Posts tagged ‘Government’

Perfect Example of Government Doublespeak

An Obama Administration executive order / regulation (hard to tell the difference any more)

Department of Labor
29 CFR Part 10
Establishing a Minimum Wage for Contractors; Proposed Rule

34568 Federal Register / Vol. 79, No. 116 / Tuesday, June 17, 2014 / Proposed Rules

This document proposes regulations to implement Executive Order13658, Establishing a Minimum Wage for Contractors, which was signed by President Barack Obama on February 12, 2014.

The Executive Order therefore seeks to increase efficiency and cost savings in the work performed by parties that contract with the Federal Government by raising the hourly minimum wage paid by those contractors to workers performing on covered Federal contracts to: $10.10 per hour, beginning January 1, 2015; and beginning January 1, 2016, and annually thereafter, an amount determined by the Secretary of Labor.

Liberal and leftish economists in the audience, please explain the line in bold.

The administration wants to apply this to concessionaires as well.  This will force us to raise a $20 camping rate by $4 a night.

Why Private Companies May Stop Taking Incidental Government Contracts

Bruce McQuain has an article on how McDonald's is closing some contract-operated fast food outlets at military bases.  The article speculates that the closures on new government minimum wage regulations for government contracts.

Frankly, I doubt this explanation.  I know something of the world of government contracting, and contractors in these cases routinely just pass on wage increases to their customers in the form of higher prices.  After all, their contracts give them a monopoly of sorts in these bases.

I would like to offer an alternative explanation.

In March, a new regulation took effect that all contractors with anything larger than a $50,000 a year contract with the government must go through an expensive affirmative action planning process for ALL of their locations, not just for the people involved in that particular contract (41 CFR 60-2.1  and 41 CFR 60-4.1)

We don't do government contracting work.  We lease government facilities, but get paid 100% by customers -- since we don't take government money, we are not a contractor.  But there is one exception.  We have a $52,000 a year contract to clean bathrooms near the campgrounds we operate in California.  Basically, we bid this contract at cost because we want the bathrooms cleaned well -- if they are not, it hurts our nearby businesses.

In this contract, we have government-mandated wage requirements under the Service Contract Act.  When these mandated wages go up, we just raise the price to the government in proportion.  No big deal.

We were informed that having this contract, under the new March Obama regulations, now made us liable to go through an expensive and time consuming affirmative action planning process for every location -- of which we have over 120 -- not just for this one contract.  So this one contract was going to force us to create 120 annual written plans and presumably get them approved by someone in the government.  No way.  I might have done it if I only had to do a plan for the contract, but it is just too much work to do this everywhere merely because I have a $52,000 contract on which I make no profit.  So we told the Feds we were dropping the contract.

I think it is very unlikely that private businesses will be accepting government contracts as 5 or 10% of their business any more.   This new regulation just imposes too much cost on the other 95% of the business.  Many will drop the government contracts.

I wonder if this is what is really going on with McDonalds.  A regulatory requirement that applied just to the base operations, like a minimum wage, strikes me as manageable.  But having these three or four contracts drive an expensive requirement to create some sort of affirmative action plan for every location - essentially every one of their tens of thousands of stores, so tens of thousands of plans - that would drive them out of these contracts VERY fast.

VA Scandal Proves My Contention: The Only Government Health Care Cost Reduction Ideas are Rationing and Price Controls

I feel like I was way ahead of the pack on May 1 reminding everyone that the Left until recently held up the VA as a model for government health care.  I pointed to articles by Kevin Drum and Phil Longman in 2007, but since then others have highlighted articles by Paul Krugman and Ezra Klein that made the same point.  Klein said:

If you ordered America's different health systems worst-functioning to best, it would look like this: individual insurance market, employer-based insurance market, Medicare, Veterans Health Administration.

Paul Krugman said

Well, I know about a health care system that has been highly successful in containing costs, yet provides excellent care. And the story of this system's success provides a helpful corrective to anti-government ideology. For the government doesn't just pay the bills in this system -- it runs the hospitals and clinics.

No, I'm not talking about some faraway country. The system in question is our very own Veterans Health Administration, whose success story is one of the best-kept secrets in the American policy debate.

Supposedly, the reason for this success according to Drum and Longman was that ever-popular Lefty magic bullets, electronic medical records and preventative care.  On medical records:

"Since its technology-driven transformation in the 1990s...the VA has emerged as the world leader in electronic medical records — and thus in the development of the evidence-based medicine these records make possible." Hospitals that joined Longman's "Vista network" (his name for the VA-like franchise he proposes) would have to install the VA's electronic medical record software and would "also have to shed acute care beds and specialists and invest in more outpatient clinics." By doing this they'd provide better care than any current private network and do it at a lower cost.

On preventative care:

How is a supposedly sclerotic government agency with 198,000 employees from five separate unions outperforming the best the private market has to offer? In a word: incentives. Uniquely among U.S. health care providers, the VA has a near-lifetime relationship with its patients. This, in turn, gives it an institutional interest in preventing its patients from getting sick and in managing their long-term chronic illnesses effectively. If the VA doesn't get its pre-diabetic patients to eat right, exercise, and control their blood sugar, for example, it's on the hook down the road for the cost of their dialysis, amputations, blindness, and even possible long-term nursing home costs....The VA model is that rarest of health care beasts: one with a perfect alignment of interest between patients and providers.

Neither of these have ever proven in real life to actually lower costs in anything but tiny pilot programs, and there is a lot of reason to believe that while preventative care can improve health outcomes, it tends to increase costs.

I have said for years that at the end of the day, the only ideas government planners have for cost control are rationing (which leads to queuing) and cost controls on things it buys from private markets, like doctor time (which leads to shortages and more queuing).  This is why every health care system that offers free care to all comers, whether it be socialist systems in other countries or the VA or even an urban emergency room, has long queues.

In fact, the situation, as I think we will find at the VA, is worse.  Not only is the old pie being allocated differently (shifting from price-sensitivity to queue tolerance) but the pie of available supply is likely getting smaller as resources are consumed by government red tape and price controls drive suppliers out of the market.  The next stories will be about the staggering waste of money on red tape in the VA system, and the stories after that will be about a few VA users jumping the queue because of political connections.

This stuff is so inevitable that it was all addressed years ago in my three part series of Obamacare.  In that series, the issues were not failing exchanges and the mess we have seen so far, but the issues we are more likely to see over the long term.  The VA is merely a preview, but we shouldn't have needed a preview because we could have looked at countries like England.  Of course, if the media had any desire to honestly tell these socialized medical stories we would not get fawning profiles of the horrendous system in Cuba.

My Forbes series:

Reminder: Until Very Recently, The Left Was Touting the VA as a Great Model for Government Run Health Care for All

This is from Kevin Drum in 2007:

As regular readers may know, Phil Longman thinks the VA model of healthcare is the best around. In the October issue of the Monthly, he takes his admiration to another level, suggesting that the best way to provide healthcare to the 45 million uninsured in America is via — what? I guess you'd call it a franchised version of the VA. Basically, the federal government would offer struggling municipal hospitals a trade: if you adopt the VA's management guidelines, the government will pay you to care for all those uninsured folks currently jamming up your emergency rooms and driving you bankrupt. Deal?

The supposed reason is that great panacea, electronic medical records, cited by the Left as the solution to all woes as often as the Right mentions the Laffer Curve.

"Since its technology-driven transformation in the 1990s...the VA has emerged as the world leader in electronic medical records — and thus in the development of the evidence-based medicine these records make possible." Hospitals that joined Longman's "Vista network" (his name for the VA-like franchise he proposes) would have to install the VA's electronic medical record software and would "also have to shed acute care beds and specialists and invest in more outpatient clinics." By doing this they'd provide better care than any current private network and do it at a lower cost.

Since that time, the Left has mostly stopped talking about the VA as a miracle solution, because it is becoming clear that the VA cuts costs the same way every state health care agency cuts costs -- by restricting capacity, leading to huge waiting times, and rationing care.  The scandal here in the AZ VA is just the latest

The chairman of the House Committee on Veterans Affairs said Wednesday that dozens of VA hospital patients in Phoenix may have died while awaiting medical care.

Rep. Jeff Miller, R-Fla., said staff investigators also have evidence that the Phoenix VA Health Care System keeps two sets of records to conceal prolonged waits that patients must endure for ­doctor appointments and treatment.

"It appears as though there could be as many as 40 veterans whose deaths could be ­related to delays in care," ­Miller announced to a stunned audience during a committee hearing Wednesday.

Supporters of government health care like t o waive their arms about magic bullets, but the only strategy that has ever reduced costs in government health care systems is rationing and queuing (which is also a form of rationing).  Resources are always scarce, but the question is whether we want our health care rationed by government beauracrats or by ourselves.  The latter can only happen if we get away from first dollar and single payer medicine and find a way to get real, transparent price signals (which is the way every other service in this country is managed).

Update, Via Greg Mankiw:

"In Britain, even though they're already paying for the National Health Service, six million Brits—two-thirds of citizens earning more than $78,700—now buy private health insurance. Meanwhile, more than 50,000 travel out of the U.K. annually, spending more than $250 million, to receive treatment more readily than they can at home."

Which is the exact same way we run our education system -- everyone has to pay for a basic crappy level of the government monopoly product, and then if you can afford it you pay again to get a better private product.

Trying, And Failing to Get Transparency About the Government Shutdown of Private Park Operators

Hans Bader submitted a FOIA on October 9 about US Forest Service and Dept. of Agriculture decision-making leading up to the unprecedented shutdown of private operations on US Forest Service land.  I have seen the FOIA results and -- almost laughably -- virtually all of the documents relate to the end of the shutdown, and all of the documents are dated after the date of his FOIA.  In other words, the US Forest Service essentially ignored the documents requested by the FOIA request and submitted a stacks of unrelated documents.

More from Mr. Bader here

Even the Feds Give Up Under The Weight of Regulation

Many on the Left often deride the notion that government regulation really affects business behavior and reduces business activity.  But it turns out that even the Feds themselves throw up their hands and give up in the face of trying to deal with their own regulations

Government estimates suggest there may be 77,000 empty or underutilized buildings across the country. Taxpayers own them, and even vacant, they’re expensive. The Office of Management and Budget believes these buildings could be costing taxpayers $1.7 billion a year.

…But doing something with these buildings is a complicated job. It turns out that the federal government does not know what it owns.

…even when an agency knows it has a building it would like to sell, bureaucratic hurdles limit it from doing so. No federal agency can sell anything unless it’s uncontaminated, asbestos-free and environmentally safe. Those are expensive fixes.

Then the agency has to make sure another one doesn’t want it. Then state and local governments get a crack at it, then nonprofits — and finally, a 25-year-old law requires the government to see if it could be used as a homeless shelter.

Many agencies just lock the doors and say forget it.

The Root Cause of Government Corruption is the Power over the Economy We Have Given the Government

Corruption is often blamed on the corruptible.  But corruptible people will always exist (see: entire history of civilization) if the incentives for corruption are sufficient.  Here is another example, from a vote-buying scandal in south Texas:

In the deeply Democratic Rio Grande Valley, the primary is the election that matters. And in local races like county commissioner and district attorney a sliver of votes can make a difference between winning and losing the election. Many times, paid campaign workers called “politiqueras” deliver the votes that put a candidate over the top.

Politiqueras—who are paid to turn out voters, especially in low-income neighborhoods and colonias—have been part of elections in the Rio Grande Valley for decades. But the recent suicide of a school board president in the small town of Donna and the indictment of three politiqueras for allegedly buying votes in a Donna school board election with beer, drugs and cash has rattled the Valley’s political world.

Politiqueras are typically older women with deep ties in the community. They meet with seniors at nursing homes and adult daycare centers and residents in colonias to advocate for their candidates. They come bearing barbecue plates or Mexican pastries and offer voters a ride to the polls, none of which is illegal. But over the decades intense competition in an impoverished region for a limited number of jobs and the power to decide who gets a government contract or a lucrative-paying job has pushed some candidates to cross the legal line and offer cash for votes. “The competition for access to [government] contracts has become intense,” says former Edinburg state Rep. Aaron Peña. “Politiqueras have been pushed further and further to perform in a system that has been corrupted.”

Why Equal Marriage Needs to Be Legalized, Even if You Don't Think Government Should Have A Role in Marriage

This is an update of a post I wrote here.

One question that keeps coming up, both from libertarians as well as others, is why should government define marriage at all?  Can't anyone get married in any kind of private ceremony?

My response is that yes, in some sort of libertarian small-government world, the state would be irrelevant -- what I used to call separation of marriage and state.

But it turns out that the state is already deeply involved in marriage.  The explicit state licensing of marriage already exists, and our laws in Arizona for this licensing are unequal -- some couples get access to this state license, and some cannot.

What makes this important is that marriage is embedded in hundreds, even thousands, of laws.   I searched the Arizona Revised Statutes for mentions of the words "spouse" or "spouses".  These words are used 1133 times in 373 different statutes!  The Our America team told me they counted over a thousand references in Federal code.  In other words, our law codes give -- in thousands of instances -- specific rights, responsibilities, and privileges to married couples who have access to a state-granted marriage license.  Those left out of the current unequal definition of marriage face any number of challenges imposed on them by these specifics of spousal rights and privileges embedded in our law code.  I call this the non-marriage penalty.

There is no way to rip all these references to marriage out of the law and tax code.  Likewise, there is no way to create an equable marriage alternative such as a civil union -- to do so, we would have to go through and rewrite 373 statutes to incorporate this terminology.   The fairest solution -- the one that most respects individual freedoms -- is to accept that such government licensing of marriage exists and then make it as open and as equal and as fair and as accessible as we possibly can.

Challenging the Governments Arbitrary Closure of Privately-Funded Parks During the Shutdown

I have not updated this story in a while, but we continue to litigate against the Federal Government over the closure of privately-operated and privately-funded parks on public lands.  The closure is over, obviously, but it is a situation that is very likely to recur and we are attempting to fight this battle now to set a precedent.   The Wall Street Journal's law blog is running an update on the story here.

You can find all my posts from the shutdown here.

Inequality Metrics Exclude Effects of Government Actions to Reduce Inequality

I have seen this fact a number of times and am always amazed when I read it, since poverty figures are never, ever presented with this bit of context

LBJ promised that the war on poverty would be an "investment" that would "return its cost manifold to the entire economy." But the country has invested $20.7 trillion in 2011 dollars over the past 50 years. What does America have to show for its investment? Apparently, almost nothing: The official poverty rate persists with little improvement.

That is in part because the government's poverty figures are misleading. Census defines a family as poor based on income level but doesn't count welfare benefits as a form of income. Thus, government means-tested spending can grow infinitely while the poverty rate remains stagnant.

Rector argues that poor today is very different than poor in  Johnson's day, and that perhaps we might celebrate a bit

Not even government, though, can spend $9,000 per recipient a year and have no impact on living standards. And it shows: Current poverty has little resemblance to poverty 50 years ago. According to a variety of government sources, including census data and surveys by federal agencies, the typical American living below the poverty level in 2013 lives in a house or apartment that is in good repair, equipped with air conditioning and cable TV. His home is larger than the home of the average nonpoor French, German or English man. He has a car, multiple color TVs and a DVD player. More than half the poor have computers and a third have wide, flat-screen TVs. The overwhelming majority of poor Americans are not undernourished and did not suffer from hunger for even one day of the previous year.

Remember what I presented a while back.  This is what the Left thinks, or wants us to think, American income inequality looks like -- our rich are richer than comparable European welfare states because our poor are poorer.

click to enlarge

And this is what income inequality in the US actually looks like -- our rich and middle class are richer, but our poor are not poorer.  A less redistributionist approach floats all boats.  I compared the US to many European welfare states, using the Left's own data source.  Here is an example, but hit the link to see it all.

click to enlarge

Government Regulation and Incumbent Business Protection

Scratch "consumer" protection laws and you will almost always find the laws are really aimed a protecting incumbent businesses and traditional business models.  This time from France:

To the surprise of virtually everyone in France, the government has just passed a law requiring car services like Uber to wait 15 minutes before picking up passengers. The bill is designed to help regular taxi drivers, who feel threatened by recently-introduced companies like Uber, SnapCar and LeCab. Cabbies in the Gallic nation require formidable time and expense to get their permits and see the new services -- which lack such onerous requirements -- as direct competitors.

This is the interesting political ground where the Occupy Wall Street movement and the Tea Party have a lot of overlap.  That is why the Chamber of Commerce, which represents all these incumbent businesses, is working with both parties to keep the cozy corporatists in power against challenges from the Left and Right.  If you are a business owner, eschew the Chamber and join the NFIB and support the IJ.

Yet Another Reason To Keep Government Out of Commerce

Because the government exempts itself from the most basic rules that apply to private companies.

Raising concerns about consumer privacy, California's health exchange has given insurance agents the names and contact information for tens of thousands of people who went online to check out coverage but didn't ask to be contacted.

The Covered California exchange said it started handing out this consumer information this week as part of a pilot program to help people enroll ahead of a Dec. 23 deadline to have health insurance in place by Jan. 1.

State officials said they are only trying to help potential customers find insurance and sign up in time. But some insurance brokers and consumers who were contacted said they were astonished by the state's move.

"I'm shocked and dumbfounded," said Sam Smith, an Encino insurance broker and president of the California Assn. of Health Underwriters, an industry group.

Smith said he was under the impression from the exchange that these consumers had requested assistance. He received the names of two consumers this week but has not yet contacted them.

"These people would have a legitimate complaint," Smith said.

The names provided include people who started an insurance application on the Covered California website since enrollment launched Oct. 1, but for whatever reason never picked a health plan or completed the sign-up process.

The state said it provided information on tens of thousands of people who logged into the state's website, but it didn't know the exact number.

The exchange said agents were given names, addresses, phone numbers and email addresses if available.

Connecting Government Actions to the Jobs Report

This is an update of a chart I have published a couple of times.  The Obama Administration in the past couple of years has threatened at various times that a) the sequester and b) the government shutdown would have a devastating impact on employment.  Here is the most recent job addition data (I would prefer just private job changes but this is public and private, via here).

I have helpfully annotated it with two government actions the Left claimed would negatively affect employment growth, and one item I claimed would do so.  You be the judge:

job-report-annotated2

 

The media published 6 zillion articles worrying or outright predicting in advance that the government shutdown would hurt the economy and destroy private employment.  No such thing appears to have happened.  But of course the media never, ever, ever goes back and retrospectively revisits predictions of doom gone wrong.

@kdrum Missing the Point. Doctors May Control the Cartel, but Government Gives it Power.

The other day, Kevin Drum wrote a post wondering why we had so few doctors per capital in the United States and observing, reasonably, that this might be one reason to explain why physician compensation rates were higher here than in other countries.

He and Matt Yglesisus argued that this smaller number of doctors and higher compensation rates were due to a physician-operated cartel.  This is a proposition I and most libertarians would agree with.  In fact I, and many others apparently, wrote to him saying yes there is a cartel, but ironically it owed its existence to government interventionism in the economy and health care.  In a true free market, such a cartel would only have value so long as it added value to consumers.

Drum seems to have missed the point.  In this post, he reacts to themany commenters who said that government power was at the heart of the cartel by saying no, it's not the government because doctors control the nuts and bolts decisions of the cartel.  Look!  Doctors are in all the key positions in the key organizations that control the cartel!

Well, no sh*t.  Of course they are.   Just as lawyers occupy all the key slots in the ABA.  But neither the ABA nor these doctors cartels would have nearly the power that they have if it were not for government laws that give them that power (e.g. giving the ABA and AMA monopoly power over licensing and school credentialing).  I had never heard of the RUC before, which apparently controls internship slots, but its ability to exercise this control seems pretty tied to the billions in government money of which it controls the distribution.

Let's get out of medicine for a second.  I am sure Best Buy wishes it had some mechanism to control new entrants into its business.  Theoretically (and it may have even done this) it could form the Association of Bricks and Mortar Electronics Retailers (ABMER).  It could even stake a position that it did not think consumers should shop at upstarts who are not ABMER members.  Take that Amazon!  Of course, without any particular value proposition to do so, consumers are likely to ignore the ABMER and go buy at Amazon.com anyway.

Such cartel schemes are tried all the time, and generally fail (the one exception I wonder about is the Visa/Mastercard consortium, but that is for another post).  Anyway, the only way the ABMER would really work is if some sort of government licensing law were passed that required anyone selling consumer electronics to be ABMER members.  And my guess is that the ABMER might not invite Amazon.com to join.  All of a sudden, Amazon is out of the electronics business.  Or maybe it just gets forced to deliver all its product through Best Buy stores, for a fee of course.

Crazy stupid, huh?  The government would never write licensing laws to protect a small group of incumbent retailers, right?  Well, tell that to Elon Musk.  Tesla has been trying for years to bring its cars to consumers in innovative ways, but have time and again run up against state auto dealership laws that effectively force all cars to be sold through the state dealer cartel.  Or you can talk to California wine growers, who have tried for years to sell directly to consumers in other states but get forced into selling through the state liquor wholesaler cartels.

All these cartels are controlled and manned by the industry, but they are enforced -- they are given their teeth -- by the government.

Here are a few off-the-top-of-my-head examples of cartel actions in the medical field admittedly initiated and supported and administered by doctors, that are enforced by state and federal law:

  • Certificate of need laws prevent hospitals from expanding or adding new equipment without government permission.  The boards in this process are usually stacked with the most powerful local hospitals, who use the law to prevent competition and keep prices high.  This is a great example where Drum could say that the decisions are essentially being made by hospitals.  Yes they are, but they only have the power to do so because the government that grants them this licensing power over competitive capacity.  Without this government backing, new hospitals would just laugh at them.
  • Government licensing laws let the AMA effectively write the criteria for licencing doctors, which are kept really stringent to keep the supply low.  Even if I wanted to only put in stitches all day to busted up kids, I would still have to go through 8 years of medical school and residency. Drum and Yglesias focus on the the number of medical schools and residencies.  I do not know if these are an issue or not.  But what clearly is an issue is the fact that one has to endure 8 expensive years or more just to be able to hand out birth control or stitch up a skinned knee.
  • Government licensing laws help doctors fight a constant rearguard action against nurse practitioners and other less expensively trained folks who could easily do half or more of what doctors do today.
  • The FDA and prescription drug law not only helps pharma companies keep profits up, but also increases business to doctors as people have to have a prescription for certain drugs they could easily buy on their own (e.g birth control pills, antibiotics).
  • The government limits immigration and thus labor mobility, reducing the ability of doctors from other countries to move here.

I am sure there are more.

There is no denying that in the middle of every industry cartel are insiders who are maneuvering to increase the rents of the incumbent players.  In fact, I am sure that every industry has participants who dream about getting off the competitive treadmill and creating a nice industry cartel, and would be the first to sign up.  But none of these dreams are ever going to happen unless they are enabled by the coercive power of government.

Of course, the consistent answer is, well, we just have the wrong guys running things.  If we had the right guys, it would work great.  But this kind of co-option always happens.   Look at taxis and liquor license holders and the entire banking sector.  Five years ago I would bet that progressives thought they finally had that right guy in the administration.  And look what has happened.  Banking cronyism is as strong as ever.  Obama's signature health legislation is full of crony giveaways.  In 6 months the health insurers are going to be running the entire PPACA infrastructure to their own benefit.

update:  This post is verging on the "is cronyism capitalism's fault" argument.  Rather than go into that again, it is here.

Update #2:  Related

Arkansas orthodontist Ben Burris was hauled in front of the state dental board in September after dentists in northeast Arkansas complained that he was offering dental cleanings to the general public in his Braces by Burris orthodontics clinics. The price for dental cleanings was $98 for an adult and $68 for a child, which Burris has said is about half of what dentists in northeast Arkansas typically charge.

Burris said most of the patients who need cleanings don’t have a dentist, but are checked by one of the three orthodontists in his clinic. Also, Burris said he offered the service because it was good for his business and good for the public. Some of his competitors “have gone absolutely ballistic” over the price and complained to the board, Burris said.

MP: Of course, the Arkansas dental cartel has no basis to complain directly about the low prices for dental cleaning at Braces by Burris clinics, so they are instead complaining that the clinic’s low-cost teeth cleaning services violate the states Dental Practice Act, which prohibits orthodontists and other specialists from practicing “outside their specialty.”

In New Mexico, Forced Government Anal Probes are Way Better than Having Even One Person Smoke A Joint

Or so I am led to believe by the fine folks in Deming, New Mexico, who forced a man to undergo two forced X-rays, two anal probes, three enemas, and a colonoscopy under anesthesia because they worried that he might be hiding a smidge of illegal narcotics in his nether regions.  Oh, and they made him pay the hospital bills for these procedures as well, sort of like billing someone's estate for the electricity used to execute them in the electric chair.

Details here.

Update:  Orin Kerr has a legal anal-ysis of the case (sorry, couldn't resist).   His conclusion seems to be that the victim may be sh*t out of luck (sorry again) in seeking compensation.  From reading it, he may even be stuck with the medical bills.  I have come to expect cops to display this kind of excessive behavior.  What is particularly disappointing is to see a doctor so eagerly cooperate and even, apparently, take the lead in escalating the intrusiveness of the search.  It is depressing that Kerr believes the doctor may well enjoy qualified immunity for his actions.  Thousands of doctors every day are successfully sued for malpractice over honest mistakes and differences in judgement, but this guy is going to walk?

Most Obscene Example of Promoting Government Dependency I Have Ever Seen

We are going to cancel the health care policies of millions of middle class Americans, then raise their rates, and then give half of them taxpayer subsidies so it seems like they got a rate cut.

Industry experts like Larry Levitt, of the Kaiser Family Foundation, say the insurance companies have no choice. "What we're seeing now is reality coming into play," he said.

Obamacare forces them to drop many of their plans that don't meet the law's 10 minimum standards, including maternity care, emergency visits, mental health treatment and even pediatric dental care.

That means consumers have to sign on to new plans even if they don't want or need the more generous coverage. Industry experts say about half the people getting the letters will pay more -- and half will pay less, thanks to taxpayer subsidies. Levitt said, "The winners outnumber the losers here, but because of all the website problems, it's hard to find out who the winners are because they don't even know it themselves."

Millions of middle class people who were independent and paid for their own health insurance will soon be wards of the state.

 

Total Fecklessness

If a city government cannot bring itself to end something so obviously abusive as pension spiking, what hope is there of any real reforms on tougher matters?  Government employees are increasingly running government in their own favor.

After nearly three hours of contentious debate, Phoenix city leaders were so divided over how to tackle pension “spiking” on Tuesday that they ended up doing nothing at all.

They walked into the City Council chambers prepared to make changes, but after splintering into three ideological factions, voted 5-4 against a plan to combat spiking, generally seen as the artificial inflation of a city employee’s income to boost his or her retirement benefit.

Several high-profile cases have come to light, pushing the effort to eliminate pension boosting to the forefront of the council’s agenda.

Former Phoenix City Manager David Cavazos, who retired last week to lead another city, was able to apply unused sick pay and other perks to spike his pension to an estimated $235,863, the second-largest retirement benefit in city history.

Earlier this month, a subcommittee of council members proposed modest reforms that they said would reduce pension spiking and provide transparency. They said the plan treated existing employees fairly and avoided potential litigation.

But the proposal fell apart Tuesday night, when a group of liberal-leaning council members joined the body’s fiscal conservatives in voting against it, though their rationales were vastly different.

After the motion to approve the proposal failed, the meeting ended. The result, greeted by cheers from employee unions in the crowd

Is Cronyism Private Enterprise's Fault or the Government's?

Oddly enough, this is perhaps the most frequent argument I have with people on the Left in cocktail party conversations.

It begins this way -- some abuse of "private enterprise" is cited.  Almost every time, I have to point out that the abuse in question could not occur if private companies were not availing themselves of government's coercive power to [fill in the blank: step on competitors, limit choice, keep prices high, rake in subsidies, etc.] Michael Moore's Capitalism: A Love Story is very much in this mold, blaming bad outcomes that result in government interventions on free market capitalism.

Kevin Drum has a great example of this.  Asthma inhalers are expensive because certain companies used the government to ban less expensive competitive products.

Nick Baumann picks up the story from there:

The pharma consortium transformed from primarily an R&D outfit searching for substitutes for CFC-based inhalers into a lobbying group intent on eliminating the old inhalers. It set up shop in the K Street offices of Drinker Biddle, a major DC law firm. Between 2005 and 2010, it spent $520,000 on lobbying. (It probably spent even more; as a trade group, it's not required to disclose all of its advocacy spending.) Meanwhile, IPAC lobbied for other countries to enact similar bans, arguing that CFC-based inhalers should be eliminated for environmental reasons and replaced with the new, HFC-based inhalers.

The lobbying paid off. In 2005, the Food and Drug Administration (FDA) approved an outright ban on many CFC-based inhalers starting in 2009. This June, the agency's ban on Aerobid, an inhaler used for acute asthma, took effect. Combivent, another popular treatment, will be phased out by the end of 2013.

In other words, pharmaceutical companies didn't just take advantage of this situation, they actively worked to create this situation. Given the minuscule impact of CFC-based inhalers on the ozone layer, it's likely that an exception could have been agreed to if pharmaceutical companies hadn't lobbied so hard to get rid of them. The result is lower-quality inhalers and fantastically higher profits for Big Pharma.

Rosenthal has a lot more detail in her piece about how the vagaries of patent law make this all even worse, and it's worth reading. But she misses the biggest story of all: none of this would matter if drug companies hadn't worked hard to make sure the old, cheap inhalers were banned. How's your blood doing now, Dr. Saunders?

No one has more disdain than I for companies that attempt to use the coercive power of the government as a competitive weapon in their favor.  Heck, I have barely gone 2 hours since the last time I bashed an industry for doing so.

But the implication that this is all the fault of corporations is just wrong, as is the the inevitable Progressive conclusion that somehow more government regulation and powers are necessary to combat this.

The Left has been the prime cheerleader over the past decades in creating the Federal behemoth that not only allows this to happen, but actively facilitates it.   We have created a government whose primary purpose is to redistribute spoils from one group to another.

Just look at the example he uses.  These drug manufacturers could have protected their markets and products the free market way, by investing tens of millions in more research, manufacturing cost reduction, and customer marketing.   But instead, we have a system where - entirely legally - a company can spend a fraction of this (the chump change amount of half a million dollars) to market to a few dozen people in DC and get the same benefits as investing tens of millions in satisfying customers.    The wonder is not that losers like these drug companies go this route, but that anybody at all still has enough sense of honor to actually invest in the customer rather than in DC bureaucrats.

I put it this way - "invest in customers rather than DC bureaucrats" - because every new regulation, every new government power over commerce is essentially a dis-empowerment of consumers in the marketplace.  Nowhere is this more true than in pharmaceuticals, where the government tells consumers what they can and cannot buy.

In a free market, accountability is enforced by consumers defending their own best interests and new competitors seeking fortunes by striving to serve consumers better than market incumbents.  Every government intervention is essentially saying to consumers that the government is going to make yet another decision for them.  So, having taken over so many decisions of consumers in those huge office buildings in DC, is it any wonder that companies go to DC to market to bureaucrats rather than bother marketing to consumers?

The problem, then, is not that some corporations avail themselves of legal shortcuts to profits.  The problem is that these legal shortcuts exist at all.  The problem is the coercive power of government to intervene in markets, chill competition through incensing, subsidize one competitor over another, etc.  These kinds of stories are going to proliferate endlessly until  that power is scaled back.

The Progressives I argue with come back with one of two answers.

This is a crock, and is the worst bit of enablement for a bad system ever invented.   The folks in government are not bad people -- they are normal people with bad information and bad incentives, and that is never going to change.  After all, something that Drum glosses over here, the agency in hid example went along and did the industry's bidding.  I know why the industry was doing what it did, but why did the agency roll over?  The whole theory is that these are public spirited people without commercial incentives.  Yet they rolled over none-the-less.  And it's not like these government employees are Rothbardian libertarians.  I work with the government all the time.  Their employees are there because they believe in public solutions over private ones.  In outlook and biases and beliefs they look a lot more like Kevin Drum than myself.  So why do they get a pass?  Of the two people here -- the drug company guy and the regulator guy -- which one is not doing his job right for his constituents?  So why does the drug company get the blame?

Response 2:  We just need to ban lobbying and contact with the regulated industry.  The whole theory of regulation is that the regulators are totally knowledgeable about the industry, but they have different incentives so they can work in the public interest.  But how are they going to be totally knowledgeable about the industry without frequent contact?  Or even experience in the industry?  And as to lobbying, lobbying is just speech.  It would be Constitutionally impossible to ban lobbying, and wrong anyway.  Think of it this way-- let's say you ran a restaurant but had to get a government agency's permission for each change in your menu (just as drug companies have to get permission for each change in their product offering).  Would you be happy with a situation in which the government made decisions on your menu without consulting you?  You would want to explain your desired changes and the logic behind them, right?   That's called lobbying, and you would not be happy to see it banned.

Government-Paid Lobbyists for Incumbent Hotel Interests in New York

In New York, the local hotel industry is freaking out.  Hotels, in a wearyingly familiar pattern, want the city to ban competitors using new business models (in this case companies like Airbnb).  Of course, they can't say that they are demanding government action to block competition.  So they come up with other BS.   This statement is right out of the corporate state paybook

NYC & Company, the city’s official tourism agency, issued a statement saying, “This illegal practice takes away much needed hotel tax revenue from city coffers with no consumer protections against fire- and health-code violations.” Neither city officials nor hotel organizations would estimate how much revenue hotels and the city might be losing.

The tax argument is absurd.  There is no reason that the city could not apply lodging or some sort of new tax to the rentals if that were their real concern.  The part about fire and health regulations is equally absurd.  New York apartment and building owners would be very surprised to learn that they are suddenly somehow unregulated.  Is the implication really that New York hotels are safe but New York apartments are Triangle Shirtwaist fires waiting to happen?

This is a great example of industry capture.  A true city tourism agency should be saying "It is great that this city is developing even more options for visitors.  A diversity of lodging experiences and price levels can only help spur tourism in New York.  There may be a few regulatory tweaks that are needed to accommodate this model, but we welcome this new lodging model with open arms."  Instead, though, they are acting as government paid lobbyists for existing hotel interests.

Reason TV on Government Shutdown of Privately-Funded Parks

My competitor Eric Mart does a great job explaining the issues.

Trading $1 in Debt for 85 cents of Economic Activity

UPDATE:  Mea culpa.  One point in the original post was dead wrong.  It is possible, contrary to what I wrote below, to get something like a 0.7%  difference in annual growth rates with the assumptions he has in the chart below (Drum still exaggerated when he called it 1%).  I don't know if the model is valid (I have little faith in any macro models) but I was wrong on this claim.  Using the 0.7% and working more carefully by quarter we get a cumulative GDP addition a bit lower than the cumulative debt addition.  There is still obviously a reasonable question even at a multiplier near 1 whether $1 of economic activity today is worth $1 of debt repayment plus interest in the future.  

I am not a believer, obviously, in cyclical tweaking of the economy by the Feds.  To my thinking, the last recession was caused by a massive government-driven mis-allocation of capital so further heavy-handed government allocation of capital seems like a poor solution.  But what really drives me crazy is that most folks on the Left will seductively argue that now is not the time to reduce debt levels, implying sometime in the future when the economy is better will be the appropriate time.  But when, in any expansion, have you heard anyone on the Left say, "hey, its time to reduce spending and cut debt because we need the fiscal flexibility next time the economy goes wrong."

I will leave the stuff in error below in the post because I don't think it is right to disappear mistakes.  For transparency, my spreadsheet reconstruction both confirming the 0.7% and with the updated numbers below is here:   reconstruction.xls.

 

Kevin Drum is flogging the austerity horse again

I see that Macroecomic Advisors has produced a comprehensive estimate of the total effect of bad fiscal policies. Their conclusion: austerity policies since the start of 2011 have cut GDP growth by about 1 percentage point per year.

Something seemed odd to me -- when I opened up the linked study, it said the "lost" government discretionary spending is about 2% of GDP.  Is Drum really arguing that we should be spending 2% of GDP to increase GDP by 1%?

Of course, the math does not work quite this way given compounding and such, but it did cause me to check things out.  The first thing I learned is that Drum partook of some creative rounding.  The study actually said reductions in discretionary spending as a percent of GDP reduced GDP growth rates since the beginning of 2011 by 0.7% a year, not 1% (the study does mention a 1% number but this includes other effects as well).

But it is weirder than that, because here is the chart in the study that is supposed to support the 0.7% number:

click to enlarge

Note that in the quarterly data, only 2 quarters appear to show a 0.7% difference and all the others are less.  I understand that compounding can do weird things, but how can the string of numbers represented by the green bars net to 0.7%?  What it looks like they did is just read off the last bar, which would be appropriate if they were doing some sort of cumulative model, but that is not how the chart is built.  If we interpolate actual values and are relatively careful about getting the compounding right, the difference is actually about 0.45%.  So now we are down to less than half the number Drum quoted see update above (I sent an email to the study author for clarification but have not heard back.  Update:  he was nice enough to send me a quick email).

So let's accept this 0.45% 0.7% number for a moment.  If GDP started somewhere around 16 trillion in 2010, if we apply a 0.45% the quarterly growth numbers from his chart, we get an incremental economic activity from 2011 through 2013:Q2 of about $333 billion.

So now look at the spending side.  The source says that discretionary spending fell by about 2% of GDP over this period.  From the graph above, it seems to bite pretty early, but we will assume it fell 1/12 of this 2% figure each quarter, so that by the end of 2013 or beginning of 2014 we get a fall in spending by 2% of GDP.  Cumulatively, this would be a reduction in spending over the 2.5 years vs. some "non-austere" benchmark of $388 billion.

Thus, in exchange for running up $677 billion $388 billion in additional debt, we would have had $445 billion $333 billion in incremental economic activity.  A couple of reactions:

  1. Having the government borrow money and spend it definitely increases near-term GDP.  No one disputes that.  It is not even in question.  Those of us who favor reigning in government spending acknowledge this.  The question is, at what cost in terms of future obligations.  In fact, this very study Drum is quoting says

    Economists agree that failure to shrink prospective deficits and debt will bestow significant economic consequences and risks on future generations. Federal deficits drive up interest rates, “crowding out” private investment. If government borrowing supports consumption (e.g., through Social Security and major health programs) rather than public investment, the nation’s overall capital stock declines, undermining our standard of living. The process is slow but the eventual impact is large.2 In addition, accumulating debt raises the risk of a fiscal crisis. No one can say when this might occur but, unlike crowding out, a debt crisis could develop unexpectedly once debt reached high levels.

    High deficits and debt also undermine the efficacy of macroeconomic policies and reduce policymakers’ flexibility to respond to unexpected events. For example, in a recession, it would be harder to provide fiscal stimulus if deficits and debt already were high. Furthermore, fiscal stimulus might be less effective then. Additional deficit spending could be seen as pushing the nation closer to crisis, thereby forcing up interest rates and undercutting the effects of the stimulus. With fiscal policy hamstrung, the burden of counter-cyclical policy is thrust on the Federal Open Market Committee (FOMC) but, particularly in a low interest-rate environment, the FOMC may be unable (or unwilling) to provide additional monetary
    stimulus.

  2. I guess we have pretty much given up on the >1 multiplier, huh?  Beggaring our children for incremental economic growth today is a risky enough strategy, but particularly so with the implied .66 .85 multiplier here.

This is not the first time Drum has taken, uh, creative data approaches to cry "austerity" during a mad spending spree. 

Anti-Deficiency Act

You may be wondering under what authority the government is taking actions during the government shutdown.  We had a meeting with the Chief of the US Forest Service on Friday.  This is the specific text the Administration is using to justify all of its shutdown actions

(a)(1) An officer or employee of the United States Government or of the District of Columbia government may not—

(A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation;

(B) involve either government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law;

(C) make or authorize an expenditure or obligation of funds required to be sequestered under section 252 of the Balanced Budget and Emergency Deficit Control Act of 1985; or

(D) involve either government in a contract or obligation for the payment of money required to be sequestered under section 252 of the Balanced Budget and Emergency Deficit Control Act of 1985.

I will leave it as an extra credit exercise for the reader to explain how this text justifies either a) spending extra money to barricade war memorials on the Washington Mall or b) closing privately-funded parks that take not a single dime of government money.    All these tests have everything to do with limiting government expenditures, not limiting citizen access to public lands.

We had some delays (in part because the government is taking a holiday from the shutdown today, so everything is REALLY closed) but we file our lawsuit seeking a temporary restraining order on the US Forest Service in the morning.

PJ Tatler Interviews Me on Government Closure of Privately-Funded Parks

The interview is here by Bryan Preston

Government Closing Parks It Does Not Fund or Operate

I mentioned in an earlier article that the Administration is threatening to close US Forest Service parks it does not even fund or run, privately operated parks that happen to have the Federal government as a landlord.  In fact, in our case, we pay the US Forest Service between 8 and 22 percent of revenues as a concession fee, so by threatening to close us it is costing them, not saving them extra money.

Apparently, the NPS is already doing this:

National Park Officials closed down the educational Claude Moore Colonial Farm near the CIA in McLean, Va., even though the federal government doesn't fund or staff the park popular with children and schools. Just because the privately-operated park is on Park Service land, making the federal government simply its landlord, the agency decided to close it.

A Claude Moore Colonial Farm official said that the privately-funded staff is on the job Wednesday, but barred from letting anybody visit the historically accurate buildings or animals. Anna Eberly, the managing director, sent out an email decrying the decision and rude National Park Service staff handling the closure.

Pointing to Park Service claims that parks have to be closed because the agency can’t afford staff during the government closure, Eberly wrote: “What utter crap. We have operated the Farm successfully for 32 years after the NPS cut the Farm from its budget in 1980 and are fully staffed and prepared to open today. But there are barricades at the Pavilions and entrance to the Farm. And if you were to park on the grass and visit on your own, you run the risk of being arrested. Of course, that will cost the NPS staff salaries to police the Farm against intruders while leaving it open will cost them nothing.”

She added: “In all the years I have worked with the National Park Service, first as a volunteer for six years in Richmond where I grew up, then as an NPS employee at the for eight very long years and now enjoyably as managing director for the last 32 years — I have never worked with a more arrogant, arbitrary and vindictive group representing the NPS. I deeply apologize that we have to disappoint you today by being closed but know that we are working while the National Park Service is not — as usual.”

This is purely political -- it costs rather than saves the government money.

If Parks Stayed Open, No One Would Notice The Government Shutdown

For several days now I have been highlighting article after article (here and here) where the only service downside of the government shutdown anyone can come up with is the closure of parks.  Here is another example, from the AP entitled "Lawmakers feeling heat from Government Shutdown".  Its all parks:

Some 800,000 federal workers deemed nonessential were staying home again Wednesday in the first partial shutdown since the winter of 1995-96.

Across the nation, America roped off its most hallowed symbols: the Liberty Bell in Philadelphia, the Statue of Liberty in New York, Mount Rushmore in South Dakota, the Washington Monument.

Its natural wonders — the Grand Canyon, Yosemite, the Smoky Mountains and more — put up “Closed” signs and shooed campers away.

Democratic Sen. Tim Kaine of Virginia said he was getting pleas from businesses that rely on tourists. “The restaurants, the hotels, the grocery stores, the gasoline stations, they’re all very devastated with the closing of the parks,” he said.

The far-flung effects reached France, where tourists were barred from the U.S. cemetery overlooking the D-Day beaches at Normandy. Twenty-four military cemeteries abroad have been closed.

Only 22,000 of those 800,000 run parks.  Apparently none of the others do anything we will miss.  Oh, they come up with one new one:

Even fall football is in jeopardy. The Defense Department said it wasn’t clear that service academies would be able to participate in sports, putting Saturday’s Army vs. Boston College and Air Force vs. Navy football games on hold, with a decision to be made Thursday.

Eek!  I joke about this but I fear that today this is going to bite me right in the butt.  Our company operates campgrounds on land we lease from the US Forest Service.  Since we pay all expenses of the operation, take no government money, and employ no government workers, we have never closed in a shutdown and the US Forest Service confirmed at noon yesterday we would not have to close this time.  But apparently someone above the US Forest Service somewhere in the Administration is proposing to reverse this, and illegally close us.  My guess is that they realize parks are the only thing the public misses, and so the Administration trying to see if it can close more of them, even ones that are operated privately and off the government budget.

Update:  This is very similar to what is happening in DC.  By trying to close us, the USFS is actually costing themselves more money (since we pay rent to them based on our revenues) with the only goal being to make the closure worse.  The Administration has ordered the same thing to occur in DC parks, where they are spending far more money "closing" monuments than they do just having them open all the time

Yesterday, the sight of a group of World War II veterans storming the barricaded monument built in their honor in Washington, D.C., became the buzzworthy moment from the first day of our federal shutdown.  The open-air, unmanned outdoor memorial had been barricaded to keep people from "visiting" due to the government shutdown, though there was no real (as in “non-political”) reason to have done so. Barricades certainly wouldn’t prevent vandals from busting in there at night if they wanted to. It was an absurd, petty move.

This morning, Charlie Spiering of the Washington Examiner returned to the memorial to find a gaggle of “essential” government workers there to barricade it once again. He tweeted that the employees fled after cameras started filming them working, but then came back to attach “closed” signs. A couple of them appear to be talking to the media. The barricades are apparently there, but have not been tied together and are therefore easily removed.