax increase on job loss. The Pioneer Press reported “the $1 billion income tax increase that the Democratic-controlled Legislature passed and Pawlenty vetoed in May would have cost the state an estimated 1,000 jobs over the next two years.”
Unfortunately, in eagerness to report or spin Stinson’s numbers, the press, progressive think tanks and DFL legislators misunderstood the purpose of Stinson’s work and didn’t get the basic story straight. In the measured terms of a professional, Stinson confirmed to me that the coverage of his testimony was “not entirely accurate” and interpretation of his data was somewhat “simplistic.”
His job as an economist is not to make political or policy judgments, Stinson said, but to provide a common basis of information and understanding from which better political and policy judgments can be made.
I fear he misreads the motivation of the DFL-dominated commission.
When House Majority Leader Tony Sertich, DFL-Chisholm, declares that “Governor Pawlenty’s budget proposal is going to cause three to five times as many job losses in the state as the legislative proposal,” he is “not entirely accurate” and “simplistic.” In his eagerness to exploit Stinson’s data, he misses larger policy implications. And that is the problem.
First, Stinson’s research did not analyze the DFL bill vetoed by the governor (as reported and repeated). The vetoed bill included income tax increases and pass-through tax increases on credit card companies and on alcohol products. Stinson was asked to evaluate the governor’s unallotments in terms of job loss. A professional, he also modeled a hypothetical $1 billion income tax increase (over two years) because he was “trying to make sure people understood that there are no easy answers.”
In other words, Stinson came not to praise or bury Pawlenty. Short-term job loss is one data point among many trade-offs inherent in the budgeting process, but it is not the only trade-off. In fact, the trade-off between tax increases and spending cuts results from a higher-level trade-off — between a balanced budget and making a recession worse.
Progressive think tanks often quote Nobel laureate and Columbia University professor Joseph Stiglitz saying that a reduction in government spending is more harmful to the economy in the short run than an increase in taxes. What they fail to note (but Stiglitz emphasizes) is the balanced-budget trade-off that puts policy-makers in a situation that is ultimately harmful to the economy.
“It is worth emphasizing,” Stiglitz writes, “that any state spending reductions or tax increases are counterproductive at this time: they restrain the economy at time when it is already slowing.”
So, let’s be honest: The debate over tax increases or spending cuts is not about improving the state’s economy. The choice is not between “good and bad” or “better and worse”; the choice is between “bad and worse.”
Stinson’s model does not make value judgments about how the loss of specific job types affects the state economy. Nor does it consider the value of freeing unproductive resources for other uses, nor does it provide any criteria for making those judgments. Those are among the political and policy questions that must be addressed on a case-by-case basis, which won’t happen while the Legislative Advisory Committee remains intent on misusing data to beat up the governor.
The legislative end game is neither “stupid” DFL tax increases nor “evil” GOP spending cuts (nor some really stupid and evil “bipartisan” combination); the end game is enabling Minnesota to be a competitive player in the global competition for the capital that creates productive jobs in the private sector. To correct that problem requires reform of the tax system and a redefinition of the role of government, and that won’t happen if the Legislative Advisory Council stubbornly continues turning data points into talking points, which makes for provocative newspaper headlines but precious little progress.
Craig Westover is a contributing columnist to the Pioneer Press Opinion Page, a senior policy fellow at the Minnesota Free Market Institute (mnfmi.org) and a member of the Republican Party Liberty Caucus. His e-mail address is westover4@yahoo.com.
This commentary originally appeared in the St. Paul Pioneer Press July 15, 2009.
Dane Smith’s most recent Legal Ledger column “If taxes are bad for us, how did we get so healthy, wealthy and wise?” provides the most vivid example of strawman abuse since the Wicked Witch of the West plucked the Scarecrow.
Dane is a pretty reasonable guy, so when he resorts to calling those who disagree with him “anti-government” and “anti-tax,” you know he’s on shaky ground. It is not “anti-government” to be concerned when government consistently exceeds its constitutional authority; it is not “anti-tax” to uphold the constitutional principle of the sanctity of private property and think it wrong for the state to tax for programs and projects that exceed its constitutional authority. That said his column is made for fisking, and that just what I’ll do.
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If taxes are bad for us, how did we get so healthy, wealthy and wise?
by Dane Smith, Growth & Justice
Here’s a tax-and-budget Question for the Century, as we brace ourselves in Minnesota this summer for continued cuts to our state and local governments, all in the holy cause of not raising state income taxes ever again under any circumstances whatsoever.
Actually, not raising state income taxes ever again sounds like a pretty good objective when you consider what it means. It means that that economy is healthy, that more people are working, more wealth is being generated, and more tax revenue is being collected. It means that instead of relying on inefficient, unstable revenue generated by narrowly based, high marginal rate taxes, the state would transition to more efficient, broader-based, low rate taxes, which produce a stable revenue source providing sufficient revenue to meet the state’s constitutional objectives. When Dane tries to be sarcastic with the phrase “under any circumstances,” he succeeds only in declaring a tax increase to be the last resort of the incompetent.
Answer this: If government and taxes are so bad for growth and general prosperity, why did we grow so much and get so generally prosperous over the last century, especially in Minnesota, a period during which government and taxes grew exponentially?
Okay, so what is it? In past pieces, Dane has told us that Minnesota taxes have not kept up with the national average and the size state government has remained constant and is actually below its apparently Creator-endowed 17 percent of state income. But that aside, the question Dane is asking might be addressed with an analogy.
Suppose I challenge LaBron James to a little game of one-on-one basketball, and he beats me 21-zip. We play again, and to make things more fair LaBron wears 25-pound ankle weights. He still beats me 21-zip. Now suppose, as Dane suggests, we “exponentially” increase LaBron’s handicap and attach 50-pound weights to his ankles. This time he beats me 21-1. Same outcome: LaBron wins. Relative to kicking my butt, it is accurate to conclude that even 50-pound ankle weights did not affect LaBron’s performance, but it is not logical. Of course the 50-pound weights affected LaBron’s performance, but he is so much better than I am, he still beats me handily. So it is with capitalism.
The economic engine of capitalism, the adaptability and innovation of free people in a capitalistic system can carry a lot of deadweight government activity. That is accurate, but it also follows logically that without carrying excessive government on its back, a capitalistic society could produce a whole lot more wealth for a lot more people. It also logically follows (and Dane acknowledges later in his column) that at some point even a superstar can be handicapped beyond ability to produce. Chain LaBron James to a truck, I just might beat him; chain capitalism to a government that finds virtue in “expanding exponentially,” and capitalism is defeated.
Since 1909, and with big spurts in the 1930s and 1970s, the federal-state-local government’s share (anti-tax types like to call it “take”) of income in Minnesota and the United States grew steadily and sharply, from about 5 percent to 35 percent.
A seven-fold increase in taxes should have left us a howling wasteland, if one subscribes to the anti-government theory of anti-tax zealots. We should have less wealth, no creativity, diminished entrpreneurialsm, little technological innovation, and no incentives to do anything but seek or wait for the next government check.
The exact opposite happened as government grew.
Our mostly well governed nation, and high-tax Minnesota in particular, and other democratic and capitalistic nations with expanding public sectors, got very rich during this period. And more important, our quality-of-life improved dramatically, beginning with life expectancy but extending into a multitude of aspects ranging from education to mobility to more fairness and equality for the two thirds of society (women and non-white males) who were second-class citizens in 1909.
Dane needs a little lesson in the difference between correlation and causation. Over that same period of time, Al Gore tells us the earth was getting warmer, carbon emissions were increasing, and dramatic changes were occurring in the Earth’s ecosystem. Using Dane’s logic, I can only conclude that global warming is good for the economy.
I would point out to Dane that it was government that denied certain civil rights to women and non-white males, so it is kind of cheap to give points to government for the wisdom to correct its own mistakes – mistakes that those of us advocating for limited government understand result from government overreaching in the first place.
It is always interesting to me that when progressives want to justify government they point to areas where government has a defined constitutional role (education being a state but not a federal obligation). They also use as a measure of success “participation” rather than “effectiveness” – education being the prime example. Today, public schools proudly proclaim they “take everyone,” and quietly disavow that they cannot “educate everyone.” As in my mythical game of one-on-one with LaBron James, the deadweight of government hasn’t yet reached the point where it completely burdens the resilience of a free people, but image if that burden were diminished.
Now to be fair to Dane, as a nation and a state, we do accomplish good things, collectively, through government. But the point Dane never seems to grasp is that we live in a constitutional republic, not a democracy. Democracy is how we make collective decisions about collective actions, but it does not tell us when collective action is appropriate or allowed. We do not vote on when we get to vote. It is our federal and state constitutions that define when we act collectively. We are a republican government of enumerated powers, and the problem is, Dane does not recognize that restraint. In his progressive view, government authority is defined by the consent of the governed, the will of the many, and the rights of the minority are protected only by the grace of the majority. It is no wonder then that he takes the inevitable and makes it look like a plan when he gives government points because the majority controlling government finally decided to provide equality for women and non-white males. Are we to assume then that it was okay when the majority denied equality to women and non-white males?
Again to be fair, Dane has some handicap weight to carry when we debate. To denigrate my ideology, he must come up with terms like “anti-government” and “anti-tax.” To denigrate his ideology, I merely have to use his self-description – “progressive.”
This question and sound answers to it are posed strongly and clearly in a gem of a little book penned right here in Minnesota “Cracks in the Foundation: Refuting the Conservative Case for Low Taxes and Small Government.’’
Its author is Elaine J. Handelman, a lifetime Minnesotan and a recent addition to the Growth & Justice Board of Advisers. She’s neither a left-wing academic nor an advocate for taxpayer-funded causes. She’s a business professional with expertise in quality improvement initiatives for the private sector, who has a real grasp of economics and history.
“If freedom varies with the portion of our income we keep,’’ Handelman observes in the book, “then we were freer in 1900.
“Yet most of us, I suspect, would prefer the freedom we had in 2000…The capacity to exercise choice is an important part of our freedom and there is no question that the number and quality of choices increased over the century… (And) that growth would not have been possible without significant investments in the public sector.’’
If I might borrow from Robert Browning, I would suggest that Ms. Handelman’s reach has exceeded her “real grasp of economics and history,” but then what’s a government-run utopia for?
In the first sense, Handelman is talking about “freedom” as manifest in the principles the U.S. Constitution – the primacy of individual sovereignty, the sanctity of private property, and preservation of the rule of law, the protection of which is why our government was formed and our Constitution written. In the second paragraph she is talking about “freedom” as opportunity, the result of the wealth created by a free people, each person acting in his own self-interest absent coercion of any kind.
In the first respect, yes to a large degree we were freer in 1900 than we are today. In the 1900’s we were even free to campaign against government’s denial of women’s suffrage and government-imposed Jim Crow laws; today, even the president of the United States by implication compares those who campaign against the government-sanctioned view of climate change with “holocaust deniers,” and we have a Patriot Act that is used against people who support a presidential candidate who advocates a return to constitutional principles.
Even were one to acknowledge Ms. Handelman’s conclusion, “that growth would not have been possible without significant investments in the public sector,” where does she suppose those investments came from? They were the result of private sector wealth production. Why were those public sector investments required? To support private sector growth, not to subjugate the primacy of individual sovereignty, the sanctity of private property and the rule of law. Without that freedom and the wealth it produces, we will not have the freedom of opportunity in 2100 that we had in 2000. Frankly, we don’t have it in 2009.
Handelman, with careful footnotes and sourcing, nails down the facts of public sector growth and all the ways that taxes have provided humanity-enriching investments — from building national parks to ensuring financial security for old age to probably the most cost-effective spending of all, our state and national appropriations in behalf of educational equality and attainment.
Recognizing and celebrating the basic virtues of business and profits and private enterprise, Handelman scores strong points on several other important spin-off issues raised in the eternal debate between public and private.
“The oft-heard “points of light’’ claim — that private charities and non-profits can fill the void if our governments abdicate that responsibility — is just not realistic as a total solution. Private spending for the economically disadvantaged currently amounts to only 10 percent of what government spends. If government pulls out of the safety-net business, does anyone really expect Americans to increase their giving tenfold? Or even half?
“The notion that the private-sector always does it better than the public sector is dispelled, with anecdotes and statistics. Handelman cites numerous success stories in government, including the consensus that programs like Medicare and Social Security are remarkably efficient and low in overhead costs.
Here’s where Dane plucks the Scarecrow. Yes, some people make these arguments as absolutes, but there are far more fundamental issues – respect for the Constitution for one – that are at stake. For example, the issue is not whether or not a “safety net” is in place, the question is because we have some individuals who are economically disadvantage must we reinvent government outside its constitutional authority and create massive government programs that impinge upon the entire population to its determent and still don’t help the disadvantaged?
Universal health care is a prime example. Much like Dane’s effort to make government correcting its disenfranchisement of women and non-white males into a virtue, universal health care is government’s effort to correct its misguided creation of a bureaucratic, highly regulated managed care system (not by any-stretch a free-market health care system) that caused the economic distortions progressives call a “crisis.”
Because some people can’t participate in our state-imposed, highly regulated, managed health care system is not a good reason to give government even more authority over health care. Instead, why not consider freeing the health care system of the ankle-weights of government interference. More toward a free market in health care where patients control their health care dollars, doctors compete for patients not insurance dollars, and insurance companies compete for customers by writing diverse policies targeted to individual need. And the disadvantaged? Why not provide them with health care vouchers and let them participate in a free health care market with the same freedom and dignity as others instead of pushing poor people into government programs that provide neither quality care nor the self-esteem and motivation to become self-sufficient?
“And yes, taxes obviously have their limits and cannot be raised without consequences for growth. And governments need to redouble their efforts at accountability and cost-efficiency. “Everyone agrees that taxes can not be increased endlessly (and) the manner in which the tax burden is distributed on businesses and individuals has economic consequences.’’
Handelman concludes: “We all agree that government should defend us against enemies foreign and domestic, provide a safe environment and enforce the law. I argue for the value of government in additional roles: Our public investments provide us with increased individual choice, expanded business opportunities, increased scientific and technological ideas for our entrepreneurs to exploit, improved health and an improved quality of life.’’
Okay. Dane quotes Ms. Handelman and confirms the old wives tale that if we engage in the self-abuse of excessive taxation too long, we will eventually go blind. But citing the second paragraph, Dane also wants to keep doing it until we need glasses.
As noted above, it is a fundamental progressive belief that government is restrained only by the consent of the governed and the will of the majority. Dane advocates raising taxes and expanding government until the majority determines that there are “consequences for growth” but without guidance on what constitutes a “consequence.” Cap and trade certainly has “consequences” for growth, not to mention it impinges on individual sovereignty, the sanctity of private property and makes a mockery of the rule of law. But apparently, the national self-abuse of cap and trade is still on the path to eyewear and won’t yet cause climatic blindness, only economic disaster.
Dane and Ms. Handelman can argue for “the value of government in additional roles,” but in the context of our constitutional republic, they nor anyone else has the legitimate authority to expand government into a role not granted to it by the Constitution, irrespective of the benefits.
I couldn’t have put it better.
Here, I agree with Dane – he could not have put the progressive case better. The weight of progressivism’s immorality, economic illogic, and contrariness to constitutional principle would be too much handicap for even the intellectual equivalent of the athleticism of LaBron James. One-on-one is simply not the progressives’ game.
There is one point about a single-payer health-care system on which Dr. Oliver Fein and I agree — there’s not enough of a definition for the public to make an assessment about what a single-payer health-care system really is. In a recent MinnPost piece ["Medicare 2.0: Doctors group urges health care for all," by Casey Selix], Fein, president of Physicians for a National Health Care Program, provides a set of six principles that “really define what single-payer is.” Indeed they do. But when one examines logically the six principles Fein lays out, one realizes that as well-intentioned as is his desire for universal health care, the single-payer model can’t get us there, it actually inhibits improved health care — and, ironically, to establish a manufactured “right” to health care a single-payer system destroys the unalienable right of individuals to make their own health-care decisions.
Let’s look at Fein’s principles in detail, contrasting them with a free-market health-care system, keeping in mind that the health care system we have today is NOT a free-market system but a heavily regulated managed-care system — single-payer-lite.
Fein’s principles Nos. 1, 2 and 3 define the classic trade-off among access, quality, cost. His first principle of a single-payer system is “automatic enrollment, which would lead to universal coverage.” His second principle is that “benefits ought to be really comprehensive … going from prevention, doctor, hospital, pharmaceuticals, to dental, metal health — all medically necessary services.” Principle three is that “these things should be publically financed.”
Every system — whether a manufacturing system, a sales system, the education system or the health care system — has the same three (and only three) outputs and addresses the same three questions: “How many of what kind at what cost? In health care, those three questions are expressed, “What quality of care (kind) can we provide at what cost to how many people?” Trade-offs are necessary to achieve the optimum (not perfect) system.
In a free-market health-care system, the optimum solution is determined by the pricing mechanism and individual choice. Each of the three variables is truly variable — that is given a market where physicians determine service and price and the individual is responsible for his care costs, a person might choose to have his annual check-up done by a local clinic rather than the Mayo Clinic. Given his family history, his doctor might decide he needs a specific procedure at a different interval than “the average patient.” It is these kinds of individual decisions made by millions of individuals that create an optimum health care system.
‘Variables’ aren’t variable
In Fein’s single-payer model, the “variables” are not variable at all. One of the three variables is fixed (universal coverage); consequently, the other two must be consciously managed from outside the system. Everyone cannot receive comprehensive health care (however “comprehensive” is defined) except at very high cost (or with very high taxes). If costs are fixed (as they must be at some level) then all that remains to be managed is the definition of “comprehensive.” That is why the Obama health plan calls for creation of a third-party board to determine the cost-effectiveness of specific medical treatment for specific classes of people and decide if the treatment will be covered. “Comprehensive” medical care means “quality” medical care is what government says it is, not necessarily what the patient wants.
Whereas in a free-market system millions of medical decisions are made with immediate cost and quality information available to doctors and patients, in a single-payer system, health-care decisions are governed by a relative few individuals necessarily making aggregate assumptions about individual patient situations because they cannot possibly have instant access to data required to make a decision about any individual patient.
That would be “you.”
Trade-offs among access, quality and cost in a health-care system are inevitable even if Fein does not acknowledge them. In a single-payer system with universal coverage, at some point, someone other than you and your doctor will be making decisions that materially dictate and limit treatment options available to you and your family.
Fein’s principle No. 4 is that single-payer eliminates “administrative waste” that results from having multiple payers. His principle No. 5 is that single-payer maximizes choice compared to “our present private insurance system.” Before we can discuss those two principles it is necessary to debunk the misconception Fein implies — that our “present private insurance system” is equivalent to “free-market health care” and that the present managed-care system is the same as a “private health insurance system.”
In free market, patients control the money
In a free-market health-care system, patients control the money that is spent on their health care. That money might be theirs, it might come from an insurance settlement, it might be a health-care voucher by a government program, but in each case, the patient decides how his money will be spent. In turn, in a free-market system, doctors determine what services they will provide and at what price. Doctors compete for individual patients on price and quality of care. Finally, in a free-market health-care system, insurance companies offer policies that meet the differing resources and tolerance for risk of individual consumers. They also have control of products and price. Insurance companies compete for customers based on price and comprehensiveness of coverage.
True health insurance (as opposed to prepaid medical care) has little to do with access to actual medical treatment. Health insurance, like any other insurance product, is concerned with asset protection. The purpose of health insurance is turning unpredictable and unaffordable expense into predictable, affordable expense. Insurance companies offer a variety of policies at different premium levels and deductibles that consumers will buy depending on their needs, resources and tolerance for risk.
In today’s prepaid managed-care system, insurance companies control (via government regulation) which services will be covered and how much physicians will be paid for those services. Even Fein acknowledges that in today’s regulated environment consumer choices are limited. Because a single entity controls both demand and supply of health care, there is no competitive pricing mechanism and consequently no accurate regulator on prices. Cost can’t be controlled if there is no mechanism for determining price and demand at a price.
Three outputs, three questions
Recall that any system has the same three outputs and addresses the same three questions — “How many of what kind at what cost? In a private health-insurance system, those three questions are expressed as “How many policies can be written, covering which situations at what cost?” In the current system, by law, “covering what situation” is mandated. Minnesota has more than 60 insurance mandates requiring specific coverage, for example. When one variable is fixed, the other two must be consciously managed from outside the system. Hence, on top of necessary administrative costs, we get unnecessary administrative costs imposed by regulation.
Because a third party, government, has fixed the extent of coverage, private companies are limited as to the policies they can provide and the price at which they can provide them. To keep costs down, they must either limit service provided or reduce payments to service providers. That does not change with the advent of a single-payer system. A single-payer system is not essentially different from the managed-care system we have today. The only difference is eliminating the regulated private health-care insurers and replacing them with a regimented bureaucracy.
That brings us back to Fein’s single-payer health care principles Nos. 4 and 5: eliminating administrative waste and maximizing choice.
I’ll forgo arguing with Fein’s statistics on administration costs other than to say determining administrative cost depends a lot on what is included as “administration” and what isn’t, and Fein’s numbers are based on some fairly biased assumptions — as would be my assumptions to the contrary. However, the fundamental irony, as the Cato Institute’s Michael Tanner points out, is that folks like Fein praise one of the greatest failings of socialized medicine, lack of administration, as if it were a virtue.
Administration is key
Economist Tyler Cowen notes administrative costs like monitoring, marketing and overhead costs of private insurance companies are what enable those companies to offer coverage for expensive medical treatments. Competing insurance companies spend money evaluating claims and setting pricing structures so that there is an accurate measure of what coverage actually costs relative to need. Without that review mechanism, it is impossible to limit health-care costs without reducing service. Without the consulting function of insurance agents, individuals will either buy more coverage than they need and pay more for it than they should, or find themselves underinsured and taking on more financial risk than warranted.
Tanner adds, “If European health-care systems appear to have lower administrative costs, it is because, rather than scrutinizing claims, they limit the overall amount they will spend on medical services. Of course, that just means they shift costs to patients who either must pay for medical services themselves, or deal with the costs of waiting.” Going back to the access, quality, cost triumvirate, if claims are not reviewed then cost must be shifted or care limited, or “administrative saving” or the consequences of lax oversight must be passed to taxpayers.
In his principle No. 5, as he did with the definition of “comprehensive,” Fein obscures the concept of “choice” in health care. “The program in the country with the most choice is Medicare,” he writes. “You have the choice of physician, a choice of hospital; so, again, single payer would lead to increased choice.”
Indeed, as Fein envisions single-payer, it would lead to increased choice compared to today’s system. But remember, the system we have today is not a free market system, which by definition requires that patients control their health care dollars and choose their own physicians and by extension hospitals and other treatment facilities. The system we have today, thanks to government regulation, is a managed care system where different costs for “in-network” and “out-of-network” care are unavoidable because doctors are competing for pools of patients provided by health plans based on how little reimbursement they will take; doctors are not competing for patients based on value to the patient.
However, what Fein calls “choice” turns out to be anything but, as his principle No. 6 illustrates.
In his sixth principle, Fein again tries to reassure with the idea that a single-payer system really delivers health care through a “nonprofit, privately controlled system.” Doctors, he says, “would not be employed by the government; hospitals would not be owned by the government. What you would have is public financing and collection of money by the single payer, but the private delivery system would continue.”
Sort of like General Motors, I guess.
Choice, but not much of a choice
What Fein doesn’t make clear is that while patients in a single-payer system might choose from among private doctors and private hospitals, there will be little difference among doctors and hospitals in the procedures and treatments they are allowed to perform. There is a big difference between choosing among McDonald’s, Burger King and Subway (a free market) and “choosing” any (but only) McDonald’s. Again, in a single-payer system at some level, medical choices for the individual must be made by a third party based on aggregate rather than individual considerations — you just can’t get “a flame-broil Whopper Jr. for a buck” at Subway.
A second point Fein ignores in his choice argument is that with a single-payer system there is little to no motivation to innovate. Using Fein’s Medicare analogy, the single-payer determines both service descriptions and reimbursement rates. Innovations, by the definition of “innovation,” are not in the system. Medical innovations by their nature are, in initial stages, very expensive, and until perfected, produce unpredictable results. Where is the motivation to innovate if a) one must buck the system at one’s own expense to put the procedure on the service schedule, and b) one will be able to price the innovation to compensate for developing it.
Removing the profit motive stifles innovation; that reduces choice, it does not increase it.
Concluding, Fein provides us with the single-payer analogy of Medicare for all. “So what we talk about is Medicare 2.0,” he writes, “an expanded program of Medicare for all and an improved program that deals with many of these other programs. That would be the way a single-payer program would operate in the United States.”
OK, let’s assume Medicare provides “comprehensive” medical care at affordable cost (a debatable point). Why is that so? It is because the private health-care market picks up the tab for subsidized, below-market Medicare patient care; non-Medicare patients pay much more for the same services. When you extend Medicare to everyone, who is left to pick up the slack?
The dirty little secret today is that increasing numbers of physicians are simply not taking new Medicare patients. They continue to provide care as their patients age into Medicare, but the reimbursement rates for Medicare are so low that private physicians simply cannot afford to take on new Medicare patients. We’re not talking the ever-available criticism of “greed.” We are talking government reimbursements that are so low that they do not cover the cost of treatment and overhead, let alone any expectation of profit.
This situation points out another consequence of a single-payer system that Fein ignores: A Medicare-for-all scenario necessarily requires a nonvoluntary requirement on physicians to provide care irrespective of their own interests. The individual sovereignty of health-care providers, an unalienable right, must be sacrificed for the manufactured “right to health care.” As must the patient’s unalienable right to make his own health-care decisions.
Trade-offs would be imposed from on high
In his MinnPost interview, Fein has given us a clear picture of a single-payer system. What he has not offered is the trade-offs such a system must necessarily impose from on high by boards and bureaucrats, unlike in a free-market health care system where trade-offs are determined by individuals and their doctors. A single-payer system is a classic example of the dichotomy between freedom and perfection: A free society can never be perfect; a perfect society can never be free. The ultimate trade-off offered by a single-payment health care system is between the unfulfillable promise of perfection and the frustration of imperfection engendered by individual freedom.
In a true free-market system, not the heavily regulated managed-care health-care system we have today, individuals and their doctors decide how trade-offs will be made based on their individual situations. In a single-payer system, third-party government boards must necessarily make cost-based decisions about individual medical care based only on aggregate data. A free-market health-care system encourages innovation because innovators reap the rewards of their effort; a single-payer system discourages innovation because the system doesn’t know how to value innovation. A free-market health-care system establishes an optimum (not perfect) relationship among access, quality and cost; a single-payer system providing universal coverage distorts market signals by the necessity to system control costs, and consequently misallocates costs and redefines “quality.”
Ultimately the question that the public must answer vis-à-vis single payer health care is “Who do you want making decisions about health care for you and your family — you and your doctor, or somebody else?
Craig Westover, a senior policy fellow with the Minnesota Free Market Institute, is a contributing columnist to the Pioneer Press Opinion Page and a contributor to MinnPost.
This piece originally appeared at MinnPost.Com — COMMUNITY VOICES | THU, JUN 25 2009 7:00 AM
In a recent post drawing a comparison between potential speculation in carbon credits and the meltdown of the subprime mortgage industry, “Cap and Trade Draws An Ace – Rebuilding The House of Cards” Doug Williams quoted Rachel Morris.
You’ve heard of credit default swaps and subprime mortgages. Are carbon default swaps and subprime offsets next? If the Waxman-Markey [that's the main Cap and Trade legislation - ed.] climate bill is signed into law, it will generate, almost as an afterthought, a new market for carbon derivatives. That market will be vast, complicated, and dauntingly difficult to monitor. And if Washington doesn’t get the rules right, it will be vulnerable to speculation and manipulation by the very same players who brought us the financial meltdown.
In a one-minute speech on the floor of the House, Democrat Peter DeFazio puts a populist spin on that idea and affirms the point of Doug’s article.
The Wednesday before Memorial Day, I made a roadtrip to Duluth to appear on Almanac North with Dane Smith of Growth & Justice. We discussed the pre-allotment environment at the state legislature. Needless to say, it was a lively discussion. Dane and I didn’t give the hosts too much opportunity to get questions in — just kept jabbing back and forth.
Dane: “Craig and I actually share some common ground …”
Craig (interrupting): “Yes, we both want to control my life.”
I am completely convinced of two things: That the greatest advances in Western civilization have been lost somewhere between the third and fourth beer for want of a dry napkin; and that the more widely a public policy is heralded as something we ought to do, the less likely it is we actually can do it.
Case in point is the sobering announcement by Minnesota Education Commissioner Alice Seagren that Minnesota is joining the Common Core Standards Initiative, a state-led process to develop nationwide English-language arts and mathematics standards for K-12 education.
Led by the National Governors Association and the Council of Chief State School Offices and subscribed to by 46 states and the District of Columbia, the Common Core Standards Initiative would create a framework of content and skills all children must master each year of K-12 education. The standards will be “research and evidence-based, internationally benchmarked, and aligned with college and work expectations,” according to the coalition press release.
Let the heralding begin.
“Common standards will provide educators clarity and direction about what all children need to succeed in college and the workplace and allow states to more readily share best practices that dramatically improve teaching and learning,” said CCSSO President-Elect and Maine Education Commissioner Sue Gendron.
“Common standards … have the potential to bring about a real and meaningful transformation of our education system to the benefit of all Americans,” echoed NGA Vice Chair Vermont Gov. Jim Douglas.
Indeed, who could possibly be opposed? While there is a range of opposition from skeptical to fierce for nationally mandated standards out of Washington, there is broad support for “state-led, voluntary common standards,” said CCSSO President and Arkansas Commissioner of Education Ken James. “This is an idea whose time has come.”
“Only when we agree about what all high school graduates need to be successful will we be able to tackle the most significant challenge ahead of us: transforming instruction for every child,” Gendron said.
Therein lies the rub.
“Many people think national standards would be great,” the Cato Institute’s Neal McClusky said. “But though people may love the idea of na-tional standards, when it comes to actually creating them, love quickly turns to anger.”
After attending a meeting on “International Evidence about National Standards,” McClusky observed, “If you can’t get people who really believe that we need national standards to agree on even their basic shape, why would anyone think that they could get a majority of Americans to agree on a single standard?”
No matter how intuitively it appears we ought to spend money and resources to implement some “awesome” public policy — “ought to” implies that we actually “can.”
Noting that ethicists can imagine all kinds of schemes to remedy perceived social ills, St. Lawrence University economics professor Steven Horowitz writes, “We always have to ask whether it’s humanly possible to do what the ethicists say we ought. To say we ought to do something we cannot do, in the sense that it won’t achieve our end, is to engage in a pointless exercise.”
Of course, it is quite possible to implement a set of rigorous standards as Minnesota has done. As Seagren trumpeted, less than humbly: “By participating in this effort, we will take an active role in helping other states create consistent academic standards that will be as rigorous as Minnesota’s current standards.”
Great. However, the actual objective is not creating standards, but improving student readiness for the serious business of living. High standards don’t necessarily indicate that children are receiving a quality education. Perhaps that’s why the Legislature waived Minnesota’s math test graduation requirement as too difficult for too many students. Education is an individual experience; the path to proficiency is an individual choice, not a national echo.
“People support national standards simply because they are easier to conceptualize than multiple standards,” McClusky said. “And they think they — not people they dislike — will get to write the new, inescapable standards for all.”
Far better for America’s kids if the great idea to implement common standards had come up somewhere between the third and fourth beer. On sober reflection, the idea will cost a lot of money, waste a lot of time and resources, reach consensus somewhere just south of mediocrity, and in the end prove to be an “ought” that simply cannot achieve its objective.
Craig Westover is a contributing columnist to the Pioneer Press Opinion Page and a senior policy fellow at the Minnesota Free Market Institute (mnfmi.org). His e-mail address is westover4@yahoo.com.
This commentary originally appeared in the St. Paul Pioneer Press, Tuesday June 9, 2009.
Weary of watching the Twins’ futility in the home of those damn Yankees last week, I looked for a winner on my bookshelf. I seized upon the optimistically titled ‘The End of Liberalism.’ Although its predictive value is somewhat depreciated by its 1969 copyright, the classic text by political scientist Theodore Lowi is as insightful today as in the heyday of ‘The Great Society.’
Lowi coined the term “interest-group liberalism” to describe policy-making through deference to organized lobbies. Interest-group liberalism rests on two fundamental beliefs: Government is a positive force and a champion of good, and virtually all interest-group demands are legitimate. Consequently, a primary function of government becomes balancing and advancing any and all organized petitions.
The “end of liberalism” comes about when the appeasement process evolves the perfect storm of unrestrained bureaucratic growth, an unmanageable web of conflicting regulations and an unsustainable skyrocketing budget. Are we there yet, at the end?
Not by a long shot, and the reason is simple: Interest-group liberalism is the prevailing political philosophy of the American public, of Democrats and of Republicans — all the post-election Republican talk of a return to “conservative values” and “conservative principles” notwithstanding.
Slate writer Jacob Weisberg picked up on Lowi’s theme in a 2005 piece analyzing the governing philosophy of then President George Bush. When Democrats were in power, Weisberg noted, they were beholden to unions, lobbies for women’s rights, civil rights and gay rights, senior citizens lobbies, welfare advocates, Hollywood and trial lawyers. The hallmark of Democratic governing was a focus on policies that meant more to those groups than mattered to the welfare of the country at large.
When Republicans assumed power in 2000, the implied promise was the end of liberalism. Instead, Bush-era Republicans practiced their own brand of interest-group liberalism. Out with the old and in with military contractors, evangelical Christians, wealthy investors, gun owners and an alternative conservative media — new regime, new supplicants, but the same process.
Like the repentant weight-watcher who will do whatever it takes to slim down except diet and exercise, after getting hammered in the past two election cycles Republicans seem willing to do whatever it takes to restore conservative “values” — except adhere to conservative “principles.” Consider the touting by Republican Rep. Erik Paulsen of a legislative amendment he authored.
“Our military veterans who own businesses face unique challenges, and government must ensure the policies in place to assist them are achieving their goals,” Paulsen said in a press release. The “Job Creation through Entrepreneurship Act,” to which Paulsen’s amendment ensuring benefits for veterans was attached, also includes specific largess for women, Native Americans and a new grant program for Small Business Development Centers. It passed the House 406-15.
Paulsen and Republican Rep. John Kline voting for a bill that champions small business and veterans is certainly in keeping with “conservative values” (GOP Rep. Michele Bachmann did not vote). But using public funds to create private benefits for multiple interest groups by expanding the federal bureaucracy and deficit spending most certainly violates the conservative principles of limited government and fiscal responsibility (not to mention constitutional fidelity).
Such interest-group liberalism turns logrolling (legislators trading votes) from “a necessary evil into a virtue.” So at a state level, when southern Minnesota legislators earmark state funds for an international volleyball center in Rochester, there is nary a peep from their Arrowhead compatriots who expect reciprocal support in anticipation of a photo-op at a Duluth arena expansion. Both outstate areas support a budget-draining light-rail system between Minneapolis and St. Paul. A combined financial obligation on all Minnesotans, these projects respectively mean more to Rochester, Duluth and the Twin Cities than they matter to the welfare of the state at large.
The irony is that by practicing interest-group liberalism, both Democrats and Republicans are conservatively protecting an unsustainable status quo. Chances of actual reform — say, replacing the inefficient corporate income tax with a more efficient broad-based, low-rate sales tax — is problematic, not because of any flaw in economic logic, but because Democrats and Republicans both have supporters threatened by the reform. Their here-and-now concerns matter more, politically, than the future economic welfare of the state.
While many are outraged at government largess to interest groups other than their own, few are eager to gore their own oxen for the sake of principle. Nonetheless, unless we the people demand reform, it’s more likely the Twins will sweep a series in Yankee Stadium than we will ever achieve an “end of liberalism.”
This commentary originally appeared in the St. Paul Pioneer Press Thursday, May 28, 2009.
This commentary was first published in the Minnesota Free Market Institute Weekly Update. For your free subscription, click here.
The headline in the Pioneer Press seemed to tell the story: ‘DFL budget plan would have cost fewer jobs, state economist says.’
Dane Smith’s most recent Legal Ledger 
Health care: Life and death and substance
August 28th, 2009 by Craig WestoverIt’s unfortunate that some opponents of federal government-directed health care jumped on the ‘Death Panel’ metaphor instead of the substance of the proposed legislation. Whether the federal legislation intends it or not, a government-directed plan necessarily requires bureaucrats to make life and death decisions that are more far-reaching and more complex than the hyperbolic ‘pulling the plug on grandma.’
No matter how wealthy we are as a nation, the government will never be able to provide health care for all AND provide all of the health care everyone would want. Trade-offs are inevitable; if universal access is a given, then the amount and quality of delivered medical treatment must necessarily be negotiable.
To understand the complexity and God-like power the feds are proposing to invest in some poor civil servants, let’s allow grandma to peacefully nap and consider the other end of the life spectrum, infant mortality. Imagine yourself charged with managing the cost of care for newborn infants under the government program. Here’s the situation you would face.
The U.S. has an infant mortality rate of approximately 7 deaths per 1,000 live births, compared with 5 deaths in other developed countries; in Norway, infant mortality is a mere 4.1. Race, geography, income and education all factor into those numbers, but irrespective of its genesis, low birth weight is a primary factor in infant mortality.
Low birth weight occurs in about 7 percent to 8 percent of all live births, but 40 percent to 70 percent of all infant deaths can be attributed to low birth weight (depending on how one defines “low”). When compared to normal weight infants (more than 5.5 lbs), infants with “moderate” (less than 5.5 lbs), “very low” (less than 3.3 lbs) and “extremely low” (less than 2.2 lbs) birth weights have 40, 200 and 600 times greater risk than normal weight infants, respectively.
According to the journal “Pediatrics,” 8 percent of 4.6 million infant hospital stays (2001 data) included a preterm/low-birth-weight diagnosis, accounting for 47 percent of the costs for all hospitalizations ($5.8 billion) and 27 percent of all pediatric stays. The average cost of the hospital stay (12.9 days) was $15,100 compared with $600 (1.9 days) for uncomplicated births. For infants less than 2.2 lbs, the average cost of hospitalization was $65,600.
Advances in medical technology have significantly improved the survival chances of infants with extremely low birth weights (without complications), but at a high cost. Complications, however, are common in infants with low birth weights, often requiring intensive, expensive care; still, the mortality rates remain relatively high.
What do you do? Here’s more data.
A study by the Rand Corporation found that 69 percent of infants who die during their initial hospital stay did so within one day of birth. Those infants were the least expensive to treat, an average of $6,310. For infants who died during the remainder of their initial hospitalization, average treatment was $58,800. Infants at “extremely low” birth weights, in aggregate, create the most costs; technology keeps them alive past the first day, but despite the extra effort and added cost, infants born weighing less than 2.2 lbs have the lowest initial hospitalization survival rate.
More data to consider: The aggregate annual incremental costs among low-birth-weight children ages birth to 15 have been estimated at $5.4 billion per year, not including long-term care, special services and special education often correlated with low-birth-weight children. All that said, remember, those are aggregate statistics; many low-birth-weight children grow into healthy, happy adults with no unusual health problems – you just don’t know who they will be.
So, were you tasked with managing the public newborn-care option, what would you do? Should the public health plan allow spending billions of tax dollars on technology and treatment attempting to save low-birth-weight infants when that practice has a high probability of complications yielding a relatively low survival rate with a high probability of ongoing medical and other expenses associated with survival?
Access, quality and cost — you cannot reduce costs if your promise is equal effort for every low-birth-weight child using whatever technology and treatment is available. In Switzerland, a country often cited for a lower infant mortality rate than the United States, infants weighing less than 2.2 lbs. at birth who die are designated stillborn, whether measures are taken to help them survive or not. Problem solved?
Infant mortality highlights the underlying question of the health care reform debate: How can individuals deal with unpredictable, unaffordable expenses? Neither the regulated, privately managed care approach we have today nor the government-run managed care proposals being debated in Congress provide an acceptable answer. A free market system where patients control the money, health care providers set prices for services, and private insurers are free to develop policies that convert unpredictable and unaffordable events into affordable and predictable premiums, could well be the best way to optimize (not perfect) health care resources.
Unfortunately, in the progressive rush to birth a government-run solution, the free-market solution is designated “stillborn.”
This commentary originally appeared in the St. Paul Pioneer Press, Friday August 28.
Photo Caption: Neonatalogist Jonathan Muraskas places his hand next to Rumaisa Rahman, known to be the smallest baby in the world to survive birth (8.6 ounces). Rumaisa was born at Loyola University Medical Centre in Chicago. Photo: Reuters
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