What Is Seen and What Is Not Seen

“Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself.” — Mark Twain

The great French economist Frederic Bastiat observed that “In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

The same is true in the sphere of public policy. The bad economist or the thoughtless politician (but I repeat myself) sees only the direct effect of a law; he doesn’t foresee the indirect effects. In many cases the politician may consider only the short-term effects that might help him win the next election; he may not consider at all the long-term effects.

Bastiat noted that “it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa.” So when a politician urges a great new solution to some problem – or typically, the same old ineffective solution to a problem – the long-term result very often is more harm than good.

One such example was alcohol Prohibition almost 100 years ago. The problem of alcohol may have been bad, but Prohibition made the problem much worse, to the point that Prohibition was later repealed. Another example was a luxury tax on yachts to “soak the rich”. Even a mediocre economist or a slightly thoughtful politician could have foreseen the disaster it turned out to be. The tax collected virtually nothing from the rich but did send many blue collar boat builders to the unemployment line. Two years later Congress repealed the law.

With the greatest intentions of reducing poverty, politicians have enacted policies that, in the short-term, help people survive one month until the next government check, but the unseen long-term effect is to trap people in poverty, sometimes for generations. If we truly care about helping people – and I think most of us do – then wouldn’t it be better to find long-term solutions that help people escape poverty?

As long ago as the 1980s, better economists and more thoughtful politicians saw the indirect effects of the welfare system – it “fostered a permanent underclass dependent on government handouts.” In 1996, a Republican Congress and Democrat President Clinton passed welfare reform with the goal of reducing the dependency trap and helping people escape poverty. Ten years later, The New Republic, a liberal magazine, looked back and editorialized that the reform “worked much as its designers had hoped [foreseen].” Since then, less thoughtful politicians seeing only the easily visible effects of welfare, and not seeing the long-term consequences, have undone most of the successful reform.

Our disability system likewise helps disabled people survive month-to-month but traps them in poverty. Wouldn’t it be better to find long-term solutions, using some amazing modern technology to help them overcome their disabilities, become productive, and no longer trapped in poverty?

Some short-sighted politicians want to extend the length of unemployment benefits beyond 26 months, but the long-term effect can be permanent unemployment. Studies have found that someone unemployed for more than six months has very little chance of ever getting a job.

Other bad economists and thoughtless politicians suggest raising the minimum wage. The immediate effect would be to slightly raise the pay for a small number of people – but cause others to lose their jobs. The long-term consequence would be to destroy many more entry-level jobs, making it harder and harder for teenagers to enter the work force.

When was the last time you saw a full-service gas station? That used to be a good first job for many young kids. Washing dishes was another good first job. Kids learned the self-discipline of showing up on time every time. While on the job they often picked up skills from the auto mechanics or cooks around them. But as the minimum wage rose, machines replaced those jobs. If it continues to rise, we will see machines taking orders for fast food, flipping burgers, and delivering the goods. The long-term effect of raising the minimum wage is disastrous for millions of young people.

Some politicians saw ObamaCare as a good idea; they did not foresee the terrible consequences. Today, some people think we will see good effects if we adopt the ObamaCare expansion of Medicaid. Not only do they fail to see the indirect, long-term terrible effects, they don’t even see the bad effects that have already occurred elsewhere. To put it simply, Medicaid is an inefficient, incredibly expensive program that provides even worse health outcomes than for people who are uninsured. Expanding it would cost even more than now predicted and would lead to much higher taxes.

To achieve better results – better economy, more good jobs, higher pay, less poverty, lower cost health care – we need to see not just the immediate effects of a policy, but to foresee the long-term effects.

Medicaid is a cruel program

“If we wish to be compassionate with our fellow man, we must learn to engage in dispassionate analysis. In other Walter E. Williams

Would you believe that many politicians over-promise and under-deliver? They promise you that a new law will fix some terrible problem, but usually it does not fix the problem, and often it makes the problem worse.

Too many politicians look only at the stated goals of a program. They believe so much in the goals that they refuse to believe any harm could result. They don’t look beneath the surface for possible unintended consequences. Even when other people do find bad side-effects in the bill, the true believers ignore the potential problems.

Thus is the case with expanded Medicaid. The same politicians who thought ObamaCare was a good idea and promised us that “If you like your health insurance, you can keep your health insurance”, those same politicians now tell us that expanding Medicaid is a good idea.

Sadly, Medicaid is a cruel program that hurts the very people it’s meant to serve. One commentator wrote: “Imagine a government-run health care program in which medical access is severely limited, that is racked by uncontrollably rising costs, and that in many instances results in demonstrably worse health outcomes than having no insurance at all. Such a program isn’t a mere hypothetical; it already exists, and it’s called Medicaid.”

More and more doctors are refusing to accept Medicaid because the system doesn’t pay enough to cover their expenses. Would-be patients spend hours on the phone trying to find someone willing to treat them. If they do succeed in finding a doctor, the appointment is, on average, three weeks later than someone with private insurance.

And it gets worse…, multiple studies have shown that Medicaid patients are more likely to die from surgery than privately insured patients and sometimes even more likely to die than uninsured patients. A Univ. of Pennsylvania study of colon cancer found that the mortality rate for Medicaid patients was 27% higher than for uninsured patients. A Florida study found that Medicaid patients were more likely than uninsured patients to have late-stage prostate cancer, breast cancer, or melanoma.

On broader measures of health, the Oregon Medicaid health experiment found no significant difference between Medicaid patients and uninsured patients in objectively measured physical health outcomes. Put simply, Medicaid did not make patients any healthier, though it did make them feel more financially secure.

Expanded Medicaid has been tried and has failed. The state of Maine expanded their Medicaid program ten years ago. Every predicted benefit failed. Politicians said it would reduce the number of uninsured. Wrong. Politicians said it would reduce emergency room visits. Wrong. Politicians said it would relieve uncompensated care. Wrong. The only significant change was that thousands of Mainers switched from private insurance to Medicaid.

There was one absurd result from Maine’s Medicaid expansion: Since the eligibility rules differ for expanded Medicaid and regular Medicaid, 10,000 able-bodied, childless adults received benefits while 3,000 elderly and disabled were put on a waiting list.

A pernicious aspect of Medicaid is that it traps people on the edge of poverty. The eligibility rules make it very difficult for someone to escape poverty and move up the ladder of success. A young person entering the workforce, earning $14,856 gets free health care. But if he or she earns just one dollar more, then that same young person not only loses the free coverage, but becomes obligated to purchase coverage or else face a penalty. This is a terrible incentive that encourages people to stay poor.

Isn’t it a good thing to learn more skills, get a better job, work more overtime, earn more money, save toward the future? Medicaid and similar entitlement programs punish people who try to better themselves and become self-sufficient, not dependent on government. Why should we encourage people to be involved in such a terrible system?

Proponents of expanded Medicaid rarely, if ever, discuss the adverse health outcomes for people on Medicaid. They never talk about the perverse incentives that can keep someone trapped in near-poverty forever.

What proponents mostly talk about is getting “free” money from the federal government. It is as if the poor are mere pawns for collecting more money. But does anyone really believe that the money is “free”? The federal government is running gigantic deficits. It has borrowed trillions and trillions of dollars. Our children, grandchildren, and their grandchildren will be stuck paying off this debt.

And the money isn’t free even in the short term. The feds talk about paying 100% of the cost for two years, but can we really believe that promise? And the federal budget negotiators are already talking about reducing the 100% promise because the costs keep going higher and higher and higher.

Many opponents of expanding Medicaid worry that the ever-increasing costs to NH taxpayers will lead us inevitably toward a sales or income tax.

The ObamaCare Medicaid expansion is bad for the people it claims to help, bad for the taxpayers, and bad for the future of New Hampshire. We should fix the broken system, not expand it.

Extending unemployment benefits can hurt the unemployed

A strange thing happened when North Carolina slashed unemployment benefits. People got jobs. Unemployment fell to its lowest level in five years. 

Economists have observed this behavior for decades. The unemployed are most likely to find a job when their unemployment benefits are about to run out. 

Their new job may not be as good as they want but any job is better than staying unemployed. Someone who is unemployed for more than six months is at risk of never finding a job again. 

When “compassionate” politicians extend unemployment benefits beyond 26 weeks, the unintended consequence is often to condemn recipients to permanent unemployment.

Who should make decisions for you?

“Politics is the art of looking for trouble, finding it whether it exists or not, diagnosing it incorrectly, and applying the wrong remedy.” — Ernest Benn

There was a time when there were “company towns”. The company owned all the land, all the buildings. The company provided food and housing; the company doctor provided health care; the bar and general store were company-owned. The employer made all decisions about food, housing, clothing, liquor, etc. Employees had no other choices because the nearest town might be a day’s ride away.

With one major exception, employers no longer decide for us what we will consume. Our employers pay us cash then we go out and buy food, clothing, housing, cars, entertainment, vacations, college educations, etc. We each make our own decisions, not our employers. The one exception is health insurance. In most businesses, the employer chooses our health insurance and we have very little, if any, say about the insurance.

But why? Why should our employer decide what health insurance is best for each of us? Our employers don’t choose the best auto insurance, fire insurance, or life insurance for us. Why should they choose the best health insurance for us? Wouldn’t it be simpler just to take the cash they are sending to an insurance company, give it to each employee, and let each of us decide what is better for us?

If you think it is a good idea for your employer to buy health insurance for you, would you also like your company to buy your food, clothing, housing, and automobile for you? After all, by buying in bulk the company should be able to get a better price on all of your family’s clothes. Isn’t that a good reason for the company to make decisions for you? No, I didn’t think so.

But, you say, it’s “always” been that way; most people get their insurance from their employer. If it ain’t broke why fix it? Well, it is broke. Employer-paid insurance is a major cause of problems with our health care payment system. (Our health care system is excellent; our payment system is terrible.)

Employer-paid insurance is not portable from one job to another job. If you switch jobs, you lose your old insurance and have to get new insurance, probably with a whole different set of conditions. Same problem if you are laid off or the company goes out of business. Contrast this with your home, auto, or life insurance. You pay for those. It doesn’t matter if you switch jobs or lose your job. You don’t lose your insurance.

The problem of pre-existing conditions largely disappears when you own your own health insurance policy. With self-paid policies you might keep the same insurance for years no matter how many times you switch jobs. With employer-paid policies you get a new policy every time you have a change of jobs. If you develop a medical condition after you have had a policy for just a few months, the insurance company can say, “That condition existed before you signed up for this policy, so it is not covered.” But if you have had the policy for years, then the condition started on their watch and they must cover it.

Employer-based insurance suffers from the one-size-fits-all problem. What is right for one employee might be not at all right for another employee, but at most companies they both get the same insurance. If employers simply paid the employees directly whatever amount they were paying the insurance companies, then each employee could choose the kind of policy that is best for him and his family.

Now consider the not uncommon case of both spouses working and both receiving employee-paid health insurance. One of those insurance policies is useless, a waste of money. If something happens they can’t file claims under both policies. If instead, their employers paid them cash, they would buy just one policy; they might take the extra cash and put it into an HSA account.

If you have employer-paid insurance, you probably have no idea what the cost of that insurance is. Your employer pays the cost and doesn’t tell you what it was. When you don’t know the price of something, it is hard to be a smart consumer. It is even harder when you won’t benefit from any cost savings that you undertake.

If you buy your own insurance using money that your employer would have paid to buy his choice of insurance, then you can often greatly reduce total health care costs by shopping around. The Wall Street Journal reported on one surgeon who managed to reduce his patient’s out-of-pocket cost from $20,000 down to $3,000 with a few simple phone calls to an anesthesiologist and nearby hospitals.

So with all of its disadvantages, why do so many of us have employer-paid insurance? It is due to ill-thought out tax policy that gives an incentive for employers to buy insurance instead of paying that same money to employees and letting them buy insurance. (Did you think that politicians and bureaucrats never made bad decisions?) ObamaCare only exacerbates that same bad policy.

Real health care payment reform would give to individuals the same incentive given to businesses to buy health insurance.

We are a caring and generous society

“The history of recent decades has involved replacing what worked with what sounded good.” — Thomas Sowell

According to an old story, a small town in Italy was having a problem with vipers. So the town council established a “viper bounty” to pay people for bringing in dead vipers. The result was that people started breeding vipers in their basements.

This illustrates one of the basic laws of economics: People respond to incentives. They do more of something when the reward increases; they do less of something when the penalty or cost increases.

Much of our public policy suffers from a failure to understand the basics of human behavior. Politicians perceive a problem, rush to pass a law that sounds good, pat themselves on the back, then go on to the next problem. They rarely look back to examine whether their “solution” actually fixed the problem or made it worse. If the program doesn’t work, their answer always is that it needs more money. They never admit that they were wrong.

Consider our many programs to help the poor and vulnerable. We are a caring and generous society. We donate hundreds of billions of dollars and countless millions of hours of our time to helping others. Caring for the vulnerable attracts almost universal support. But good intentions don’t automatically produce good policies.

Shouldn’t the goal of our anti-poverty programs be to help people move up out of poverty? Most if not all of the programs don’t even try to reduce poverty. Instead, they simply hand out money so the poor will be a little less destitute. Those unfortunate people remain in or near poverty, dependent on government sometimes for their entire lives – and their children’s lives.

To paraphrase Winston Churchill: “They want to give you a line where you can wait for a handout… I want to offer you a ladder so you can reach for your dreams.” Democrats measure success by how many people receive assistance. Republicans measure success by how many people no longer need assistance.

The myriad of welfare programs reward people for being poor and penalize those who try to move out of poverty and up the income ladder. Someone who works harder, takes a second job, learns more skills, might earn $10,000 more but lose $15,000 of benefits. Hence, many say “I can’t afford to take that job. I’d lose my benefits!” With perverse incentives like these it is no wonder that we have more people in poverty and fewer people making the effort to better themselves.

New York Times columnist Nicholas Kristof recognized the problem: “This is painful for a liberal to admit, but conservatives have a point when they suggest that America’s safety net can sometimes entangle people in a soul-crushing dependency. Our poverty programs do rescue many people, but other times they backfire.”

Democrats like to claim that they are for the poor, that Republicans are for the rich. The truth is that we Republicans are for all people to have the opportunity to become rich. The Democrats are for policies that keep people poor. If they really cared for the poor, they would fix a system that traps people in poverty. They would reward, not penalize, people who try to better themselves and escape poverty.

Bad policies are condemning people to lifelong poverty, trapping them there, and killing all hope of a better life.

Three simple rules will keep most people out of poverty: “finish high school, get a full-time job, and wait until age 21 to get married and have children.” Follow all three rules and you have just a 2% chance of falling into poverty. Break all three rules and your chance of winding up in poverty is 76%. Tragically, government policies create incentives to break all three rules.

Welfare programs pay more to a teenage girl who has children, and pay less if she gets married, thus violating the third rule. ObamaCare provides a terrible incentive for businesses to limit employees to part-time work. This year 96% of all new jobs are part-time jobs, making it very hard to follow the second rule.

But the worst incentive of all is the government school system in too many parts of the country. In the inner cities the school systems are so bad that half the children drop out before they graduate and half those who do graduate are functionally illiterate. They will never get a decent job or a shot at the American dream.

The politicians and even the teachers know that the schools are terrible. That is why they send their own kids to private or parochial schools. Parents cry out for voucher programs that would let them send their kids to the same good schools that the politicians and teachers use for their kids. But the politicians and teachers care more about teachers’ jobs than they care about the kids whose lives they are destroying.

Did I mention which party runs all of these cities, has held the mayoralties, the city councils, the school boards for more than fifty years? Democrats run the welfare and school systems; they have created the policies that ruin the lives of the recipients of their handouts. And these are the people who say they care for the poor. They like the poor so much that they want more of them.

Gun control myths demolished

This video does a good job of demolishing some gun control myths, e.g. “gun control prevents gun crime”. To those of us who remember that “The road to hell is paved with good intentions”, there is no surprise in the video itself. The only surprise is that it was broadcast prime time by ABC News (20/20).

  • Since Washington’s gun ban passed, the murder rate actually increased, even while in the rest of the country it went down.
  • Guns can also save lives.
  • Just pulling out the gun was enough to stop [the bad guys].
  • In the 40 states that allow concealed carry, there is no more violent crime than in states where guns are restricted.
  • After Kennesaw, GA required every home to have a gun, violent crime decreased.
  • Felons said they feared an armed victim much more than the police.
  • Felons said they didn’t worry about gun laws, they would carry a gun anyway.
  • We don’t know how often guns stopped criminals because who reports a crime that didn’t happen?
  • People use guns in self-defense every day. Often, just showing the gun is enough to stop the crime.
  • The National Academy of Sciences reviewed hundreds of studies and could not document a single gun regulation that reduced violent crime.
  • If some [bad guy] gets in your house, which would you rather have: a handgun or a telephone?

The timing of this story is a bit strange. The blogosphere has had at least a dozen posts on this video in the last month. But it was originally broadcast in December 2010. Every few months since then another post appears as if the story is new. I don’t know why there was a flurry of activity this past October.

Government solutions often have disastrous consequences

The problems of Obamacare’s healthcare.gov or the negative consequences of the law should come as no surprise. … Government-program incentives tend to favor interest groups instead of rewarding success or punishing failure. … The health care law was designed to expand health care insurance coverage rather than to improve health outcomes — a choice that benefits the insurance industry without necessarily producing better and more affordable health care.

Those are just a few observations in a recent column by Veronique de Rugy. You probably haven’t heard of her but she is a brilliant scholar at the Mercatus Center. Here’s more:

Obamacare, like Medicare and Medicare Part D, is yet another law that concentrates benefits on older Americans (who are often active voters) at the expense of young and healthy ones (who aren’t as active voters). … government institutions themselves are inherently prone to bad decision-making, often choosing the interest of politically favored groups. … The institutions of government themselves are inherently incapable of performing certain tasks well even when the people in power are smart, compassionate and well-intentioned.

Read the whole thing. It’s short and very readable.

Can you solve this simple puzzle?

A bat and ball cost $1.10.
The bat costs one dollar more than the ball.
How much does the ball cost?

Simple puzzle, right? Well, more than 50% of students at Ivy League colleges got the wrong answer. At other universities the rate of wrong answers was 80%. The lesson of this simple problem is:

many people are overconfident, prone to place too much faith in their intuitions. They apparently find cognitive effort at least mildly unpleasant and avoid it as much as possible.
One of the problems with government is that many of our “leaders” are overconfident, quick to choose a “solution” that they are sure is right for everyone, and are reluctant to do the analytical work to determine whether their answer is even reasonable. Their overconfidence and reliance on intuition inevitably leads to unintended consequences.

ObamaCare – the beginning of the end

“Never believe anything in politics until it has been officially denied.” — Otto von Bismarck 

Seems like just yesterday that I wrote about the Law of Unintended Consequences. Then just a few days later several union leaders fired off a letter complaining about the unintended consequences of ObamaCare, “The unintended consequences of the ACA are severe. Perverse incentives are causing nightmare scenarios.”

Seriously, what did they expect from a 2000-page bill that nobody had time to read before they voted on it? If there is one thing that everybody should have learned about gigantic bills is that there will certainly be unintended consequences. The politicians ought to take time to read the bills and allow the public to read them, and they should allow extensive time for thorough debate. Will they learn? No.

But back to ObamaCare. July 2013 should go down as the beginning of the end – or perhaps the end of the beginning – of this terrible act. Right now, some reader of this column is disagreeing, thinking that “universal health care is not terrible; it’s a great idea.”

There is a huge difference between a good idea and a good bill. Even if we were to agree that the idea was good, the bill was terribly written. By now, all but the true believers must realize that its implementation is proving next to impossible and the unintended consequences are destroying jobs. As the Wall Street Journal opines, “The law’s implementation is turning into a fiasco for the ages.”

The unraveling began on April Fools’ Day. The government announced that a key part of the law, the Small-business Health Options Program (SHOP), would be delayed a year. Even though the law had passed a full three years earlier, the government had not written final rules until the previous month. The Chamber of Commerce announced that without SHOP the federal exchanges “will be of little or no value to employers, or by extension, their employees.”

Later in April, Sen. Max Baucus, chief author of the bill, said the law’s implementation would be a “train wreck.” A Democratic colleague, Sen. Jay Rockefeller, described the massive act as “beyond comprehension.” The government’s chief technical officer for the insurance exchanges remarked, “I’m pretty nervous . . . Let’s just make sure it’s not a third-world experience.”

Also in April, a union leader called for the repeal of ObamaCare, saying that “in the rush to achieve its passage, many of the act’s provisions were not fully conceived, resulting in unintended consequences that are inconsistent with the promise that those who were satisfied with their employer-sponsored coverage could keep it.” (There’s that phrase again – unintended consequences.)

In May, a separate group of union leaders grew “frustrated and angry about what they say are unexpected consequences of the new law – problems that they say could jeopardize the health benefits offered to millions of their members.”

When the government wants to hide bad news, it usually issues a press release just before a weekend or holiday, hoping it will get little attention. Thus it was when the administration finally had to acknowledge that ObamaCare was a shambles. The Treasury Department announced at 6 pm on July 2 that they were delaying the employer mandate for one year, until January 2015, conveniently after the November 2014 elections. Can anyone seriously doubt that politics was a major reason for his decision to delay the mandate? Clearly, Obama and his political advisors know that ObamaCare is more and more unpopular with voters.

Which brings us back to the union leaders at the start of this missive. Shortly after the Treasury’s announcement, the leaders warned that ObamaCare would “shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class.” One of the unintended consequences of the law is a perverse incentive for businesses to convert full-time employees to part-time. “The impact is two-fold: fewer hours means less pay while also losing our current health benefits.”

In another instance of hiding bad news, the government buried in the Federal Register an acknowledgment that without the employer mandate in place, it had no mechanism to verify an individual’s eligibility for subsidies. It would rely on the “Honor System”. And without employers reporting the insurance status of employees, the individual mandate is not enforceable.

For consumers that’s not such bad news. By a 2-1 margin, voters want the individual mandate to be delayed one year. Even Democrats (by a 43%-35% margin) favor a delay. Majorities of Republicans (84%) and independents (57%) favor eliminating the mandate completely. The only voter group still strongly supporting ObamaCare is Liberal Democrats. Surprisingly, even “Moderate Democrats are quitting on Obamacare” (Washington Post-ABC News poll).

So, after three months of bad reports from his own administration, from allies in Congress, and allies in the labor unions, President Obama felt it necessary to defend his law. It is hard to find a single major media outlet praising his speech – the Associated Press labeled it “another round of exaggeration”.

The point of this essay is not to highlight all that is wrong with ObamaCare – that would take many more volumes. It is to emphasize that the Law of Unintended Consequences can never be repealed. Politicians who ignore that law do so at our peril.

 

The Law of Unintended Consequences

I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. — Benjamin Franklin

There is one law that legislatures can never repeal. That is the Law of Unintended Consequences. When legislators rush into something that sounds good without carefully considering possible consequences, that is when they are apt to write a law that does more harm than good.

Thus it is a very good thing that the NH Senate held firm in requiring a careful study before implementing that part of ObamaCare known as Expanded Medicaid. As more and more people realize that ObamaCare is a “train wreck” in progress, it is all too likely that expanding Medicaid will worsen the train wreck.

ObamaCare itself provides multiple examples of the unintended consequences of rushing to pass a bill that nobody has had time to read, much less debate. One major section of the law comes into play when a business has 50 or more employees. It should be no surprise that many, many small businesses are becoming known as “49ers” because they are limiting themselves to no more than 49 employees. This is one reason for the extremely weak jobs market.

The New York Times’ Nicholas Kristof reported a tragic example of the law of unintended consequences. The Supplemental Security Income (SSI) program initially covered children with physical or mental disabilities so severe that parents often couldn’t hold jobs. Later it was expanded to cover kids with learning disabilities. The program pays families with such kids $698 per month.

The unintended consequence of SSI is that it creates a terrible incentive for parents to keep their kids illiterate. For some poor families, the disability check is their major source of income. If their child begins to do well in school, they risk losing the check. Parents have pulled their children out of literacy programs just to keep the check coming. They may love their kids and want them to succeed but they are desperate.

Kristof noted that “nearly two-thirds of these children make the transition at age 18 into SSI for the adult disabled. They may never hold a job in their entire lives and are condemned to a life of poverty on the dole — and that’s the outcome of a program intended to fight poverty.”

National Public Radio (NPR) also reported on some of the perverse results of the disability program. It noted one mother whose “teenage son wanted to work, but she didn’t want him to get a job because if he did, the family would lose its disability check.” NPR suggested several items that should be goals of a disability program, then concluded that “The disability program stands in opposition to every one of these aims.”

NPR noted that the disability program traps people into a lifetime of poverty. “… in most cases, going on disability means you will not work, you will not get a raise, you will not get whatever meaning people get from work. Going on disability means, assuming you rely only on those disability payments, you will be poor for the rest of your life. That’s the deal. And it’s a deal 14 million Americans have signed up for.”

It’s not just the disability program that traps people into dependency on government. The panoply of welfare programs has the effect of punishing people who try to move out of poverty and up the income ladder. Someone who works harder, takes a second job, learns more skills, might earn $10,000 more but lose $15,000 of benefits. Hence, many say “I can’t afford to take that job. I’d lose my benefits!”

The Pennsylvania Secretary of Public Welfare calculated that a single woman with two kids can be better off with gross income of $29,000 plus numerous benefits, than if she earned a gross income of $40,000, $50,000, or even $60,000, with fewer or no benefits. At $29,000 gross income her net income plus benefits could be as much as $57,327. She would have to earn $69,000 to have a net income plus zero benefits of $57,045.

Expanding Medicaid would enlarge the dependency trap. More people would find that they could not afford to better themselves because they would lose even more benefits. One cynical pundit often remarks that the political class wants more people trapped into dependency because “beggars are easier to satisfy.”

As a caring society we want to help the vulnerable. But do we want to trap them into a lifetime of dependency on government, where they are punished for trying to better themselves? Is it good for society to have millions of people unable to contribute their skills and energy? Is it good for the recipients themselves to live in poverty their entire lives with no hope of ever becoming self-sufficient and moving upward?

For Kristof, “a tentative lesson from the field is that while we need safety nets, the focus should be instead on creating opportunity — and, still more difficult, on creating an environment that leads people to seize opportunities.”

Liberal policies produced something resembling hell

Michael Barone writes, “When people ask me why I moved from liberal to conservative, I have a one-word answer: Detroit. I grew up there, on a middle-class grid street in northwest Detroit …  I got a job as an intern in the office of the mayor in the summer of 1967 when Detroit rioted. I was at the side of Mayor Jerome Cavanagh … during the six days and nights in which 43 people, mostly innocent bystanders, died. I listened to the radio in the police commissioner’s office as commanders announced, shortly after sundown, that they were abandoning one square mile after another.

“Cavanagh was bright, young, liberal, and charming. He had been elected in 1961 at age 33 with virtually unanimous support from blacks and with substantial support from white homeowners—then the majority of Detroit voters—and he was reelected by a wide margin in 1965. … He was one of the first mayors to set up an antipoverty program and believed that city governments could do more than provide routine services; they could lift people, especially black people, out of poverty and into productive lives. Liberal policies promised to produce something like heaven. Instead they produced something more closely resembling hell.”

14,000 wind turbines abandoned and slowly decaying

Built only for the tax credits, abandoned when the tax credits run out, why is nobody clamoring to have the mess cleaned up?

In most instances the turbines are just left as symbols of a dying Climate Religion. Nowhere have the Green Environmentalists appeared to clear up their mess or even complain about the abandoned wind farms.

More energy – mostly from fossil fuels – was consumed building these windmills then they ever produced.

Alameda County, California, reported that one wind turbine project alone killed 10,000 birds, including hundreds of eagles, owls, hawks, and falcons.

The Road to Hell is paved with good intentions.

 

Regulation kills jobs

Government policies are stifling young, hungry entrepreneurs,” says Andy Pudzer, CEO of CKE Restaurants. Worst among these is ObamaCare.

About 40% of Mr. Puzder’s employees are part-time and therefore exempt from ObamaCare’s coverage mandates. “That percentage of employees will probably go up. … Through attrition, three full-time employees go away and you hire four part-time employees who basically have the same hours.”

As government raises the price of hiring living workers, by raising the minimum wage and mandating higher benefits, companies find it more efficient to replace humans with machines.

Mr. Puzder also expects fast-food restaurants to deal with ObamaCare by replacing workers with kiosks. “You’re going to go into a fast-food restaurant and order on an iPad or tablet instead of talking to a person because we don’t have to pay benefits for any of those things.”

Pudzer’s company is expanding rapidly and now has “3,300 restaurants in 42 states and 28 foreign countries.” It plans 300 new restaurants in the “business-friendly” state of Texas.

One place it is not planning to expand is California because “California is not interested in having businesses grow.” Compare how long it takes his company to get a building permit. In Texas, it takes 60 days; in Los Angeles, 285 days.

California’s cumbersome labor regulations have forced the company to “fire managers who don’t report their work hours because they present a legal risk.” He tells the fired managers “to go to Tennessee or Texas, where we’ll rehire them and they’ll learn entrepreneurial skills.”

Corporations based in California are increasingly moving “where labor and the cost of doing business are cheaper. The ultimate victims are middle-class entrepreneurs, like restaurant managers, and the low-skill workers they employ.”

Down in Concord

“The government solution to a problem is usually as bad as the problem and very often makes the problem worse.” — Milton Friedman

The House is not in session this week or next. Many members will be busy in Committees of Conference trying to resolve differences between House and Senate versions of bills. Each conference committee crafts a compromise on one bill, then submits the compromise bill with explanation to both the House and the Senate by June 20. This year there are 26 bills headed to conference. The biggest and most important bills are, of course, the budget bills.  On June 26, the House will vote on conference committee reports, and that should be their last session of the year.

Most of the bills other than the budget bills will be of little interest to most people. (Does a bill “consolidating the property appraisal division and the municipal services division of the department of revenue administration” interest anyone?) Most people probably aren’t particularly interested even in the budget bills – for the simple reason that most people have little interest in anything to do with politics.

There is one bill that might interest quite a few people. And that is the Medical Marijuana bill, HB 573. The House approved it by an overwhelming bipartisan majority, but the governor said she had problems with parts of the bill, so the Senate amended it, and then passed it by a 3-1 bipartisan majority. Advocates of medical marijuana no doubt will be contacting their representatives trying to influence the conference committee.

Down in Concord, the most difficult, time-consuming, and important conference will be on the budget. The numbers aren’t all that different – the Senate increases spending by 7%, the House increases by 10%. The Senate spends $23 million more than the House on the Department of Health and Human Services. Governor Hassan labels that increase a “devastating cut”.

In the State House there is an Office of Legislative Budget Assistant (LBA), staffed with professional number crunchers. One of the many documents they produce is a line by line – 1611 pages worth – comparison of the House and Senate budgets. One column shows the dollar difference between the two versions. On page after page after page the difference is zero. I managed to get through about 800 pages before I ran out of energy. It is fair to say that over 90%, perhaps closer to 99% of the spending proposals are identical.

The numbers aren’t the problem. The contentious debate won’t be about a million here, a million there. The debate will be about expanding Medicaid to cover not just the poor but people with incomes up to 138% of the federal poverty level. Proponents say that it will help thousands of poor people, that it will cost us nothing because the federal government will pay 100% of the cost for three years.

Opponents reply that “If it sounds too good to be true, it probably is.” There are always unintended consequences from any program, especially from a federal government program. Let’s look at the long-term effect of this program.

People often complain that politicians rarely plan beyond the next election. Well, the New Hampshire Senate is now saying let’s look beyond the two years of this budget to study whether this program will be good for the long term.

Politicians all too often judge a program by its intentions, not by its results. They feel good for how much money they spend, rather than how many people are actually better off. They create some new program, congratulate themselves for how well it will work, but only rarely measure the results of the last program they created.

Supporters of expanding Medicaid live in a fantasy world where every program works as intended. Let’s look at the real world.

A study of 13,000 Oregonians conducted by Harvard and MIT economists and recently published in the New England Journal of Medicine concluded that “Medicaid coverage generated no significant improvements in measured physical health outcomes in the first two years.”

A University of Virginia study of 1 million surgeries showed Medicaid patients were twice as likely to die as those with private insurance. The same study showed that compared to NO insurance, Medicaid patients were 13% more likely to die.

A Journal of Cancer article showed that Medicaid cancer patients are two to three times more likely to die than other patients.

Our neighboring state of Maine 11 years ago decided to expand its Medicaid coverage. Supporters thought it would reduce the number of uninsured, thus reducing the costs of uncompensated care. A decade later, the number of uninsured was unchanged at 12 percent. Medicaid participation grew 7 percent but private health insurance dropped by 7 percent. The main effect of expanding Medicaid is shifting people from private insurance to government insurance and sticking taxpayers with the bill.

Medicaid is a program of low quality and high cost – not just in dollars but also to the well-being of the recipients of poor care. If we truly care about people who need help – not just feeling good about throwing money at a problem – we should try to find a replacement, not expand Medicaid.

Down in Concord

“The difference between a politician and a pickpocket is that the pickpocket doesn’t get indignant when you tell him to keep his hands to himself.” — Joseph Sobran

The big news down in Concord is the gambling bill, SB 152. Of course, when I say “big news” what I mean is big political news because for most people anything political is by definition not important. Most of the time even the biggest political news is small potatoes compared to other news.

The special committee for this bill voted by the slimmest margin (23-22) that SB 152 was Inexpedient to Legislate (ITL). The full house will vote Wednesday, May 22, on the committee recommendation. Nobody is predicting which way the vote will go. Democrats are divided – the committee chairman wrote the report opposing the bill; a division chairman wrote the report in support. Republicans are similarly divided. The vote will be bipartisan for and against.

If members were to vote on the general idea of allowing a casino, they might vote yes. But they won’t be voting on an idea; they will be voting on a specific 41-page bill – and opponents think that the words of that bill are badly flawed.

Supporters of the bill claim that SB 152 would authorize “the licensing of one highly regulated, high-end destination casino through a competitive bidding process.” Opponents counter that the claim is laughable:

  1. it won’t be highly regulated because the regulatory process cannot be completed in time for the contract-signing timeline specified in the bill;
  2. it won’t be “high-end” at all because the money proposed to be spent on the casino is less than half what has been required for high-end casinos elsewhere;
  3. the bidding process is anything but competitive because the language of the bill was written by one particular bidder, Millennium Gaming of Las Vegas, and the terms cannot be satisfied by another bidder.

One of the sponsors of the bill stated that casino gambling would be similar to the lottery – there was much opposition in the beginning but it worked out okay. A major difference is that lottery machines are allowed in thousands of businesses all over the state. A casino would be a state-protected monopoly allowed in just one place. The monopoly aspect is one of the main reasons many members oppose the bill. There might be much more support for a bill that said slot machines (and other forms of gambling) were allowed anywhere with the payment of an up-front tax and a share of the take.

Supporters say that the casino would bring in tens of millions of dollars in new revenue. Opponents respond that it would reduce revenue from existing sources. Very few casino customers would come from Massachusetts where there will be bigger and brighter casinos. The customers would be NH citizens spending their money in slot machines instead of at local restaurants, theaters, and other entertainment sources. That would mean less Meals & Rentals tax receipts and less business tax revenue.

They say the casino would create many jobs. During construction it would, but those could very well be jobs for Massachusetts workers. The proposed casino location is very close to the Mass border and workers could easily commute from Mass instead of being NH workers. Later, when the casino is in operation, it would hurt jobs in existing businesses. The Federal Reserve Bank of Boston advises that a casino “may have no net ancillary economic impacts. Residents patronizing such casinos may simply substitute gambling for other goods and services.”

Supporters promise that there will be so much extra revenue that it will pay for widening I-93, and will fund school building aid, higher education, uncompensated hospital care, and economic development assistance to the North Country. To which another Democrat at the public hearing responded, “Poppycock.” Even if casino gambling brought in all the money the supporters imagine with none of the costly side effects that opponents fear, it still would not fund all of those. It might do a little here, a little there, but it could not do all of them. It would be roughly a 1% increase in state revenue.

Governor Hassan has been inviting freshmen Democrat representatives for one-on-one chats. If she is like too many politicians she will promise one thing to one representative, something else to another, promising whatever it takes to get the member’s vote, then be unable to deliver on her promises.

In July, 2009, Governor Lynch created a Gaming Study Commission (GSC). In May, 2010, the commission issued a 170 page report. One wonders if the authors of SB 152 ever read that report. In the short time that the House committee has been evaluating the bill, the committee discovered all sorts of problems. They had time enough to identify problems but one month was not enough time to find solutions.

Wise representatives will remind themselves of the old saying “Fools rush in where angels fear to tread.” Rushing to pass a bill in the hope of receiving money quickly, instead of taking the time to fix the bill, is setting up the state for big problems later on.

UPDATE: The House voted 199-164 to kill the bill. I expected a closer vote.

Government program hurts children and families – II

“[C]onservatives have a point when they suggest that America’s safety net can sometimes entangle people in a soul-crushing dependency ” wrote admitted liberal New York Times writer Nicholas Kristof in an eye-opening (for liberals) article about poverty in America.

Here are some extracts:

parents here in Appalachian hill country pulling their children out of literacy classes. Moms and dads fear that if kids learn to read, they are less likely to qualify for a monthly check for having an intellectual disability.
:
Most wrenching of all are the parents who think it’s best if a child stays illiterate, because then the family may be able to claim a disability check each month.
:
Those kids may never recover: a 2009 study found that nearly two-thirds of these children make the transition at age 18 into S.S.I. for the adult disabled. They may never hold a job in their entire lives and are condemned to a life of poverty on the dole — and that’s the outcome of a program intended to fight poverty.

Government program hurts children and families

I haven’t had time to write about this very interesting article on disability so I will just quote a few extracts.

But, in most cases, going on disability means you will not work, you will not get a raise, you will not get whatever meaning people get from work. Going on disability means, assuming you rely only on those disability payments, you will be poor for the rest of your life. That’s the deal. And it’s a deal 14 million Americans have signed up for.

This is especially sad: (emphasis is mine)

Jahleel Duroc is gap-toothed, 10 and vibrating with enthusiasm. He’s excited to talk to someone new, excited to show me his map of his neighborhood in the Bronx. He’s disabled in the eyes of the government because he has a learning disability.

“I like school,” he told me. “My favorite periods are math and science and art, and lunch and recess and snack … social studies and writing are my favorite.”

His favorite thing about school, in other words, is everything.
:
Jahleel is a kid you can imagine doing very well for himself. He is delayed. But given the right circumstances and support, it’s easy to believe that over the course of his schooling Jahleel could catch up.

Let’s imagine that happens. Jahleel starts doing better in school, overcomes some of his disabilities. He doesn’t need the disability program anymore. That would seem to be great for everyone, except for one thing: It would threaten his family’s livelihood. Jahleel’s family primarily survives off the monthly $700 check they get for his disability.

Jahleel’s mom wants him to do well in school. That is absolutely clear. But her livelihood depends on Jahleel struggling in school. This tension only increases as kids get older. One mother told me her teenage son wanted to work, but she didn’t want him to get a job because if he did, the family would lose its disability check.
:
Kids should be encouraged to go to school. Kids should want to do well in school. Parents should want their kids to do well in school. Kids should be confident their parents can provide for them regardless of how they do in school. Kids should become more and more independent as they grow older and hopefully be able to support themselves at around age 18.

The disability program stands in opposition to every one of these aims.

ObamaCare turned three

Just over three years ago, March 23, 2010, ObamaCare was signed into law. Officially the Patient Protection and Affordable Care Act, there is no evidence to support its title. The evidence instead indicates it will:

  • Increase insurance costs via new taxes
  • Cause 7 million to lose their current employer-paid coverage
  • Cause premiums to skyrocket
  • Cost people their jobs, or force them to part-time employment
  • Tax the middle-class – not just the “rich”
  • Add to the deficit
  • Cost more than promised
  • Exacerbate doctor shortages
  • Leave millions uninsured

All this by age three. And most of the law doesn’t take effect until 2014 or 2015.

Down in Concord

Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.
— Groucho Marx

The House has passed 82 bills and has killed 89. There are about 380 House bills left to consider. March 14 is the last day for the House to act on most bills. Some bills, mostly those that have a fiscal impact, go to a second committee. Those bills have a deadline of March 28. The monster budget bills have a deadline of April 7.

In my last column, I mentioned that it is rare for the House to overturn a committee recommendation. Perhaps that statement jinxed the proceedings because, lo and behold, the House did it again, twice.
HB 325, relative to public employee suggestions for cost-saving measures, would reward state employees with a cash bonus for any cost-saving suggestions they make. The committee recommended Inexpedient to Legislate (ITL) on a split decision. The House vote was a very rare tie vote with the Speaker voting to create the tie. Since a tie vote is not enough for a motion to succeed, there was then a motion to pass the bill, which then passed by a 199-162 vote.
HB 388, provides civil immunity to the owner of a firearm in the event the firearm is stolen and used in the commission of a felony or a misdemeanor. The committee recommended ITL by 12-6 but the House defeated that motion by 167-192, then passed the bill by 211-151.

As I forecast last time, the House killed on a voice vote, HB 330, which would have allowed counties to adopt an income tax. It voted by 201-135 for an increase in the tobacco tax, voted 192-161 against slowly reducing the business enterprise tax, and repealed the education tax credit program by 188-151.

In an earlier column I wrote against HB 148, which proposed to change the way New Hampshire casts its votes for President. Our electoral votes would have been awarded to the winner of the national popular vote, even if New Hampshire voters went overwhelmingly for the other candidate. The House Election Law committee has recommended to kill that awful bill and I trust the full House will go along next Wednesday.

In last week’s column I wrote about four bills with public hearings on 2/19 or 2/21. HB 617, raising the gas tax, not only had a hearing it had a committee recommendation. Sadly, but not terribly surprising, the committee recommended to increase the gas tax – by a whopping 83%! The House will vote on 2/27 so there is time for you to contact your representatives and oppose this tax increase. They likely will respond that our roads and bridges badly need maintenance, but that answer is a non sequitur. It is not necessary to increase taxes; what is needed is to set priorities to use our existing taxes for road maintenance. The new taxes – amounting to $1 billion over the next decade – allow them to spend more money on other programs.

Four gun bills had lengthy – almost all day – hearings in Reps’ Hall. I estimate 80-100 people showed up, overwhelmingly on the side of law-abiding citizens having the right to bear arms in defense of self, family, and community. I spoke in favor of HB 451 and HB 609, and against HB 290 and HB 396. All four bills are scheduled for committee Executive Sessions on 2/28. My guess is that the two bad bills will be recommended ITL unanimously, and the two good bills will be ITL’d on party line votes.

The week of February 26-29, there will be another 26 public hearings, and the House will vote on 103 more bills. Here are some of the more interesting bills to be heard:

HB 544, repealing the prohibition on a state health exchange (part of Obamacare). Almost weekly there is more evidence that we were wise last year to prohibit a health exchange. Obamacare will cost much more than originally promised, it raises taxes on almost everybody (not just the “rich”), and it is costing jobs. Instead of lowering the costs of health care, it is increasing those costs. We should avoid every possible connection with it. But Democrats all too often judge a program by its intentions, not by its results. Obamacare “intends” to reduce health care costs so therefore they think it actually does. HB 544 is a step toward entrapment in the tentacles of the Obamacare monster. It should be defeated but the Democrats are calling for full steam ahead toward government-run health care.

HB 606, relative to community rating, actually would reduce health insurance costs so naturally the Democrats will oppose it. “Community rating” was then-Governor Shaheen’s plan to reform health insurance. It quickly (and predictably) led to the departure of most insurance companies and some of the highest health insurance rates in the country. HB 606 would reverse that bad decision and eventually bring more competition and lower costs back to the New Hampshire insurance market.

We still don’t know much more about Governor Hassan’s proposed budget because she has not delivered her draft of HB 2, which is an essential part of the budget process. By law it was due on February 15.

Obamacare costs jobs

It’s not just medical device firms that are cutting jobs due to Obamacare. Many small businesses are cutting employees’ hours to less than 30 hours per week, and some states are doing the same.

Obamacare requires businesses with over 50 full-time employees to provide health insurance or to pay a fine. To avoid these costs, many businesses are turning full-time employees back to part-time. A Wendy’s franchisee is cutting 100 employees to 28 hours per week. A Taco Bell and Papa John’s are also limiting workers to 28 hours.

It’s not just small businesses. Governments and universities are cutting back on some employees’ hours. The State of Virginia in an attempt to save $110 million is limiting the hours of thousands of part-time employees.

Ohio’s Youngstown State University is limiting adjunct professors’ hours. The Community College of Allegheny County is cutting 400 employees down to 28 hours in a move to save $6 million. Stark State College, in Ohio is similarly cutting adjuncts to 29 hours.

Too many politicians fail to understand that the law of Unintended Consequences cannot be repealed.

UPDATE: The Obamacare mandates are already reducing full-time employment. The insurance mandate is so onerous for small firms that “Many stores will have to cut worker hours out of necessity. It could be the difference between staying in business or going out of business.”

Reusable shopping bags spread disease

San Francisco, among other places, has placed a ban on plastic grocery bags for flimsy environmental reasons. Well, now it turns out that the substitute, reusable cloth bags, help spread disease. It has been known for some time that these cloth bags can spread norovirus. A recent study indicates that reusable bags are associated with e. coli, salmonella, and other bacterial infections.

It is estimated that the San Francisco ban results in 5 deaths each year. Allowing people to use plastic bags would save lives. If it would save just one life, isn’t it worth it?