The Media Redefines ‘Fiscal Resposibility’

Human Events | Seton Motley | Dec. 21, 2007

Want to ensure the growth of government? Forever? The media does, and they have with Liberals devised the perfect way to do it. It is the “pay-as-you-go” Congressional budgeting rule — Pay-Go. It requires every move that Congress makes be “budget neutral”; every new spending initiative must be paid for – no more deficit spending.

How could anyone, Conservatives especially, not be enraptured with such a concept?

It certainly intrigued everyone in Congress in 1990, for it was then that Pay-Go became law as a part of that year’s Omnibus Budget Reconciliation Act. (It went away in 2002, only to be reinstated in January of this year.)

The problems with Pay-Go, however, became apparent immediately. It did nothing to reduce spending, and everything to prevent tax cuts. This went unreported by the press because it did not fit into their government growth is good narrative.

They instead used it as an opportunity to redefine what “fiscal responsibility” means in Washington.

Before Pay-Go, “fiscal responsibility” meant limiting federal expenditure to what the government could reasonably afford. And in these good old days there were “spending hawks” in Congress, elected officials who actually kept a keen eye focused on ensuring that government never grew too big for its fiscal britches. One, the late Harry Byrd, Sr. of Virginia, was often seen on the Senate floor in objection to some expenditure, asking, “How shall we pay for this?”

Under Pay-Go, spending hawks slowly went the way of the dodo, to be replaced by “deficit hawks”, a breed of bird the media prefers. These creatures are first and foremost concerned with the Congressional bottom line, and are far more willing to raise taxes than reduce spending to maintain it.

The press in unison praised these new “hawks”, and lauded their spendthrift ways as the new definition of “fiscal responsibility.”

Responsibility used to mean frugality; it now means tax hikes to pay for as much government as possible. Accordingly, you can be an Ear-Marxist and still be a “deficit hawk”, so long as you raise taxes enough to foot the bills.

And despite replete examples throughout our history that reducing taxes actually increases the revenue Washington collects, under Pay-Go Congress can not decrease taxes a dollar here without raising taxes a dollar there or cutting spending a dollar somewhere — “budget neutrality”, remember?

. . . more


28 thoughts on “The Media Redefines ‘Fiscal Resposibility’”

  1. Most of the growth is federal spending has nothing to do with anti-poverty programs which are a favorite whipping-boy of the Right and whose spending levels have been fairly stagnant relative to inflation these last 6 years. Consider that:

    – Congress just passed an agriculture bill that continues to lavish subsidies on grain farmers despite record high crop prices.

    – Congress just passed an energy bill that continues to lavish subsidies on the oil and gas industry despite their record profits this year.

    – Congress just passed $90 billion more for military operations in Iraq and Afghanistan raising the costs of those wars to over half a trillion dollars. Hundreds of millions, if not billions, paid to military contractors or given to the new Iraqi government have disappeared and cannot be accounted for.

    – The spending increase in the two federal entitlements that are growing, Medicare and Medicaid, reflect sharply rising costs throughout the entire health care system, public and private. By refusing to pass meaningful health care reform that would rein in costs, we allow this trend to continue.

    – As the federal government continues to borrow more the amount of federal spending that must be devoted to paying the interest on the national debt continues to rise.

    So yes, there is a problem with federal spending, but lets not blame the most vulnerable members of our society for that when special interests gorging at the federal trough are the parties truly at fault.

  2. Sorry Truthmeter, but this statemet from you is absolutely false: Most of the growth is federal spending has nothing to do with anti-poverty programs which are a favorite whipping-boy of the Right and whose spending levels have been fairly stagnant relative to inflation these last 6 years.

    If you expect your posts to be approved, please take the time to research your comments and verify your claims.

    The Budget and Economic Outlook: Fiscal Years 2006 to 2015

    The largest increases were in the Mandatory spending category which are represented by the “anti-poverty” social programs.

  3. It is true that mandatory spending related to health care has grown considerably and is expected to rise even faster in the years ahead – and I noted that. However, this growth reflects the addition of the Medicare Part D drug benefit and rising costs throughout the health care system overall.

    I followed the link you provided and found this statement:

    In contrast to the rapid increases in outlays for Social Security, Medicare, and Medicaid, spending for other income-security programs will grow modestly at an average annual rate of 1.8 percent, CBO estimates. (Those programs include unemployment compensation, Supplemental Security Income, the refundable portion of certain tax credits, and Food Stamps.) As a result, those programs will make up a declining share of GDP–falling from about 1.7 percent in 2004 to 1.2 percent by 2015. Some of the drop over time is the result of provisions in law that affect the child tax credit, which is scheduled to expire in 2010. (The amount of the child tax credit that exceeds an individual’s tax liability is treated as an outlay in the budget.) Moreover, some major benefit programs (for example, Temporary Assistance for Needy Families, or TANF) are capped by law and thus do not adjust according to increases in inflation or for changing caseloads. Still other programs, such as the refundable portion of the earned income tax credit (EITC), are projected to remain at roughly the same nominal amount over the next 10 years, though they are not capped. Consequently, as the economy expands, spending on those programs will drop relative to GDP.

    Once again, the data is telling us that if we want to get entitlement spending under control we have to fix the health care system.

  4. Chris B. writes: “Sorry Truthmeter, but this statement from you is absolutely false: Most of the growth is federal spending has nothing to do with anti-poverty programs which are a favorite whipping-boy of the Right and whose spending levels have been fairly stagnant relative to inflation these last 6 years.

    As Aletheameter noted, a lot of the spending increase is due to medical programs in which the costs are driven by what is happening in the larger healthcare market. I suppose an exception to that would be the Medicare prescription drug program, that really does represent an expansion of benefits.

    But let’s consider mandatory federal programs that would be considered more traditional “welfare” programs, comparing 2007 and 2008 budget figures (dollars in billions):

    Supplemental Security Income:
    2007 $35
    2008 $40

    Earned Income/Child Tax Credits
    2007 $48
    2008 $48

    Food Stamps
    2007 $32
    2008 $32

    Family Support
    2007 $25
    2008 $25

    Child Nutrition
    2007 $14
    2008 $14

    Foster Care
    2007 $7
    2008 $8

    As you can see, growth in those programs is very modest, flat in most cases. As Aletheameter said, the main growth has been in medical programs. And also Social Security, which he doesn’t mention.

    Source: CBO’s Baseline Projections of Mandatory Spending, Table 3.3

    Consider also this interesting graph showing a decline in welfare recipients from 1996 to 2003, reflecting welfare reforms:

    Chris B.” The largest increases were in the Mandatory spending category which are represented by the “anti-poverty” social programs.”

    The three largest programs in the mandatory category are Social Security, Medicare, and Medicaid. Frankly, those programs dwarf the traditional welfare programs. Food stamps and all the other programs I mentioned above are pocket change compared to the big three.

    The retired and elderly members of your church are beneficiaries of Social Security and Medicare. Question: for the older members of your church, how much would you like to see their Social Security and Medicare benefits cut? If you really want to cut “anti-poverty” programs, those are the people who will feel the greatest effect. [Ed. – I will let this comment through, but this is COMPLETELY OFF-TOPIC. You’re again setting up a false argument and arguing against a straw-man. I have not advocated this and never raised this issue at all. What the heck are you talking about?]

    Chris B.: “If you expect your posts to be approved, please take the time to research your comments and verify your claims.”

    With all respect, I would strongly recommend NOT deleting posts simply because you think they are in error. Economics is a very complex subject, and there are many different ways of looking at the data. In my humble opinion, the solution is not fewer posts but more posts, more information, more points of view, more discussion. For what it’s worth I say that as someone who has been in the data business for over twenty years.

  5. Jim and Truthmeter, Not sure where you’re getting the information from, but here’s a Summary review from Wikipedia based on CBO reports:

    The President’s actual budget for 2007 totals $2.8 trillion. Percentages in parentheses indicate percentage change compared to 2006. This budget request is broken down by the following expenditures:

    $586.1 billion (+7.0%) – Social Security
    $548.8 billion (+9.0%) – Defense[2]
    $394.5 billion (+12.4%) – Medicare
    $367.0 billion (+2.0%) – Unemployment and welfare
    $276.4 billion (+2.9%) – Medicaid and other health related
    $243.7 billion (+13.4%) – Interest on debt
    $89.9 billion (+1.3%) – Education and training
    $76.9 billion (+8.1%) – Transportation
    $72.6 billion (+5.8%) – Veterans’ benefits
    $43.5 billion (+9.2%) – Administration of justice
    $33.1 billion (+5.7%) – Natural resources and environment
    $32.5 billion (+15.4%) – Foreign affairs
    $27.0 billion (+3.7%) – Agriculture
    $26.8 billion (+28.7%) – Community and regional development
    $25.0 billion (+4.0%) – Science and technology
    $23.5 billion (+0.0%) – Energy
    $20.1 billion (+11.4%) – General government

    Jim, This is a moderated blog. If you want a non-moderated round-table feel free to start your own. We tried the old approach but the personal attacks and leftist propaganda didn’t stop, despite the clear discussion standards outlined. I simply don’t have the time and inclination to deal with Michael Moore and AlGore level opinions and commentaries.

  6. Chris B. writes: “Jim and Truthmeter, Not sure where you’re getting the information from . . .

    I posted my sources, so there shouldn’t be any question. And thanks much for the fast turnaround.

    Chris B: ” . . . but here’s a Summary review from Wikipedia based on CBO reports . . . ”

    But that makes my point doesn’t it? Increases in unemployment and welfare, even Medicaid and other health costs are a fraction of other categories.

    Chris B.: “Jim, This is a moderated blog. If you want a non-moderated round-table feel free to start your own. We tried the old approach but the personal attacks and leftist propaganda didn’t stop, despite the clear discussion standards outlined.”

    Dude, let me be clear — I’m not your enemy. Moderation is fine, especially when it comes to personal attacks. I’m just saying that with complex topics such as economics and global warming, no one is going to get it right all the time. When a complex topic is discussed, more discussion is better than less discussion. Best wishes to you and the other Orthodox posters as you prepare for the Christmas feast a couple of weeks from today.

  7. I support the right of the moderator to block comments that are vulgar, offensive, malicious or anti-Christian. As someone who cherishes his Orthodox faith, I certainly would not appreciate reading comments mocking or attacking Christianity.

    However, economics, politics and the environment are a different matter. Our Church has no political dogma and requires no orthodoxy of opinion on issues like supply-side economics, for example, or the American foreign policy in Iraq. In 2003 for example, my Priest supported the decision of President Bush to invade Iraq, while his superior, Metropolitan Anthony of San Francisco, opposed it. Both were free in the eyes of the Church to express their own opinion.

    On political and economic topics a diversity of opinion is welcome and beneficial since the consideration of the pros and cons of various arguments tends to deepen everyones understanding of a particular issue. If anything, the American ideal champions a free marketplace of ideas with each idea free to succeeed or fail on its own merits. Nothing could be more un-American than censoring comments simply for their political content.

    Lastly, even limiting political views to those that conform to “conservative” ideals would be an impossible task, since among conservatives there is a wide diversity of views. Who is the true conservative running for President, for example, can anyone tell me? Is it Rudy Guiliani who supports Roe V. Wade, an aggressive, muscular foreign policy and minimal government interference in economic affairs? Is it Mike Huckabee a social conservative who is also said to be an economic populist and who as Governor sided with liberal Democrats to expanded health care for low-income children ? Or is it Ron Paul, who supports an isolationist foreign policy and would pull US troops out of Iraq immediately, abolish the IRS and support freedom of individuals too make their own personal decisions regarding abortion and marriage?

    There is no consensus on what it means to be a conservative today, and the very task of exploring what it means to be a conservative, by definition, requires a wide-ranging freedom of expression and opnion.

    Merry Christmas!

  8. Dean, This is a moderated Blog, it’s about time you got used to it. 🙂 Please quit whining about it and submit substantive and on-topic commentary and stay away from Michael Moore, AlGore, and Al Franken style attacks and you can participate in the discussions. Stray off the path and suffer the consequences. 🙂

  9. Chris – Here is a research study that supports what you wrote about the importance of morality in determining financial and economic outcomes:

    Morality matters for economic performance
    Guido Tabellini
    22 December 2007

    Morality – defined as individual values and convictions about the scope of application of norms of good conduct – is an important factor in individual behaviour and thus economic outcomes. Such values evolve slowly so they are an important channel through which distant political history can influence current economic performance. Here is new evidence supporting this view.

    ..In a recent working paper (Tabellini 2007), I argue that to answer this question we have to look beyond pure economic incentives, and think about other factors motivating individual behaviour. One of these factors is morality. Conceptions of what is right or wrong, and of how one ought to behave in specific circumstances, exert a strong influence on behavioural aspects that directly affect economic outcomes. The list included voters’ demands and expectations, citizens’ participation in group activities, the extent of moral hazard inside public organisations, and the willingness of individuals to provide public goods.

    Values also evolve slowly over time, as they are largely inherited from previous generations. Thus morality, defined as the scope of application of norms of good conduct, is an important channel through which distant political history can influence the functioning of current institutions.

    Sometimes we agree and sometimes we don’t. I hope you can live with that.

  10. Chris: You say:

    stay away from Michael Moore, AlGore, and Al Franken style attacks and you can participate in the discussions

    How do you define “Michael Moore, AlGore, and Al Franken style attacks”. I want to stay within the rules and were hoping you could provide more detailed instructions. Are you saying that you will allow opposing viewpoints, but that there is a certain manner of expression you find objectionable. If so what is that manner of expression?

    Or are you saying that you reserve the right to block any comments if you whose political content or viewpoint you personally disagree with? Are you saying that you will only post the comments of people who agree with you and no one else?

    If you reserve the right to block comments whose political content you disagree with won’t that interfere with and inhibit discussion on the blog. Do you expect that particpants will agree with your view-point 100% of the time and are you sending the message that you discourage competing viewpoints? Won’t the participants on the blog be afraid to ask each other questions if they can’t depend upon getting a response because you may disagree with the answer?

  11. From the Chicago Tribune, (submitted without comment):

    Analysts: Bush was big spender in early years
    By Mark Silva | Washington Bureau
    December 25, 2007

    WASHINGTON – In the year-end battle of the budget that consumed Congress and the White House, President Bush repeatedly accused Democrats of “budget-busting” schemes to spend more money, presenting himself as a fiscal conservative holding the line against profligate spending.

    Yet congressional leaders and independent analysts contend that in the first few years of his presidency, it was Bush who did a good deal to drive up the national debt. Bush spent at a pace that exceeded that of President Lyndon Johnson in the Great Society years, they say, including huge war bills that went beyond the bounds of normal budgeting.

    With Democrats in control of Congress since the start of this year, Bush has begun wielding his veto power over spending with a new vigor. He did not veto a single spending bill during the six years that the Republicans controlled Congress, despite some generous packages produced by lawmakers in those days.

    ..Whoever is at fault, the impact of federal spending in the Bush years will be long-lasting, analysts say. The accumulated national debt — $5.77 trillion near the end of Bush’s first year in office — now stands at $9 trillion. The cost of paying the interest on that debt ran to $250 billion in 2007, nearly half of what the government spent on the Defense Department.

    Partisans on both sides agree that war costs have driven much of the spending. The president already has secured more than $600 billion for the wars in Iraq and Afghanistan, using “supplemental budgets” outside the normal budget process, and is seeking nearly $200 billion more for the year ahead.

    Defense spending has grown by an average of 5.7 percent each year under Bush, more than under any other post-World War II president, the Cato Institute has found. At the same time, discretionary spending has grown by an average of 5.4 percent, compared to 4.6 percent during Johnson’s tenure.,1,2762133.story?ctrack=1&cset=true

    Read em’ and weep.

  12. Dean, What do you know, you’re slowly turning into a conservative! Never thought I’d see the day when you criticized gov’t for wasteful spending and taxing and spending us into oblivion. That’s the point I’ve been driving at for months and you have not gotten it! Bush is no different than big-gov’t liberals and leftists when it comes to the way he approves the runaway regulations, more taxes, and huge deficit budgets that Congress dreams up. With controls in both houses for many years he failed to abolish the IRS and move the US to a flat tax system that would benefit most the poor and the elderly. Bush is not a conservative when it comes to many issues except sanctity of life, national defense, and some faith-based programs. He wasted most of the legacy he was entrusted with.

  13. We’ve created a political system in which elected officials (of both parties) are beholden to special interests, and as result our economic system has become one of socialism for the rich and powerful.

    – Democrats as well as Republicans fought to continue massive, unneccesary agricultural subsidies, maintain huge subsidies for the oil and gas industry, and to kill higher auto fuel efficiency standards opposed by Detroit.

    – Chuck Schumer, a New York Democrat, opposed paying for the Alternative Minimum Tax fix by imposing a special tax on the mega-million dollar incomes of Wall Street hedge fund managers.

    – The latest budget bill contained over 9,000 “earmarks”. Often these are projects of dubious neccesity championed by some wealthy campaign contributor. It is not uncommon to read of Congress funding an expensive weapons program, only because it benefits the Congressmans home district.

    – Neither, the Republican or Democratic Presidential candidates have offered health care plans that take on special interests or attack the root causes of runaway medical inflation. The Democrats are supported by health care industry interests who have figured out how to profit from “reform”, while the Republicans are supported by health care industry interests who profit more from the present system.

    – Here in California, the wife of Fabian Nunez, the Democratic majority leader guiding California’s health care reform through the State Assembly, works for a health insurance lobbying association.

    The only solution may be to ban all campaign contributions, publically fund elections and limit all campaigning to a short 8-12 week period.

  14. No Dean, the solution is not to destroy more freedoms and add more regulations, but it’s much, much simpler: (a) eliminate the IRS, (b) go to a flat tax on income only (with no subsidies or tax credits or any loopholes), and (c) pass a Constitutional Amendment that demands a Balanced Budget and a cap on taxation and limits combined state, local, city, property, etc. taxes to no more than a combined 20%; then let the politicians fight it out among themselves where the 20% comes from and where it’s going. Every time they want to raise it locally, then they have to reduce the federal and vice versa. That is the ONLY way to get rid of the “special interests”, return power to the people, and neuter the professional bureaucrats and neo-communists that have run this country into the ground and enslaved us all.

  15. Chris, sounds llike quite a lot of restrictions to me and it would end up only strengthening the federal government since local and state pols would willingingly cede resposnibility for making decisions that require money to the feds who would end up with all the money anyway. Fighting over a truncated pool of money could well increase the power of special insterests (that’s always code for what someone else wants that I don’t). Even if you managed to get such legislation passed, it would not last long. Deductions, cuts and other tax favoritism would quickly restore the tax code to its current length or longer. What was not whittled away by legislation would be declared “unconstitutional” for its discrimination against (fill in the blank).

    You forgot to add full and complete disclosure of all monies that are recieved by any elected official or their immediate family and no PACS.

    No amount of external tinkering will make up for the lack of virtue in us the folks who elect the power-drunk idots we do simply because they promise us more goodies. They don’t even have to deliver on the promises, they just have to make them in a way that appeals to our own set of vices and purience, egotism and opinion.

    My rule of thumb, anybody who willingly runs for political office is unqualified to hold it.

    We’d be much better off with a lottery system for filling elective offices and and system that rotates the paid staff and functionaries out of their jobs on a regular basis and brings in fresh blood and expertise.

    We have become a nation of voyeurs whose only wish is stuff and comfort. As long as polticians promise stuff and comfort and deliver an entertaining reality show, we are happy as can be.

  16. Fiscal Policy requires that government use tax and spending policy to moderate cyclical upturns and downturns in the economy. According to Forbes “Investopedia”:

    What Is Fiscal Policy?

    Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nation’s economy. It is the sister strategy to monetary policy (see Formulating Monetary Policy), with which a central bank influences a nation’s money supply. These two policies are used in various combinations in an effort to direct a country’s economic goals. Here we take a look at how fiscal policy works, how it must be monitored and how its implementation may affect different people in an economy.

    Before the Great Depression in the United States, the government’s approach to the economy was laissez faire. But following the Second World War, it was determined that the government had to take a proactive role in the economy to regulate unemployment, business cycles, inflation and the cost of money. By using a mixture of both monetary and fiscal policies (depending on the political orientations and the philosophies of those in power at a particular time, one policy may dominate over another), governments are able to control economic phenomena.

    Tying the governments hands with restictive fiscal controls limits it’s ability to act in a counter-cyclical manner to moderate the highs and lows in the business cycle making the highs that much more dangerously inflationary, and the lows much more likely to dip into deep recession or depression.

    The problem with Bush administration fiscal policy is that it has been pro-cyclical, stimulating the economy with tax cuts during periods of strong GDP growth and now cutting spending as the nation heads into recession. Bush has also over-emphasized tax cuts while ignoring the ability of carefully targeted domestic spending to create jobs and stimulate economic demand. Most economists agree that tax cuts for the rich are a weaker form of stimulus because they tend to be saved rather than spent, while tax cuts and spending programs for the poor provide strong stimulus because they translate into immediate spending.

  17. Dean, again you have a static view of taxation and wealth creation. You assume that a 20% rate will reduce tax revenues. History has shown that when Reagan cut the federal tax rates from 70% to 28%, tax revenues doubled within several years. So the argument that a flat tax restricts gov’t ability to help in a financial crisis is false. Also the “tax cuts helps the rich” argument is truly one of the most incorrect and wrong arguments I keep hearing from the left. Reagan proved you wrong many times over. Please if you expect to continue posting here, start posting objective arguments since such leftist propaganda is beneath the reasoned and mature environment on this Blog. I’m really tired of having to refute such false arguments OVER and OVER and OVER again. (There I go again turning into Christopher! 🙂 )

  18. Note 17. Dean writes:

    Most economists agree that tax cuts for the rich are a weaker form of stimulus because they tend to be saved rather than spent, while tax cuts and spending programs for the poor provide strong stimulus because they translate into immediate spending.

    A couple of points.

    The poor don’t pay taxes (except for the hidden taxes everyone pays).

    The Democrats used to understand that tax cuts increased taxable income. It was the centerpiece of the Kennedy boom.

    Government wealth transfers are highly inefficient. Sure the distributed money gets spent, but how much of the second dollar was wasted getting the first dollar into the hands of the recipient?

    One final point. With your recent spate of posts criticizing government spending, how do you possibly think that government will ever efficiently manage health care?

    BTW, a young man from England (35 or so years old) in the room next to a patient I was visiting, went to the national health care doctors in England complaining of blurred vision and weakness. It took four months to see the doctor. He was diagnosed with diabetes.

    Visiting the US for a few weeks, the symptoms reappeared, he saw an American doctor the next day and found out the diagnosis was completely wrong. He had bleeding behind the eye. Within three days he had corrective surgery.

  19. how do you possibly think that government will ever efficiently manage health care?

    That’s an interesting question considering that the United States already has the most inefficient health care system in the modern industrial world. We pay twice as much per capita compared to Western Europe but are rated 37th in the world for health outcomes, behind Slovenia.

    We pay Medical providers per unit, or piecemeal, for every visit or procedure, rather than on the baisis of health outcome. As result the volume and intensity of treatment provided for the same disease may vary greatly depending on hospital system or geographic region. Every year increases in medical costs are far greater than increases in the general cost of living. According the Congressional Budget Office if the current rates of medical inflation continue unabated, in 20 years Medicare and Medicaid spending will consume a greater percentage of the nation’s GDP than the entire federal budget consumes today.

    Regarding the young man’s unfortunate experience British National Health, we should always avoid making policy on the basis of anecdote and hearsay. Michael Moore has certainly amassed an impressive collection of horror stories regarding the US health care system but I’m not sure everyone would agree that they should form the basis for future legislation.

    Lastly British National Health is not the only model for Universal health Care coverage. France and Germany have maintained a significant private sector presence in their universal health care systems, and should also be studied.

    Conservatives in the United States who are most informed about the problems of our health care system are starting to look beyond band-aid solutions like Health Savings Accounts and are studying systems like the kind provided in the Netherlands, which mix univeral coverage with market competition among insurers and providers.

    Looking at Dutch and Swiss Health Systems NY Times, October 30, 2007

    .The Swiss and Dutch health care systems are suddenly all the rage. They have features similar to proposals by at least two presidential hopefuls, and next month the United States’ top health official will visit Switzerland and the Netherlands to kick the tires.

    Health and Human Services Secretary Michael O. Leavitt will visit Switzerland on Nov. 7 and then fly to The Hague for two days. His schedule is filled with meetings with ministers and technocrats, hospital officials and insurance executives and patients and their advocates.

    ..The only models we seem to focus on here are those in Canada and Great Britain, which both have government-run systems,” Ms. Pisano said. “We thought it made sense to look at two countries that have universal coverage but rely on the private sector to get there.”

    W. David Helms, president of AcademyHealth, a health policy research organization here, said he met top Dutch health officials for several days this month in the Netherlands.

    The Netherlands is a particularly good model for the United States, Mr. Helms said, because it has solved two basic problems: moving from an employer-based system to one in which individuals buy their own insurance and subsidizing care for the poor.

    “I think the Netherlands is hot right now because a number of people are realizing that we need to go to an individual-based system instead of an employer-based one,” he said.

  20. Note 20. Dean writes:

    We pay twice as much per capita compared to Western Europe but are rated 37th in the world for health outcomes, behind Slovenia.

    Slovenia? Really?

    Glad to see you backing off your uncritical approval of the Canadian and English systems. But do you really think liberals will agree to an individual based system (if the NYT is correct — always a big “if” on questions like this)? I don’t.

    For many liberals, especially the hard left, health care isn’t really about health, just like global warming isn’t really about the environment. We’ll wait and see, but my hunch is that strongest criticism of single-payer systems will come from the left (and the NYT will dutifully backtrack).

  21. A health care system based on individual insurance is feasible if it is accompanied by supportive regulation and a fundamental shift in the health insurance business model.

    As economist Mark Thoma writes, Conservatives have always been more receptive to “government intervention, weights and measures, disclosure requirements, truth in advertising, safety requirements, etc., designed to make markets work more efficiently by creating conditions that better approximate competitive ideals. The debate over health care can be cast in this light, i.e. as a debate about how best to solve a market failure that prevents broader coverage at lower prices.”

    There is no doubt that the health care market is beset by two types of market failure, Moral Hazard and Adverse Selection. Moral Hazard occurs when easy access to benefits results in waste and over-utilization, (although providers rather than patients are more likely to be responsible, IMHO). Adverse Selection occurs when markets shift benefits away those who need them the most, and/or can afford to purchase them the least. Denial of coverage to individuals with pre-existing conditions is a form of adverse selection.

    Respected health care economist Alain Enthoven, of Stanford University is one expert who believes that market forces can be utilized to create an efficient health care system, but that it would require major changes. Enthoven champions a system he calls “managed competition”, which has been the model for Dutch health care reforms.

    The new Dutch system adheres closely to Enthoven’s original vision, which provides national health coverage through private companies rather than relying exclusively on the government. Under the Dutch program, each citizen is required by law to buy individual health insurance from an insurance company of his choice. The consumer pays a flat rate premium to the insurer at a minimum of about 1,200 euros a year.

    Each individual pays an additional income-related tax contribution to the government to help subsidize the premiums for low-income groups so that everyone can afford health insurance. The tax monies also help support coverage plans that tend to attract a greater percentage of chronically ill people whose treatment is generally more expensive. The system keeps risk and costs spread evenly among various insurance plans so that their premiums can stay competitive.

    Dutch Adopt Enthoven’s Plan of Managed Competition in Health Care

    Enthoven describes “managed competion” as follows:

    Managed competition in health care is an idea that has evolved over two decades of research and refinement. It is defined as a purchasing strategy to obtain maximum value for consumers and employers, using rules for competition derived from microeconomic principles. A sponsor (either an employer, a governmental entity, or a purchasing cooperative), acting on behalf of a large group of subscribers, structures and adjusts the market to overcome attempts by insurers to avoid price competition. The sponsor establishes rules of equity, selects participating plans, manages the enrollment process, creates price-elastic demand, and manages risk selection.

    Managed competition is based on comprehensive care organizations that integrate financing and delivery. Prospects for its success are based on the success and potential of a number of high-quality, cost-effective, organized systems of care already in existence, especially prepaid group practices. As it is outlined here, managed competition as a means to reform the U.S. health care system is compatible with Americans’ preferences for pluralism, individual choice and responsibility, and universal coverage.

    The History And Principles Of Managed Competition

    Moving to Enthoven’s vision offers the best hope for maintaining a market-drive health system while at the same time moving to universal coverage and greater cost control and efficiency. It means that insurance companies have to abandon their present business model of managing “risk” (through exclusion of coverage and denial of treatment to older and sicker individuals) and towards managing “care”. Under the theory of managed competition, information on quality and price would become more transparent and those health care organizations delivering the highest quality care for the lowest price would succeed.

  22. If we ever have a single-payer health care system in the United States, it will be because of opposition by entrenched special interests to needed market reforms. Politically, culturally and psychologically Americans are more comfortable with a market based system than a government-run system. However trends such as this one, if not addressed, are bound to produce a middle-class backlash:

    Health care costs have become a growing burden for America’s families, as premiums and out-of-pocket expenses continue to rise at alarming rates. Left unchecked, health care costs will keep going up, forcing more and more American families into debt—and even into bankruptcy. According to public opinion polls, health care is now the number one domestic priority. At the same time, pressure on policymakers to take decisive action is expected to grow. In 2008, voters will head to the polls seeking, among other things, to see that the cost of care is brought under control.

    In order to understand how high health care costs affect American families, Families USA commissioned The Lewin Group to analyze data from the U.S. Department of Health and Human Services and the Census Bureau. This analysis allowed us to determine how many non-elderly people are in families that will spend more than 10 percent of their pre-tax income, and how many will spend more than 25 percent of their pre-tax income, on health care costs in 2008.

    Our analysis paints a stark picture: Nearly one out of four Americans under the age of 65—61.6 million people—is in a family that will spend more than 10 percent of its pre-tax income on health care costs in 2008. Shockingly, the vast majority of these people (82.4 percent) have health insurance. And 17.8 million non-elderly Americans—more than three-quarters of whom have health insurance—are in families that will spend more than 25 percent of their pre-tax income on health care costs in 2008.

    Too Great a Burden: America’s Families at Risk

  23. Dean, read the piece and then looked at their board of directors. Included is (Rev.) Bob Edward, recently retired president of the National Council of Churches and now head of Common Cause. He’s an old socialist from way back, a 70’s liberal who steered the NCC down the statist path (and called it Christian).

    I talked to a retired obstetrician on New Year’s eve. His malpractice insurance (Cook County) at retirement was $140,000 a year, and he only has one claim that was settled for $500 (a nuisance claim). Tort reform would help reduce costs, but the trial lawyers have the Dem’s in their pocket hence the push for government control of pricing. (John Edward’s excessive consumption is funded by middle class insurance premiums.)

    Also, note the logic of the piece you posted. It sounds like the global warming crusade, ie: scare tactics before facts. Also, there is no explanation about how turning the reigns of health care over to government (your position) will lower costs without resorting to rationing (the English and Canadian models). If your only purpose was to cry the alarm (“health care costs are rising!”), well, we know this already.

  24. I wasn’t arguing for a single-payer system so much as warning that it could be the consequence of doing nothing to address the market failures that beset the health care system. As Stanford Professor Alain Enthoven and the Dutch are trying to prove, you can have market based competition in health care, but it is not going to happen all by itself. There have to be significant changes and reforms.

    It is not a repudiation of capitalism to insist on level playing fields, fair markets and true competition. That is what Theodore Roosevelt worked for at the turn of the century with his efforts to break up the big monopolies and trusts, and regulate product safety and worker safety in industries such as meat-packing and textiles. Forget about the NCC, there is plenty of other evidence that health care costs are an increasingly unsupportable economic burden for the middle-class. For example, large medical expenses are now the leading cause of bankruptcy.

    What do you make of the Huckabee victory in Iowa last night? (I would really like to hear your impressions, since your predictions for the 2004 election were right, and mine were wrong)

    I think Huckabee’s victory reflects the fact that there are acute economic anxieties in the middle-class, even among many Republicans. Huckabee’s speeches are laced with populist rhetoric and he has taken on the “plutocrats” insisting that the voters want a President “who looks like a guy they work with, not the guy who wants to lay them off”, a clear jab at Romney.

    David Brooks writes in the NY Times today:

    Huckabee won because he tapped into realities that other Republicans have been slow to recognize. ..Huckabee understands much better than Mitt Romney that we have a crisis of authority in this country. People have lost faith in their leaders’ ability to respond to problems. While Romney embodies the leadership class, Huckabee went after it. He criticized Wall Street and K Street. Most importantly, he sensed that conservatives do not believe their own movement is well led. He took on Rush Limbaugh, the Club for Growth and even President Bush. The old guard threw everything they had at him, and their diminished power is now exposed.

    Third, Huckabee understands how middle-class anxiety is really lived. Democrats talk about wages. But real middle-class families have more to fear economically from divorce than from a free trade pact. A person’s lifetime prospects will be threatened more by single parenting than by outsourcing. Huckabee understands that economic well-being is fused with social and moral well-being, and he talks about the inter-relationship in a way no other candidate has.

    The Democratic outcome was interesting too, since the Democrats rejected John Edwards’s harsher message regarding the evils of corporate greed for Obama’s softer and more inclusive vision of a nation pulling together to tackle its problems.

    This tells me that the voters may not neccesarily want a single payer health care system, but they are clearly upset and do want something meaningful done to fix the serious problems we have now in our health care system.

  25. Note 25. Dean asks:

    What do you make of the Huckabee victory in Iowa last night? (I would really like to hear your impressions, since your predictions for the 2004 election were right, and mine were wrong)

    I think Huckabee is still an unknown, and I don’t expect the Iowa surge to continue. Just came across this piece by George Will. It’s harsh, maybe too harsh in places, but I am in fundamental agreement with many of the points. (Count me more on the Madison side regarding government.)

    WASHINGTON — Like Job after losing his camels and acquiring boils, the conservative movement is in distress. Mike Huckabee shreds the compact that has held the movement’s two tendencies in sometimes uneasy equipoise. Social conservatives, many of whom share Huckabee’s desire to “take back this nation for Christ,” have collaborated with limited-government, market-oriented, capitalism-defending conservatives who want to take back the nation for James Madison. Under the doctrine that conservatives call “fusion,” each faction has respected the other’s agenda. Huckabee aggressively repudiates the Madisonians.

    He and John Edwards, flaunting their histrionic humility in order to promote their curdled populism, hawked strikingly similar messages in Iowa, encouraging self-pity and economic hypochondria. Edwards and Huckabee lament a shrinking middle class. Well.

    Economist Stephen Rose, defining the middle class as households with annual incomes between $30,000 and $100,000, says a smaller percentage of Americans are in that category than in 1979 — because the percentage of Americans earning more than $100,000 has doubled from 12 to 24, while the percentage earning less than $30,000 is unchanged. “So,” Rose says, “the entire ‘decline’ of the middle class came from people moving up the income ladder.” Even as housing values declined in 2007, the net worth of households increased.


    I think too that Huckabee’s success was in some measure a contra-Bush vote. Looking at the Edward’s showing in relation to Obama, you can’t conclude like Brooks does above that the Republican party has morphed into an Edwards’ like populism in greater measure than the Democrats. Brooks is simply misreading the entire picture.

    (How much of liberal “glee” — to use you term from another post that makes essentially the same point that Brooks did– is due to a sense of (misplaced) vindication for moral posturing over substantive ideas? Both you and Brooks seem delighted that Republicans appear to have jumped on the bandwagon where motives count more than results — but this is a false conclusion.)

    More interesting will be the emergence of Obama. Clinton and crew are correct that he lacks specifics and experience, but they can’t seem to comprehend that making the charge is not enough. They have to offer some ideas of their own besides empty headed points like Hillary met foreign leaders and the like. If Hillary comes up anything less than first in NH, then the spotlight on Obama will shine with a lot more intensity. Not even Oprah will be able to deflect it. I’m not so sure though that we will see anything more than Carter-lite in the end. Time will tell.

    I wasn’t arguing for a single-payer system so much as warning that it could be the consequence of doing nothing to address the market failures that beset the health care system.

    Sure you were. You were defending the English and Canadian systems to the hilt. Have you changed your position?

  26. What I would like to see is a new conservative paradigm that emphasizes proactive approaches to economic problems. Mostly these are economic problems that have the potential to grow into full-blown economic crises if not addressed. I would argue that conservatism does not need to be passive and reactive, but can be strategic and proactive, and that Theodore Roosevelt provides a model for that type of conservatism.

    If you go back a full century you can see that two seperate visions of conservatism emerged in response to growing labor unrest and populist discontent. The McKinley, and later Taft, versions of conservatism stressed leaving business alone because business knew best, and beating up striking workers and treating labor like a dangerous subversive whenever it complained. The Theodore Roosevelt vision of conservatism, on the other hand, emphasized carefully targeted government interventions and regulations to maintain fair and competitive markets and address national problems that markets could not or would not solve. In 1912 Roosevelt actually ran against Taft, who had been his Vice-President from 1904-1908, because he was so dissatisfied with Taft’s return to the laisez-faire model conservatism.

    It’s interesting how history repeats itself. The recent subprime lending crisis is a prime example of the type of self-serving and dangerous market behavior Roosevelt felt the government needed to control in order to protect capitalism. Roosevelt’s investment in land for a National Park’s system, a gift to future generations of Americans, was an example of how conservatism can continue to help future generations by erasing the deficit, preempting serious potential environmental problems and investing strategically for the long-term health of our economy.

    Health care is one of the problems we need to deal with strategically for the long-term well-being of our economy. Other conservative writers are starting to note this as well. Although I would differ with former Bush speechwriter David Frum on specific issues I agree with the major points he makes in his new book:

    Comeback: Conservatism That Can Win Again

    Too many conservatives and Republicans have shut their eyes to negative trends. David Frum offers answers.

    Frum says that the ideas that won elections for conservatives in the 1980s have done their job. Republicans can no longer win elections on taxes, guns, and promises to restore traditional values. It’s time now for a new approach, including:

    A conservative commitment to make private-sector health insurance available to every American
    Lower taxes on savings and investment financed by higher taxes on energy and pollution
    Federal policies to encourage larger families
    Major reductions in unskilled immigration
    A genuinely compassionate conservatism, including a conservative campaign for prison reform and government action against the public health disaster of obesity
    A new conservative environmentalism that promotes nuclear power in place of coal and oil
    Higher ethical standards inside the conservative movement and the Republican party
    A renewed commitment to expand and rebuild the armed forces of the United States—to crush terrorism—and get ready for the coming challenge from China

    While I might not agree with all the specifics, this type of conservatism offers a genuine alternative course of action, rather than abdication of responsibility and no action.

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