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Posts Tagged ‘Obamacare’

Even though I disagree with much of its interpretation, I admire Jonathan Gruber’s pre-PPACA research on health insurance markets. He’s one of the most forthright and clear-headed advocates of government takeover of health insurance that I know. However, his recent defense of the law in The New Republic indulges some pretty blatant economic fallacies:

But what few realize is that, by expanding insurance coverage, the law will also increase economic activity. These newly insured individuals will demand more medical care than when they were uninsured. And while it takes many years to train a family physician or nurse practitioner, it doesn’t take much time to train the assistants and technicians (and related support staff) who can fill much of this need. In many cases, these are precisely the sort of medium-skill jobs that our economy desperately needs—and that the health care sector has already been providing, even during the recession.

Gruber surely knows better than to attribute economic growth over the long term to “demand.” All increase in wealth ultimately comes from growth in productivity and exchange, not “demand.” Whether increasing demand for health care will increase aggregate demand and short-run return to equilibrium — as opposed to redistributing spending from other sectors — is another question, but Gruber doesn’t even attempt to answer it. And the amount of jobs in the economy is a function of cyclical and structural factors. Redistributing jobs from other parts of the economy to health care does not mean more wealth or a higher standard of living for Americans. These are basic, 101-level errors.

When attacking critics of the PPACA, Gruber switches to supply-side arguments. Thus:

There is now a large body of literature examining the impact of tax changes on the highest income taxpayers. This literature finds that those taxpayers will avoid some of those taxes by re-categorizing their incomes in ways that minimize taxes. But there is no evidence that they will actually work less hard, invest less, or do anything which reduces their “real contribution” to the economy.

All of a sudden the fiscal contractionary effect of the tax increase doesn’t matter. Can we just call it even on the demand-side claims – as the PPACA will probably neither increase nor decrease the deficit very significantly – and focus on the supply side? The real justification for the PPACA, if there is one, is that it makes health insurance markets more efficient. There’s simply no denying that it imposes some distortions on the rest of the economy to achieve this goal, and Gruber himself seems to acknowledge this toward the end, although he insists the cost will be small.

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Harvard economist Ed Glaeser weighs in on federal mandates in general:

Although I am open to having state governments require more health coverage, I fear a federal government with too much power to control individual behavior. The track record of federal interventions in managing markets suggests a strong case for limiting that power.

The question of bestowing appropriate power on the federal government depends not on the health-care issue alone, but on whether you think — on the whole — that the U.S. government does good things when it heavily regulates behavior. The 1942 case that is often cited as a precedent for health care, Wickard v. Filburn, provides the perfect example of why I fear this control….

There are many reasons to leave control over markets, such as health care, to state governments. States have tougher budget constraints, which discipline spending. States can adapt to local tastes, so Massachusetts can have more intervention than Texas. If people don’t like a state’s rules, they can always move elsewhere. Local experiments provide the evidence that can lead to real progress.

I’m not against all health-care mandates, but the history of federal overreach is worrisome, and I’d be happier if the Supreme Court decides that the law limits this ability to manage markets.

I don’t agree with everything in the article, and it’s unclear whether he favors a federal “tax penalty” on the uninsured to replace the “mandate,” or whether this is also something he prefers state governments do, but it’s refreshing to see a clear and sensible articulation for a more thoroughly federalist construction of the Constitution.

(For my part, tomorrow’s decision is ho-hum unless the whole bill is struck down. Community rating, guaranteed issue, rate review (price controls), Medicaid expansion, and the associated tax increases are all a bigger deal for the economy than the individual mandate.)

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President Obama recently complained about the technological backwardness of the White House.  According to news reports, he said:

“The Oval Office, I always thought I was going to have really cool phones and stuff.  I’m like, c’mon guys, I’m the president of the United States.  Where’s the fancy buttons and stuff and the big screen comes up? It doesn’t happen.” 

Brian Williams of NBC News added that this “extends to the president’s aircraft.  The truth is Jetblue had live tv on its planes before air force one did.”

Score: Market 1, Government 0. 

This is hardly surprising.  But I wonder why such realities don’t cause the President and others with excessive faith in the government to stop and consider how much better the market is compared to government in providing what we want or need in area after area (which is not to say there isn’t a role for government in some realms).  In particular, would you want Obama’s technology provider to also provide health care or groceries??  More sharply, would you rather have the government (and its contractors) provide the skills and technology to do an appendectomy and eye surgery or market participants like doctors and medical industries (with the government tort system in the background of course)?

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A rumble can be heard emanating from assemblies and governor’s mansions across these fruited plains. It is a sound reminiscent of by-gone days that echo down through centuries of constitutional thought. Prompted by everything from unfunded Congressional mandates to the new omnibus healthcare bill, (See here and here) these reverberations strike cords of distant legal memory that are, for most of us, only imperfectly recalled.

For many, talk of state’s rights, interposition, and even nullification brings forth unsavory recollections of illiberal and tyrannical state and local institutions of chattel slavery, Jim Crow and the color bar. That association is understandable given the prevailing interpretation presented in classrooms, but very unfortunate if we stop there.

One of the most essential roles of states in any federal system is to act as counterweights to centralization. For this reason all power is not assigned to the national authority. In the original constitutional design of the American federation, what was not given was reserved to the states or to the people thereof, and it is from this perspective that the check to central power, the bite of Federalism, was to be derived in its most essential forms.

The idea of states as checks to national concentration pushes the bounds of constitutionalism, but it was understood that however approached, and by whatever means undertaken, this role was not to be pursued for light or transient reasons.

The idea of interposition took many forms. It could embrace official expressions of disapproval by the legislature or governor of a state. It might entail simple, non-cooperation with federal authorities, such as a refusal to enforce a federal law, or acknowledge a mandate. Or, it might take the form of an unofficial understanding on the part of local groups and institutions, usually operating under the tacit approval of the state, not to comply with federal measures.  In its most extreme form, interposition could assert the right to interdict the enforcement of an offending provision through an act of outright nullification. How far a state might go in pursuit of this last line of interposing itself is a question of some delicacy.

Preventing by official policy or action the enforcement of a federal measure stresses the limits of constitutionality. If either of the contending powers moves from peaceful toleration or acquiescence to violence, the episode takes us from the realm of the legal to the revolutionary. For this reason, nullification has always been the most dangerous and the most controversial form of interposition.

The basis for the authority of all these options, however, remains rooted in the constitutional ideal itself. It was not the product of a mean or unnecessary political expediency. On the contrary, the idea of interposition was an attempt to sort out a vital constitutional principle and was first articulated, not to defend slavery, but to support free speech, free trade, peace and the liberty of fugitive slaves.

Federalism in all its various forms can be an instrument for good as well as ill. Like any political order, its quality is determined by the people who compose it. To really understand why the states are again making noises of interposition, we need to understand something of the history of our federal structure of government. The reason new life is breathed into old thoughts has everything to do with what rests at the center of our political existence.

Why do we have states? Lincoln made the claim that the Union preceded the states. What he could not say, however, was that the federal government as constituted in 1787 preceded them, because clearly it had not. The main thrust of Lincoln’s reasoning was that the Revolution and the move for independence began as a united effort. The implications of that claim are still debated and one need only recall the exchanges between Mel Bradford and Harry Jaffa on this point. What is certain, however, is that the federal government did not create the states. What then is the role of states in our federal order?

The authors and advocates of the Constitution, whatever they may have thought privately, were not free to assert any desired construction, but had to contend for the support of the peoples of their various former colonies. They needed to address directly the concerns of liberty that had animated the move to independence, and more specifically they had to allay the fears raised by their critics, the Antifederalists. In this way, whatever hidden motives might have existed, it is the stated intentions of the Federalist advocates that must bear legal weight.

Among the primary objects of the Revolution was to secure the liberty of the colonies to determine the disposition of their own properties, free from arbitrary imperial commands. American anxieties of the late eighteenth century grew in direct proportion to the growth of imperial designs by King and Parliament.

The Antifederalists are often called the old revolutionaries as much for their actual age as for their adherence to older ideas about colonial liberties. The list of such advocates is long and venerable: Brutus, Federal Farmer, Cato and Centinel. My favorite, however, is one not so generally recognized, but to my mind, gave the reasons for decentralization and the existence of states most succinctly and eloquently: Maryland Farmer. He took a long range perspective based on some very ancient precedents.

Edward Gibbon’s first volume of The Decline and Fall of the Roman Empire came out in 1776, and like other important works of its time, Americans were eager to read it. By the time of the Constitution, Maryland Farmer had imbibed its central lessons and recognized how closely its themes complimented American experience. He disputed the charge often heard that the states, if not united under one supreme head, would soon be at each others throats. No, he said, citing Gibbon, real terror is to be found where there is no hope of escape, no exit.

Anticipating the role of competing jurisdictions, Maryland Farmer cautioned against rejecting the Articles of Confederation, observing that “In small independent States contiguous to each other, the people run away and leave despotism to wreak its vengeance on itself; and thus it is that moderation becomes with them the law of self preservation.”

The referenced passages of Gibbon illustrated that understanding nicely. Noting the ease with which a person onerous to power could escape in the Europe of his day to the safety of a rival state, Gibbon pointed to the very different reality of the ancient empire: Rome, he observed, came to fill the world, “and when that empire fell into the hands of a single person, the world became a safe and dreary prison for his enemies.”

Maryland Farmer took that point to heart and asked Americans, who had just fought a war to resist the imperial designs of England, was it all simply to consolidate power in your own hands? He hoped not.

So strong were these sentiments in favor of decentralization, Federalists had no choice but to address them. Some of the most eloquent passages of the Federalist Papers were set out with the explicit aim of refuting the consolidationist claims of the nature of the Constitution. Indeed, more than one of those pieces by Publius was penned by that arch purveyor of centralized authority himself, Alexander Hamilton. In the next part we will examine how Publius attempted to negotiate the question of a federal check to national power, and look at the roots of interposition as they were presented by the supporters of the Constitution.

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Does anyone have the sinking feeling that the fate of ObamaCare’s individual mandate – one of the biggest Constitutional law issues of our time and one that may have vast ramifications for the future of our government of enumerated powers – is going to be determined by nature?  Specifically, assuming Justice Kennedy is a vote against the constitutionality of the mandate (and possibly ObamaCare in general given Judge Vinson’s logic), a possible future 5-4 decision against hinges on the health, well-being, and desire to stay on the court of Justices Thomas, Scalia, Roberts, Alito, and Kennedy.  The death, disability, or retirement of any of the five will essentially change history since Obama would certainly replace the justice in question with someone who will uphold the law (assuming you think Court decisions matter significantly – something a faction of political scientists would disagree with)!  Then again, maybe we shouldn’t assume Kennedy is a vote against ObamaCare?

It is thoughts like this that give me pause to the notion held by some libertarians that we should be glad McCain lost.  I have a hard time believing that McCain’s picks would have turned out to be the solid liberal block that Obama’s are likely to be for the next 20 years or so.  And imagine how many Obama could ultimately select if he wins another term?  We could be only 1/4 of the way through his presidency!  Well, at least with McCain out, the U.S. is less likely to start any foolish wars.  I hope…

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An interesting and scary fact from David Brooks’ interesting column on the future of ObamaCare:

More seriously, cost projections are way off. For example, New Hampshire’s plan has only about 80 members, but the state has already burned through nearly double the $650,000 that the federal government allotted to help run the program. If other projections are off by this much, the results will be disastrous.

I’d love to hear from our reader who is a New Hampshire State Rep about what he thinks is going on in his state and what this might portend for ObamaCare.

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Avik Roy has an interesting piece in National Review on how conservatives (really, free-marketeers) should approach the policy and politics of health care in the age of PPACA. I largely agree with his policy prescriptions, somewhat vaguely stated as they are:

First, Republicans must foster a truly free market for health insurance by eliminating the differing tax treatment of employer-sponsored and individually purchased insurance. Second, Republicans must make dramatic improvements to Medicaid, using Mitch Daniels’s impressive reforms in Indiana as a template. Third, Republicans must move Medicare onto a sustainable path that puts financial control in the hands of seniors themselves rather than central planners.

I would also argue for repealing state-level health insurance mandates, but that is properly the role of state governments. (As noted in this blog, allowing purchase of health insurance under other states’ laws would achieve more or less the same end.)

Roy’s analysis of the political situation is insightful. Republicans and conservative Democrats are very unlikely to achieve a filibuster-proof majority after the 2012 elections. Therefore, repeal of PPACA will have to be passed through reconciliation. But since the CBO scored PPACA as reducing the deficit, a simple repeal cannot pass through reconciliation.Thus, whether they like it or not, Republicans will have to take on new spending cuts to any repeal.

And this on the presidential race is spot on:

This means that influential Republican activists must — must — coalesce around the most electable Republican presidential candidate who can articulate conservative health-care principles. This is no time for single-issue small-ball or personal score-settling. A GOP nominee who passes all the litmus tests but can’t win in November would only succeed in making Obamacare permanent. One who can win but isn’t capable of pushing for real health-care reform wouldn’t be much better.

The first criterion rules out Palin and Gingrich (and let’s be honest, Paul and Johnson too). The second rules out Huckabee and Romney. Who’s left? Mitch Daniels?

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