Trump versus Clinton – a diabolical choice

Far-Side-Damned-if-You-Do-Dont_2

I am reminded of this Far Side cartoon every time I think of the Trump versus Clinton election circus we are doomed to endure for the next few months, followed by 4 years of whatever we get on the back-end of it.

On principle, I believe that voting for the Presidency should never have become, nor is it currently, a binary choice between lacklustre candidates put forward by two parties. I say this only to make the point that the Far Side cartoon, while humorous and somewhat appropriate, isn’t entirely accurate given that we can freely vote for other options or choose not to vote at all. Much of my actual lament today is that the office is as powerful as it currently is in the first place. If the executive office was relegated to its proper constitutional role, this would be far less consequential of an exercise.  It is the legislature, through reasoned and deliberative process, that was established with the preponderance of governmental powers and placed in the pre-eminent Article I of the U.S. Constitution. This was a wise decision by the founders, who intended to promote the durability of individual liberty through due process of deliberative and participatory government, as I indicate in another post. This legislative responsibility has been eroded greatly through various executive branch usurpations (i.e the vast proliferation of unaccountable executive agencies) as well as a judiciary that has strayed beyond its boundaries of interpreting law as devised in the Constitution and through laws promulgated through the legislature to a modern-day role in actively creating their own laws out of the judge’s’ own political and personal preferences.

All that being said, my ideological principles don’t matter much when the reality is that one of these individuals will become President of the United States, a fact that I can only find comic relief in the Monty Python scene in which the “Constitutionalist” peasant indicates to King Arthur, “well, I didn’t vote for you…”  I picture myself in the next four years as an increasing malcontent who mutters throughout the day, “well, I didn’t vote for you…” every time a poor decision is made or every time something else surfaces that demonstrates their unsavory characters. Actually, upon re-watching the entire scene, I think there is a good deal one could use out of the clip as a parody of modern American government.

And while I don’t agree with the enthusiasm in which the author takes in not ever voting, as I still believe that it is an important right to cherish, there is much in a recent commentary in which he quotes David Boaz posted on the Cafe Hayek blog  that I think is spot on. I quote the main points that I agree with below:

I’ve heard libertarians say, “We know how bad Hillary is, so the mysterious Trump is a better bet.”  But we do know much about Trump.  He’s been clear and consistent on a few issues: banning and deporting Mexicans, building a wall around America, banning Muslims, and taking a sledgehammer to the world’s most important trading relationship (between the United States and China).  He’s indifferent to federal spending and against entitlement reform.  He thinks he doesn’t need advisers or policies or principles.  He has no earthly idea what he thinks about taxes, abortion, minimum wages, debt, health care, or most other issues.  Most disturbingly, he shows disdain for Congress and the Constitution.

A few libertarians have said that war is the greatest threat to life and liberty, and Trump is less hawkish than Clinton and most of the other Republican candidates.  True, he has criticized the Iraq war and nation building and even read a speech proclaiming that “unlike other candidates for the presidency, war and aggression will not be my first instinct.”  But he has also promised to “bomb the s– out of” ISIS and “take out their families.”  And his ignorance, anger, and impulsiveness about trade and immigration would surely make for rocky international relations.

 

 

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“Are provider-led health care networks too big to fail?”

medical_hospital_doctor_waiting_room_health_Care_2020_500x293
Twenty20 License

AEI recently published an interesting article that serves as a thought experiment on whether the Affordable Care Act will push consolidated health networks to such a large degree that they become too big to fail.

I have attempted to chronicle elsewhere the growing list of unintended consequences of the ACA, as well as what I believe are some sensible, free-market oriented reforms that would set us on the right path that are tucked within a Hoover Institute essay written by University of Chicago economist John Cochrane,  but this “moral hazard” of health networks that are too big to fail that is similar to what we have recently witnessed in the financial industry and meltdown of 2008 certainly adds a new wrinkle that I had not previously contemplated.

Expanding beyond the AEI article that focuses on the Accountable Care Organizations, my own experience informs me that the ACOs within the ACA are unfortunately but one prong in the Obama administration and the Centers for Medicare and Medicaid Services (CMS) arsenal in this coordinated and dedicated effort to foist large integrated networks upon us. These will indeed wind up being “too big to fail.” Hospitals already possess an unfair advantage in blocking new entrants and hide behind “non-profit” status as well as serving as the largest employers in many communities. The massive rush to merge and acquire will surely exacerbate this.  Even organizations outside of the ACO model are going to be pushed to consolidate through being increasingly subjected to “value-based” payment models that shift payments from fee-for-service to models that are tied to various outcomes measures. CMS has set a goal of having fully 50% of payments to hospitals by 2018 funneled through such mechanisms. While on the surface shifting from fee-for-service to quality based measures seems a logical and positive step in the right direction, we must beware of the unintended consequences. Many of these “quality” payments are aimed squarely at issues such as readmitted patients back to hospitals, “excessive” spend per Medicare beneficiary that occurs in the outpatient settings, and one bundled payment per an episode of care (i.e. a hip and knee replacement). Interestingly, CMS is targeting directly the large hospital and not the outpatient settings. In essence, the hospital is heavily incentivized to buy and control the outpatient setting and physician practices in order to control the flow of patients and the finances. Or in the very least, hospitals that don’t acquire will starve out recalcitrant outpatient and physician practices that can’t or won’t toe the line to the hospital’s demands by shutting them out of their referral network. We will consequently be left with narrower networks and less choice.

Now, there might be some good in all of this as it relates to care coordination and the cost of care delivery, but do we really expect that these giant regional monopolies are going to pass on these cost savings to consumers, if indeed they actually do occur? Do we really expect the focus to be on product quality and consumer  value when there is no competition left, or will the focus turn to gaming the system, lobbying CMS, and inevitable asking for bailouts (per this article)? I would argue that the government conveniently ignored all of these likely negative consequences in their rush to revolutionize the system to their liking – one in which they will increasingly call the shots on who wins and who loses.

 

“The Key Role of Conservatives in Taxing Carbon”

Carbon
Julia Yellow

Economist N. Gregory Mankiw presents a compelling and succinct case for conservatives leading market based climate change through the carbon tax in a recent posting in the New York Times.

As Mankiw states in the article, “It encourages people to buy more fuel-efficient cars, form car pools with their neighbors, use more public transportation, live closer to work and turn down their thermostats. A regulatory system that tried to achieve all this would be heavy-handed and less effective.”

At this juncture, conservatives and libertarians should think of government responses to climate change as a binary choice – either opt for the inevitable heavy-handed and likely ineffective machinations of government agencies that are riddled with cronyist handouts and contradictions, or put a price on a substance that is in having an environmental impact to drive market-based incentives to change behavior and let private industry innovate around the new landscape. The role conservatives can play is to ensure that moves in this direction are consistent with limiting the role of government and making sure that carbon taxes are offset with tax reductions elsewhere. Otherwise, we will be left with a double penalty of more taxes and a higher burden of regulations.

A carbon tax would be at least neutral or perhaps much less economically malicious than taxes on income, investments, consumption, or taxes on production (corporate taxes). Conservatives could propose a compromise approach to climate change in which carbon taxes are offset by reductions in the aforementioned tax types that would likely pass into law.

It encourages people to buy more fuel-efficient cars, form car pools with their neighbors, use more public transportation, live closer to work and turn down their thermostats. A regulatory system that tried to achieve all this would be heavy-handed and less effective.

Indeed, a simple carbon tax is, as quoted in the article, “a solution that is consistent with free enterprise and limited government.” This rings particularly true when compared to the current arbitrary rule by diktat patchwork that is the EPA.

“The Farm Bill Mainly Helps Wealthy Farmers”

Farm-bill-infographic

A postscript to my recent post on Farm Welfare  is a great graphic courtesy of the American Enterprise Institute. This is a nice addition given that my previous post focused on previous iterations of the farm bill as forms of de facto middle class welfare. Politicians like to crow that in the 2014 bill forms of direct payments were ended and in their place farmers could get disaster relief in the form of crop insurance. This shift presumably allows many politicians to make the claim that they implemented more free-market reforms. Alas, as the infographic shows, large farms are getting a lion’s share of the subsidies, farm families are still much more wealthy than their non-farm counterparts (likely as a result of non-wealthy farm families getting crowded out of the market due to welfare going to those that own the land), and insurance is simply a hidden form of more welfare.

The Importance of Ending Farm Welfare – A Middle Class Redistribution Scheme

Corn Farm

It is admittedly with some degree of trepidation that I wade into the arena of agricultural subsidies. My pedigree is one marked with connections to the industry, including part of my early childhood being spent on a corn and cotton farm in the Texas South Plains and then a brief year in Missouri spent on a turkey farm raising contract turkeys for ConAgra. The Texas South Plains in which I was largely raised (and which I recently returned to) is an area that is the largest contiguous cotton growing area in the world. My undergraduate degree is in fact Agribusiness from one of the leading agricultural schools in the country, Texas A&M. Furthermore, although I am not currently employed in agriculture, I have long dreamed of one day returning to the land and occupation into which I was born. That being said, I may be just as guilty personally of falling prey to the overly idealistic aesthetics of living on a farm, which I can’t help but feel are part of our collective problem that leads to resigning ourselves to support of welfare for the farm in order to keep alive what we believe to be an ancient and idyllic profession. The State of Vermont heavily subsidizing dairy farms in an effort to keep the iconic Holstein dairy cow in pastures for tourists to see while driving by and the the recent pickup advertisement during the Super Bowl featuring Paul Harvey voicing a litany of reasons that, “God Made A Farmer” are examples of the tradition of holding agricultural producers in near-mythical status. I will quickly disabuse the notion that living in such occupations is as glamorous as an urban dweller might imagine, as anyone that has ever had to kick baby turkey chicks off of each other to keep them from suffocating the bottom layer  in -10 degree temperatures can attest. Although it still does possess just enough nostalgia for me to one day return, I will admit to desiring to return to a much more free-market system and I will get to my reasons why shortly.

Before I get into specifics, I should state that I firmly believe that getting the intrusive hand of government off of the plow in agriculture would actually benefit the “small” farmer and would stop the lion’s share of government wealth redistribution going to the relatively wealthy, which is what in fact occurs with ag subsidies. Thus, I firmly believe my stance is one that would promote greater fairness and equality and greater distribution of returns to the small and nimble innovative and flexible farmers (rather than the wealthy landowners) within the industry. And much like all of the rest of the industries in America not so coddled, the free market would create viable solutions for insurance and price supports that would be more efficient and useful compared to the cronyist and corrupting influence that is the U.S. Farm Bill.

The largest 10 percent of recipients have received 73 percent of all subsidy payments in recent years.

The U.S. Farm Bill is a monstrosity that has built up thick barnacles over decades, beginning in earnest in FDR’s New Deal Era. Thus, it won’t do to cover all of the tentacles of U.S. Ag Policy in this blog as I am already always at risk of being far too verbose, but I do enjoy and agree with the tenets of this succinct policy document from Cato Institute and appreciate its free market philosophy as much as I enjoy its brevity and important facts. While this document has been superseded by the 2014 Farm Bill, I would argue that very little has changed. The 2014 Farm Bill did finally retire Direct Transfer payments, which those tuned in to Ag policy may recall the infamous reports of wealthy celebrities receiving payments from the government simply for owning land (growing anything was not always a requirement.) While ending these egregious examples of cronyist policy is an important baby step, the rest of the decades long entitlement support for agriculture remains in place, as indicated by this USDA document. American taxpayers will still foot the bill for arcane programs with Orwellian nomenclature such as Price-Loss-Coverage, Agricultural Risk Coverages, and Dairy Margin Protection. A layman’s translation is that taxpayers provide welfare to farmers to subsidize prices, research, marketing, exports, and the purchase of insurance.

As it relates to the Cato document and for convenience of the reader, I have pulled out some quick bulleted highlights:

  • The U.S. Department of Agriculture distributes between $10 billion
    and $30 billion in subsidies to farmers and owners of farmland each year. The particular amount depends on the prices of crops, the level of disaster payments, and other factors
  • More than 90 percent of agricultural subsidies go to farmers of five crops—wheat, corn, soybeans, rice, and cotton
  • More than a million farmers and landowners receive subsidies, but the payments are heavily tilted toward the largest producers
  • Subsidies induce overproduction and inflate land prices in rural America. [My thoughts – The mis-allocated economic rent flows somewhere, and in this case it simply inflates the price of land, to the further benefit of larger landholders and to the detriment of small farmers/landholders.]
  • Farm subsidies transfer the earnings of taxpayers to a small group of fairly well-off farm businesses and landowners. USDA figures show that the average income of farm households has been consistently higher than the average of all U.S. households. The average income of farm households in 2006 was $77,654, or 17 percent higher than the $66,570 average for all households
  • Although policymakers often discuss the plight of the small farmer, the bulk of federal farm subsidies goes to the largest farms. For example, the largest 10 percent of recipients have received 73 percent of all subsidy payments in recent years. Numerous large corporations and even some wealthy celebrities receive farm subsidies because they are the owners of farmland. It is landowners, not tenant farmers or farm workers, who benefit from subsidies

I want to call out especially Cato’s prediction that Agriculture would thrive without subsidies. Sure, there would be winners and there would be losers in such a monumental transition, but the net benefit to producers and even more importantly, to consumers would be positive.

“Interestingly, producers of most U.S. agricultural commodities do not
receive regular subsidies from the federal government. In fact, commodities that are eligible for federal subsidies account for about 36 percent of U.S. farm production, whereas commodities that generally survive without subsidies, such as meats and poultry, account for about 64 percent of production. And, of course, most other U.S. industries prosper without the extensive government coddling that many farm businesses receive. An interesting example of farmers’ prospering without subsidies is New Zealand. In 1984, New Zealand ended its farm subsidies, which was a bold stroke because the country is four times more dependent on farming than is the United States. The changes were initially met with fierce resistance, but New Zealand farm productivity, profitability, and output have soared since the reforms. New Zealand farmers have cut costs, diversified land use, sought nonfarm income, and developed niche markets, such as kiwifruit. The Federated Farmers of New Zealand argues that that nation’s experience ‘‘thoroughly debunked the myth that the farming sector cannot prosper without government subsidies.’’ That myth needs to be debunked in the United States as well.”

Ending such support will be a political challenge, as those that espouse free-market views in our legislature are often the first to make policy exceptions for agriculture, usually under various guises that agriculture is somehow a different industry that can’t face the variations of the market or that food needs protection for national defense reasons. To these I am reminded of a quote I saved from F. A. Hayek’s The Constitution of Liberty that, “Most countries in the process of taking agriculture out of the market mechanism and subjecting it to increasing government direction began before the same was done in industry and that it was usually carried out with the support, or even the initiative, of the conservatives, who have shown themselves little averse to socialistic measures if they serve ends of which they approve.”

My point is this – if we as conservatives and libertarians are serious about limiting the scope and size of government and we want to be consistent, then sometimes we have to take a look and consider reducing the size and direction of government even when it favors us or our region.

“How Marco Rubio is quietly killing Obamacare”

Source: How Marco Rubio is quietly killing Obamacare

The linked article provides yet another example of a candidate in the race that has serious proposals and shows the leadership and initiative to bring about change through intelligently crafted legislation. The act of legislation exhibited deep knowledge of where the actual weaknesses of ObamaCare existed and presents a mortal blow to the Act that slipped past the desks of its most ardent supporters. Meantime, taxpayers are protected from cronyist bailouts written into the law – part of the Faustian bargain insurance companies made with the government as a prerequisite to receiving their support (and their lobbying dollars) for the law.

Hopefully the mounting evidence to the American people that the Republican race has a few viable candidates will finally stem the tide from fascination over the bluster that is confused with straight talk, the unintelligible shooting from the hip for actual sound policy, and the mistaken notion that we need an outsider to shake things up rather than someone that can actually lead.

 

Social Security – a Third Rail that Needs to be Addressed

social-security-card

A third rail in politics is so named because the real third rail in an electric rail system is the one that carries the high voltage. Social Security and Medicare have long been considered the epitomes of such untouchable third rails in American politics, given that reform often results in fear-mongering  directed at the elderly who happen to be the most likely people to vote.

Given that Social Security is set up on an original construct for which existing workers pay into the program for existing retirees, the inevitable demographic plunge beyond the baby boomers was always going to create the conditions for unsustainability for a system that many assume works more like a funded account over time rather than the hard to sustain and largely middle class and age-based wealth transfer  scheme that it actually is. As the graph below indicates, there has been a precipitous decline in the number of workers per existing Social Security beneficiary.  Alas, there are two immutable forces that will colossally collide unless leadership and reason is discovered on this issue: one force that indicates that Social Security will be out of money by the 2030s, and the other force that indicates that current beneficiaries will not politically allow downgrades to their benefits. This prompted one tax professor that I had while in graduate school to provide the personal advice to the class to err on the side of caution and assume that our deductions for Social Security as simply an income tax that we would never see again.

worker-per-beneficiary-chart

Enter a reform proposal from the American Enterprise Institute that addresses both immutable forces by largely shifting to a system based upon what they call a flat benefit. While there have been many calls for means-testing benefits (i.e. people above a certain income threshold get no or much less benefits) this proposal calls for a reduction in the complexity of the tiers and calculations for benefits with a flat rate for all above a certain level of income, some subsidization for the poor into retirement, changing of the retirement age proposals to make 401K contributions more favorable form a tax and regulatory standpoint, eliminating the payroll tax after the age of 62 to incentivize work into older age, and a few other rather wonkish details to make Social Security more solvent and more market based while throwing in enough sweeteners to the current beneficiary to make it politically palatable.

While I would much prefer that we as individuals be freed up to make the investment and saving decisions that fit our own goals and be freed entirely of the nannying arm of the state while eliminating the giant middle-class and age-based wealth transfer scheme that Social Security largely is, this proposal has a lot going for it as it relates to creating a more clear and level-playing field while also pushing more retirement saving and planning at the margins to the private investment market, particularly for those that make more than the flat-benefit provision – in essence means-testing by another form and removing the upper middle class and wealthy largely out of the middle class wealth transferring. If throwing a few sops to the elderly is what is required to actually enact reform, then so be it. This is a good reform proposal that is a step in the right direction.