Commentary Magazine


Topic: Cato Institute

Media Bias, Liberal Cluelessness

Ross Douthat writes:

A month ago, a U.C.L.A. graduate student named Emily Ekins spent hours roaming a Tea Party rally on the Washington Mall, photographing every sign she saw.

Ekins, a former CATO Institute intern, was examining the liberal conceit that Tea Party marches are rife with racism and conspiracy theorizing. Last week, The Washington Post reported on her findings: just 5 percent of the 250 signs referenced Barack Obama’s race or religion, and 1 percent brought up his birth certificate. The majority focused on bailouts, deficits and spending — exactly the issues the Tea Partiers claim inspired their movement in the first place.

On one level, as Douthat points out, this is a lesson about desperate liberals making up comforting myths. (“The Democrats are weeks away from a midterm thumping that wasn’t supposed to happen, and the liberal mind is desperate for a narrative, a storyline, something to ease the pain of losing to a ragtag band of right-wing populists.”) But it is also a cautionary tale about the willful ineptitude and outright laziness of the mainstream media.

A single intern did what not a single mainstream outlet, with collectively thousands of cameramen and reporters, refused to do: get the facts. The mainstream media eagerly recited false accounts of racial epithets but could not be bothered to do a systematic report on the Tea Partiers’ actual message.

The media and elected liberals reinforce their own contrived narrative. Liberal leaders proclaim that the Tea Partiers are racists. The media dutifully report the accusations and search out the isolated Obama = Hitler signs. The liberals breathe a sigh of relief as they read the New York Times or watch MSNBC, which confirms that, yes, these people are wackos and racists. The cycle repeats. The only thing missing are facts.

While the mainstream media’s bias rankles conservatives, the latter should be pleased that the willful indifference to reality repeatedly deprives liberal officialdom of warning signals and essential feedback on the public reaction to their agenda. It is maddening for conservatives, but it is dangerous for liberals to operate in a world of fabrication.

Ross Douthat writes:

A month ago, a U.C.L.A. graduate student named Emily Ekins spent hours roaming a Tea Party rally on the Washington Mall, photographing every sign she saw.

Ekins, a former CATO Institute intern, was examining the liberal conceit that Tea Party marches are rife with racism and conspiracy theorizing. Last week, The Washington Post reported on her findings: just 5 percent of the 250 signs referenced Barack Obama’s race or religion, and 1 percent brought up his birth certificate. The majority focused on bailouts, deficits and spending — exactly the issues the Tea Partiers claim inspired their movement in the first place.

On one level, as Douthat points out, this is a lesson about desperate liberals making up comforting myths. (“The Democrats are weeks away from a midterm thumping that wasn’t supposed to happen, and the liberal mind is desperate for a narrative, a storyline, something to ease the pain of losing to a ragtag band of right-wing populists.”) But it is also a cautionary tale about the willful ineptitude and outright laziness of the mainstream media.

A single intern did what not a single mainstream outlet, with collectively thousands of cameramen and reporters, refused to do: get the facts. The mainstream media eagerly recited false accounts of racial epithets but could not be bothered to do a systematic report on the Tea Partiers’ actual message.

The media and elected liberals reinforce their own contrived narrative. Liberal leaders proclaim that the Tea Partiers are racists. The media dutifully report the accusations and search out the isolated Obama = Hitler signs. The liberals breathe a sigh of relief as they read the New York Times or watch MSNBC, which confirms that, yes, these people are wackos and racists. The cycle repeats. The only thing missing are facts.

While the mainstream media’s bias rankles conservatives, the latter should be pleased that the willful indifference to reality repeatedly deprives liberal officialdom of warning signals and essential feedback on the public reaction to their agenda. It is maddening for conservatives, but it is dangerous for liberals to operate in a world of fabrication.

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Partners in the Conservative Revival

Both Bill Kristol and Peter Berkowitz have taken up the issue of conservative reform and the respective tasks of wonkish conservative innovators and the grassroots Tea Party movement. The mainstream media like to portray the two groups — the reformers and the Tea Partiers — in opposition in a party civil war (as if Rep. Paul Ryan and Sarah Palin were in competition for the soul of the GOP). But as Kristol and Berkowitz explain, the two aspects of the revived conservative movement are compatible, and each is essential in its own realm.

Kristol reminds us that the Tea Party movement has helped to unnerve and beat back the liberal statists, but that is the beginning and not the end of a conservative resurgence:

We already have a Middle American populist reaction against the government schemes of pointy-headed intellectuals. Barack Obama got the highest percentage of the votes of any Democratic presidential candidate since Lyndon Johnson in 1964; Republicans look to be on track this year to replicate their 47-seat House pick-up in 1966.

What comes next? That’s up to us—especially to us conservatives. We’re not doomed to repeat the pretty miserable political, social, and economic performance of 1967-80. …

Can conservatives develop a program, an agenda, and a governing vision that would, in the words of Federalist 39, vindicate “that honorable determination which animates every votary of freedom, to rest all our political experiments on the capacity of mankind for self-government”?

And Berkowitz provides a helpful review of the history of conservative reform, pointing toward those whose task it will be to provide an alternative to Obamaism:

New Jersey Gov. Chris Christie, Indiana Gov. Mitch Daniels, Louisiana Gov. Bobby Jindal, Mississippi Gov. Haley Barbour and Wisconsin Rep. Paul Ryan are among those officeholders in the process of recovering reform as a conservative virtue. In November, Meg Whitman, the new Republican nominee in California, and Brian Sandoval, the new Republican nominee for governor in Nevada, stand a good chance to join their ranks.

Today’s conservative reformers appreciate that within its limited sphere government should be excellent. Promoting individual responsibility, self-reliance and opportunity requires targeted action, beginning with health-care reform that really controls costs by eliminating barriers on insurance companies operating across state lines and limiting malpractice damages; public-sector reform that reins in unions by reducing benefits and expanding accountability; and education reform that through school-choice programs gives parents, particularly in low income and minority communities, greater control over their children’s education.

None of this is to underestimate or denigrate the intellectual underpinnings of the Tea Party movement. Despite the media indictment (Racists! Know-nothings!), it is perhaps the most wonkish popular uprising we’ve had in the past century. It is the CATO  Institute’s dream mass movement — based on self-reliance, limited government, sound money, fiscal discipline, and market economics. Many of the protesters like to carry copies of the Constitution. For every inflammatory hand-painted sign that CNN films, there are dozens quoting James Madison, challenging the “bailout nation,” and contesting the constitutionality of an individual health-care insurance mandate. It’s certainly a step up from “Turn on, tune in, drop out.” But it is not a methodology for governing nor an agenda for what would follow Obamaism. You don’t write legislation in mass gatherings seeking to discredit and upend those in power. And it’s unrealistic and misguided to expect a mass movement to decimate a political agenda, defeat liberal one-party rule, defend itself against incessant media attacks — and come up with a health-care alternative, a scheme for entitlement reform, and proposals to tame the debt. (The latter is the work of Ryan, Daniels, Christie, et. al.)

The media narrative that the conservative movement is riven with conflict is, as is so much else the media spew, a distortion intended to bolster the spirits of the left and paint the right in the most disagreeable light possible. We actually have witnessed a rather effective division of labor on the right, with reformers and Tea Partiers collaborating on common goals. They share a mutual desire to put a stake through the heart of the statist agenda of one-party Democratic rule and to find a better alternative. The first task is well under way; the latter is just beginning.

Both Bill Kristol and Peter Berkowitz have taken up the issue of conservative reform and the respective tasks of wonkish conservative innovators and the grassroots Tea Party movement. The mainstream media like to portray the two groups — the reformers and the Tea Partiers — in opposition in a party civil war (as if Rep. Paul Ryan and Sarah Palin were in competition for the soul of the GOP). But as Kristol and Berkowitz explain, the two aspects of the revived conservative movement are compatible, and each is essential in its own realm.

Kristol reminds us that the Tea Party movement has helped to unnerve and beat back the liberal statists, but that is the beginning and not the end of a conservative resurgence:

We already have a Middle American populist reaction against the government schemes of pointy-headed intellectuals. Barack Obama got the highest percentage of the votes of any Democratic presidential candidate since Lyndon Johnson in 1964; Republicans look to be on track this year to replicate their 47-seat House pick-up in 1966.

What comes next? That’s up to us—especially to us conservatives. We’re not doomed to repeat the pretty miserable political, social, and economic performance of 1967-80. …

Can conservatives develop a program, an agenda, and a governing vision that would, in the words of Federalist 39, vindicate “that honorable determination which animates every votary of freedom, to rest all our political experiments on the capacity of mankind for self-government”?

And Berkowitz provides a helpful review of the history of conservative reform, pointing toward those whose task it will be to provide an alternative to Obamaism:

New Jersey Gov. Chris Christie, Indiana Gov. Mitch Daniels, Louisiana Gov. Bobby Jindal, Mississippi Gov. Haley Barbour and Wisconsin Rep. Paul Ryan are among those officeholders in the process of recovering reform as a conservative virtue. In November, Meg Whitman, the new Republican nominee in California, and Brian Sandoval, the new Republican nominee for governor in Nevada, stand a good chance to join their ranks.

Today’s conservative reformers appreciate that within its limited sphere government should be excellent. Promoting individual responsibility, self-reliance and opportunity requires targeted action, beginning with health-care reform that really controls costs by eliminating barriers on insurance companies operating across state lines and limiting malpractice damages; public-sector reform that reins in unions by reducing benefits and expanding accountability; and education reform that through school-choice programs gives parents, particularly in low income and minority communities, greater control over their children’s education.

None of this is to underestimate or denigrate the intellectual underpinnings of the Tea Party movement. Despite the media indictment (Racists! Know-nothings!), it is perhaps the most wonkish popular uprising we’ve had in the past century. It is the CATO  Institute’s dream mass movement — based on self-reliance, limited government, sound money, fiscal discipline, and market economics. Many of the protesters like to carry copies of the Constitution. For every inflammatory hand-painted sign that CNN films, there are dozens quoting James Madison, challenging the “bailout nation,” and contesting the constitutionality of an individual health-care insurance mandate. It’s certainly a step up from “Turn on, tune in, drop out.” But it is not a methodology for governing nor an agenda for what would follow Obamaism. You don’t write legislation in mass gatherings seeking to discredit and upend those in power. And it’s unrealistic and misguided to expect a mass movement to decimate a political agenda, defeat liberal one-party rule, defend itself against incessant media attacks — and come up with a health-care alternative, a scheme for entitlement reform, and proposals to tame the debt. (The latter is the work of Ryan, Daniels, Christie, et. al.)

The media narrative that the conservative movement is riven with conflict is, as is so much else the media spew, a distortion intended to bolster the spirits of the left and paint the right in the most disagreeable light possible. We actually have witnessed a rather effective division of labor on the right, with reformers and Tea Partiers collaborating on common goals. They share a mutual desire to put a stake through the heart of the statist agenda of one-party Democratic rule and to find a better alternative. The first task is well under way; the latter is just beginning.

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Tax Day

“Can I deduct the cost of marijuana if it’s for medical use?”

“Only if you’re filing a joint return.”

The Cato Institute has an excellent short film on all that is wrong with the federal tax system. In short, that system violates all four principles of taxation described by Adam Smith:

1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

As Warren Buffett complained, his effective tax rate is half that of his secretary.

2. The tax which each individual is bound to pay ought to be certain, and not arbitrary.

The system is so complex that not even professionals can be sure what people owe. Send out the tax information of a middle-class couple with children to six tax accountants and they will come up with six different sums owed. That experiment has been run numerous times. The advice the IRS itself gives out is frequently wrong.

3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

Most people never see the money, as it never gets into their paychecks. Those with incomes not subject to withholding must estimate in January, April, July, and October, regardless of whether those months are convenient.

4. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

Well over 50 percent of filers hire people to fill out the forms because they can’t understand them. The corporate income tax is even worse. As the Wall Street Journal explains today, the cost of complying with the corporate income tax this year will equal 89 percent of the revenues received by the government. General Electric’s tax return, filed electronically, will be the equivalent of 24,000 pages long.

The current tax system benefits two groups: the rich and powerful, who are able to lobby Congress for loopholes, subsidies, tax credits, etc. etc., and the 535 members of Congress, who sell those loopholes, subsidies, tax credits, etc. etc. Yes, sell. They are traded for campaign contributions. It’s as legal as it is disgraceful.

There is no reforming the current system, as it is permeated with corruption. But Congress is utterly unable to write a new tax code from scratch. If this country is to ever get out from under a tax code that has become a clear and present danger to American prosperity and power, it will have to be done using a means similar to the military base closings after the Cold War: in secret, with Congress voting up or down, no amendments.

Only overwhelming pressure will make that happen. That’s another reason why the 2010 election might turn out to be the most consequential midterm election in American history.

“Can I deduct the cost of marijuana if it’s for medical use?”

“Only if you’re filing a joint return.”

The Cato Institute has an excellent short film on all that is wrong with the federal tax system. In short, that system violates all four principles of taxation described by Adam Smith:

1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

As Warren Buffett complained, his effective tax rate is half that of his secretary.

2. The tax which each individual is bound to pay ought to be certain, and not arbitrary.

The system is so complex that not even professionals can be sure what people owe. Send out the tax information of a middle-class couple with children to six tax accountants and they will come up with six different sums owed. That experiment has been run numerous times. The advice the IRS itself gives out is frequently wrong.

3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

Most people never see the money, as it never gets into their paychecks. Those with incomes not subject to withholding must estimate in January, April, July, and October, regardless of whether those months are convenient.

4. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

Well over 50 percent of filers hire people to fill out the forms because they can’t understand them. The corporate income tax is even worse. As the Wall Street Journal explains today, the cost of complying with the corporate income tax this year will equal 89 percent of the revenues received by the government. General Electric’s tax return, filed electronically, will be the equivalent of 24,000 pages long.

The current tax system benefits two groups: the rich and powerful, who are able to lobby Congress for loopholes, subsidies, tax credits, etc. etc., and the 535 members of Congress, who sell those loopholes, subsidies, tax credits, etc. etc. Yes, sell. They are traded for campaign contributions. It’s as legal as it is disgraceful.

There is no reforming the current system, as it is permeated with corruption. But Congress is utterly unable to write a new tax code from scratch. If this country is to ever get out from under a tax code that has become a clear and present danger to American prosperity and power, it will have to be done using a means similar to the military base closings after the Cold War: in secret, with Congress voting up or down, no amendments.

Only overwhelming pressure will make that happen. That’s another reason why the 2010 election might turn out to be the most consequential midterm election in American history.

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Why State Budgets Are so Deep in the Red

A clear majority of the public, according to Rasmussen, thinks that the federal government should not bail out the state of California but rather let it declare bankruptcy. Even when told that the state might have to slash welfare and medical care for the disabled and elderly and cut state salaries by 14 percent, 53 percent favored that outcome over a federal bailout. Only 33 percent want the feds to help.

Bloated state payrolls are a large part of the problem with state budgets. While revenues have stagnated or fallen, employees have not been laid off, and salaries and benefits have continued to increase. These expenses now make up half of all state spending. As a Cato Institute report makes clear, state employees make out much better than do private-sector ones. In total compensation, state and local workers earn $1.45 for every dollar private workers earn. State workers get $2.18 in health benefits for every one dollar their private-sector counterparts earn. For every dollar in defined-benefit pension benefits given to private-sector workers, public-sector workers get $6.95. Some states allow workers to retire early, begin to collect a pension, and then go back to work for the state at their old job, earning a salary as well as a pension.

Federal workers do even better, earning more than twice what equivalent private-sector workers do. No wonder the ratio of government workers to the total population has been steadily falling. In 1940 there were about 31 Americans for every government worker. By 1970 the ratio was 18.5-to-1. Today it is 13.7-to-1. In this decade, the number of government workers exceeded the number of those in manufacturing. Part of the reason for that, of course, has been the great increase in productivity in manufacturing in recent decades. No such productivity increase in government, however.

And the most frequent non-governmental visitor to the White House since Obama became President? Andy Stern, president of the Service Employees International Union, which represents 1.8 million mostly government workers. It’s the largest and fastest growing union in the country. Its political clout is legendary, thanks to $60 million in contributions in the last election cycle and the ability to turn out large numbers of union workers at rallies.

The states cannot hope to regain fiscal health until the wages and benefits of state works are more nearly in line with those of the private sector.

A clear majority of the public, according to Rasmussen, thinks that the federal government should not bail out the state of California but rather let it declare bankruptcy. Even when told that the state might have to slash welfare and medical care for the disabled and elderly and cut state salaries by 14 percent, 53 percent favored that outcome over a federal bailout. Only 33 percent want the feds to help.

Bloated state payrolls are a large part of the problem with state budgets. While revenues have stagnated or fallen, employees have not been laid off, and salaries and benefits have continued to increase. These expenses now make up half of all state spending. As a Cato Institute report makes clear, state employees make out much better than do private-sector ones. In total compensation, state and local workers earn $1.45 for every dollar private workers earn. State workers get $2.18 in health benefits for every one dollar their private-sector counterparts earn. For every dollar in defined-benefit pension benefits given to private-sector workers, public-sector workers get $6.95. Some states allow workers to retire early, begin to collect a pension, and then go back to work for the state at their old job, earning a salary as well as a pension.

Federal workers do even better, earning more than twice what equivalent private-sector workers do. No wonder the ratio of government workers to the total population has been steadily falling. In 1940 there were about 31 Americans for every government worker. By 1970 the ratio was 18.5-to-1. Today it is 13.7-to-1. In this decade, the number of government workers exceeded the number of those in manufacturing. Part of the reason for that, of course, has been the great increase in productivity in manufacturing in recent decades. No such productivity increase in government, however.

And the most frequent non-governmental visitor to the White House since Obama became President? Andy Stern, president of the Service Employees International Union, which represents 1.8 million mostly government workers. It’s the largest and fastest growing union in the country. Its political clout is legendary, thanks to $60 million in contributions in the last election cycle and the ability to turn out large numbers of union workers at rallies.

The states cannot hope to regain fiscal health until the wages and benefits of state works are more nearly in line with those of the private sector.

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No Chair When the Music Stops

California Governor Arnold Schwarzenegger expressed doubt and concern on Monday about the Senate health-care reform bill. National media haven’t given this nearly the coverage they awarded his expressions of support for the overall ObamaCare effort in July and October. But under the mainstream media’s radar, the Governator was going soft on the Democrats’ health-care reform as early as last week, and the reason for his shifting posture is the cost to California.

Schwarzenegger’s prior attempt at health-care reform in California makes a superb cautionary tale. The 2006 proposal, advanced by Democrats in Sacramento and substantially endorsed by the governor, was eerily similar to the U.S. Senate bill to be voted on this week. It incorporated an individual mandate to purchase health insurance; increased employer costs through either insurance premiums for workers or a tax penalty; vague and open-ended bureaucratic measures to control costs; expanded enrollment in Medicaid/Medi-Cal; and subsidies to those with incomes up to 400 percent of the federal poverty level who would be required by law to buy insurance.

There was no question this plan would cost more. Even friendly analysts concluded that it would add between $6.8 and $9.4 billion in state costs, while causing private health expenses to rise by 9.9 percent per year and employer costs to rise by 8.8 percent per year. California, the analysts pointed out, has 12 times as many “uninsured workers under 65” as Massachusetts; the Bay State’s solutions would be overwhelmed by sheer numbers in the Golden State.

Yet, until the housing-market collapse stopped California’s decade-long spending spree in its tracks, state Democrats were pushing their health-care reform proposal vigorously — with the support of the Republican governor. A CATO Institute analysis pinpointed why: the state Democrats’ plan relied heavily on federal matching funds. A bit of comically transparent budgetary sleight-of-hand would have enabled California to shift most of its additional costs to the other 49 states.

The bill in the U.S. Senate this month, however, will impose on California all the inevitable costs of mandating universal “insurance coverage” in California, and then some. California doesn’t have the advantage of recalcitrant Democratic senators whose votes need to be bought with Medicaid-funding relief, as Ben Nelson’s (NE) and Mary Landrieu’s (LA) were. California’s senators, Barbara Boxer and Dianne Feinstein, are some of the “safest” party-line voters in Congress. The result is a case of unpleasant consequences that must be humorous to those who don’t live in the Golden State.

The game of “musical health care costs” is only just starting across America. Senators Nelson and Landrieu think they have already grabbed their states’ seats for when the music stops. But the impact on the states — especially an unequal impact — may well be the spike on which the Democrats’ plan is ultimately impaled. Federalism, uniquely strong in America, has not yet had its say on this topic.

California Governor Arnold Schwarzenegger expressed doubt and concern on Monday about the Senate health-care reform bill. National media haven’t given this nearly the coverage they awarded his expressions of support for the overall ObamaCare effort in July and October. But under the mainstream media’s radar, the Governator was going soft on the Democrats’ health-care reform as early as last week, and the reason for his shifting posture is the cost to California.

Schwarzenegger’s prior attempt at health-care reform in California makes a superb cautionary tale. The 2006 proposal, advanced by Democrats in Sacramento and substantially endorsed by the governor, was eerily similar to the U.S. Senate bill to be voted on this week. It incorporated an individual mandate to purchase health insurance; increased employer costs through either insurance premiums for workers or a tax penalty; vague and open-ended bureaucratic measures to control costs; expanded enrollment in Medicaid/Medi-Cal; and subsidies to those with incomes up to 400 percent of the federal poverty level who would be required by law to buy insurance.

There was no question this plan would cost more. Even friendly analysts concluded that it would add between $6.8 and $9.4 billion in state costs, while causing private health expenses to rise by 9.9 percent per year and employer costs to rise by 8.8 percent per year. California, the analysts pointed out, has 12 times as many “uninsured workers under 65” as Massachusetts; the Bay State’s solutions would be overwhelmed by sheer numbers in the Golden State.

Yet, until the housing-market collapse stopped California’s decade-long spending spree in its tracks, state Democrats were pushing their health-care reform proposal vigorously — with the support of the Republican governor. A CATO Institute analysis pinpointed why: the state Democrats’ plan relied heavily on federal matching funds. A bit of comically transparent budgetary sleight-of-hand would have enabled California to shift most of its additional costs to the other 49 states.

The bill in the U.S. Senate this month, however, will impose on California all the inevitable costs of mandating universal “insurance coverage” in California, and then some. California doesn’t have the advantage of recalcitrant Democratic senators whose votes need to be bought with Medicaid-funding relief, as Ben Nelson’s (NE) and Mary Landrieu’s (LA) were. California’s senators, Barbara Boxer and Dianne Feinstein, are some of the “safest” party-line voters in Congress. The result is a case of unpleasant consequences that must be humorous to those who don’t live in the Golden State.

The game of “musical health care costs” is only just starting across America. Senators Nelson and Landrieu think they have already grabbed their states’ seats for when the music stops. But the impact on the states — especially an unequal impact — may well be the spike on which the Democrats’ plan is ultimately impaled. Federalism, uniquely strong in America, has not yet had its say on this topic.

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Copenhagen All Over Again

This Fox News report suggests that Copenhagen, the site of Obama’s Olympic-size humiliation, may be (to borrow a phrase from Yogi Berra) déjà vu all over again for the president:

At both meetings, the president scheduled very brief appearances, planning to arrive early and be long gone before any decision was reached. And, coincidentally, the destination in both cases was Copenhagen, Denmark. … Patrick Michaels, former president of the American Association of State Climatologists and environmental fellow at the Cato Institute, said he has his doubts. “The president is carrying nothing credible in his pocket, so how can he compel people to do something credible?” he said, referring to the fact that Congress has not passed its cap-and-trade bill.

Even fellow Democrat Sen. Jim Webb is reminding Obama that he doesn’t have “the unilateral power to commit the government of the United States to certain standards that may be agreed upon” in Copenhagen. And then there is the peculiar challenge of an international confab to decide how to micromanage national economies based on science that is now the subject of comedy routines. It doesn’t seem quite, well, credible.

To avoid another major embarrassment, it’s possible that, as the Obami have been forced to do many times already, they will come up with a photo-op, or a meaningless working agreement to get to work on an agreement. Still, one wonders why the president is once again putting his prestige on the line when the chances of a payoff are slim. Well, I suppose it beats answering media questions at home about the looming Iranian threat and our domestic economic woes (and yes, another national unemployment figure due out Friday).

This Fox News report suggests that Copenhagen, the site of Obama’s Olympic-size humiliation, may be (to borrow a phrase from Yogi Berra) déjà vu all over again for the president:

At both meetings, the president scheduled very brief appearances, planning to arrive early and be long gone before any decision was reached. And, coincidentally, the destination in both cases was Copenhagen, Denmark. … Patrick Michaels, former president of the American Association of State Climatologists and environmental fellow at the Cato Institute, said he has his doubts. “The president is carrying nothing credible in his pocket, so how can he compel people to do something credible?” he said, referring to the fact that Congress has not passed its cap-and-trade bill.

Even fellow Democrat Sen. Jim Webb is reminding Obama that he doesn’t have “the unilateral power to commit the government of the United States to certain standards that may be agreed upon” in Copenhagen. And then there is the peculiar challenge of an international confab to decide how to micromanage national economies based on science that is now the subject of comedy routines. It doesn’t seem quite, well, credible.

To avoid another major embarrassment, it’s possible that, as the Obami have been forced to do many times already, they will come up with a photo-op, or a meaningless working agreement to get to work on an agreement. Still, one wonders why the president is once again putting his prestige on the line when the chances of a payoff are slim. Well, I suppose it beats answering media questions at home about the looming Iranian threat and our domestic economic woes (and yes, another national unemployment figure due out Friday).

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Arnold’s Failure Is The GOP’s Gain

Aside from the Florida primary, the biggest news this week, and the event with the most potential to affect the 2008 presidential race, was the defeat in California of Arnold Schwarzenegger’s healthcare proposal. It foundered when the Democratic state legislature figured out that it would have cost a boatload of money. Just how much? $14.9 billion.

The Wall Street Journal points out that this is an important policy lesson. An individual or government mandated health care system is very expensive and does nothing to stem rising healthcare costs, which are the real issue. The Journal‘s editors explain:

What the California collapse should discredit in particular is the individual mandate as a policy tool for Republican reformers. This was Mr. Romney’s enthusiasm for a time, helped along by the Heritage Foundation. But in order to be enforceable, such a mandate inevitably becomes a government mandate, and a very expensive one at that.
Voters are rightly concerned about health care, but they also don’t want to pay higher taxes to finance coverage for everyone. Mr. Schwarzenegger’s spectacular failure shows that there’s an opening for Republicans to make the case for health-care reform based on choice and tax-equity, not mandates and tax hikes.

If John McCain is indeed the nominee, he will have clean hands on this issue and a market-based healthcare plan that even the Cato Institute, which has led the charge against healthcare mandates, could love. McCain will now have some powerful examples to highlight why the healthcare approach of the two potential Democratic nominees is a recipe for failure.

Aside from the Florida primary, the biggest news this week, and the event with the most potential to affect the 2008 presidential race, was the defeat in California of Arnold Schwarzenegger’s healthcare proposal. It foundered when the Democratic state legislature figured out that it would have cost a boatload of money. Just how much? $14.9 billion.

The Wall Street Journal points out that this is an important policy lesson. An individual or government mandated health care system is very expensive and does nothing to stem rising healthcare costs, which are the real issue. The Journal‘s editors explain:

What the California collapse should discredit in particular is the individual mandate as a policy tool for Republican reformers. This was Mr. Romney’s enthusiasm for a time, helped along by the Heritage Foundation. But in order to be enforceable, such a mandate inevitably becomes a government mandate, and a very expensive one at that.
Voters are rightly concerned about health care, but they also don’t want to pay higher taxes to finance coverage for everyone. Mr. Schwarzenegger’s spectacular failure shows that there’s an opening for Republicans to make the case for health-care reform based on choice and tax-equity, not mandates and tax hikes.

If John McCain is indeed the nominee, he will have clean hands on this issue and a market-based healthcare plan that even the Cato Institute, which has led the charge against healthcare mandates, could love. McCain will now have some powerful examples to highlight why the healthcare approach of the two potential Democratic nominees is a recipe for failure.

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REPUBLICAN DEBATE: Reagan Coalition, RIP

I don’t take Ron Paul’s ideas seriously, but his presence in this debate really is the best proof that Ed Rollins, Mike Huckabee’s campaign manager, is right: The Reagan coalition is gone.  Don’t just listen to Paul.  Go read the material put out by the Cato Institute. Listen to Chuck Hagel on the war in Iraq.  Follow the debate on immigration.  Think back to Republican reaction during the Dubai Ports World debate. For a brief moment, the Reagan coalition seemed to get together again in fighting the Harriet Miers nomination. Once that was taken care of, that momentary Reaganite unity disappeared.

I don’t take Ron Paul’s ideas seriously, but his presence in this debate really is the best proof that Ed Rollins, Mike Huckabee’s campaign manager, is right: The Reagan coalition is gone.  Don’t just listen to Paul.  Go read the material put out by the Cato Institute. Listen to Chuck Hagel on the war in Iraq.  Follow the debate on immigration.  Think back to Republican reaction during the Dubai Ports World debate. For a brief moment, the Reagan coalition seemed to get together again in fighting the Harriet Miers nomination. Once that was taken care of, that momentary Reaganite unity disappeared.

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Conflicted Libertarians

Last week at the Cato Institute, I debated Michael Tanner and former Congressman Dick Armey, two stalwart libertarians. The occasion was the release of Tanner’s book Leviathan on the Right, one of the better distillations of the argument that George W. Bush has frittered away Reagan’s legacy, increased the size and scope of government, and betrayed conservative principles.

But Tanner’s argument is not persuasive. For one, the often-shrill complaints of a few years ago about runaway federal spending now seem overwrought. To everyone’s surprise, the size of the deficit has fallen dramatically over the past two years. This year the deficit will be 1.6 percent of the economy–a level lower than in 18 of the past 25 years. The federal budget is projected to be in surplus by 2012.

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Last week at the Cato Institute, I debated Michael Tanner and former Congressman Dick Armey, two stalwart libertarians. The occasion was the release of Tanner’s book Leviathan on the Right, one of the better distillations of the argument that George W. Bush has frittered away Reagan’s legacy, increased the size and scope of government, and betrayed conservative principles.

But Tanner’s argument is not persuasive. For one, the often-shrill complaints of a few years ago about runaway federal spending now seem overwrought. To everyone’s surprise, the size of the deficit has fallen dramatically over the past two years. This year the deficit will be 1.6 percent of the economy–a level lower than in 18 of the past 25 years. The federal budget is projected to be in surplus by 2012.


But the real flaw of the anti-“big-government conservative” argument is that the adherence to libertarian orthodoxy often stands in the way of long-sought conservative and free-market goals. A recent development in New Orleans’s public school system makes the case vividly. Many conservatives castigated President Bush when he approved billions in post-Katrina relief for New Orleans. No doubt they were right when they predicted that much of it would be wasted, if not pilfered, by dishonest bureaucrats.

Yet the funds have also made possible one of the most interesting experiments in American education. Prior to Katrina, the Orleans Parish School Board was among the worst in the country. Barely any of its 8th-graders were performing at an adequate level. Post-Katrina, with federal money to spread around, the school board has been disbanded. In its place is a new organization that has been approving a wide range of competitive charter schools run by entrepreneurs and dedicated education leaders. A recent article in The Atlantic described it as “the most market-driven system in the United States.”

So the long list of conservatives and libertarians who have assaulted the Bush Administration over reckless spending on New Orleans have to make up their minds. Either they are intractably against big-government spending, or they are in favor of the most successful effort to undo the teachers’ unions and create a competitive system of public schools. But they can’t be on both sides.

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Maybe Al Gore Is Right

Conservatives like to think of themselves as hard-headed, flinty-eyed realists who draw conclusions based on the way the world actually works, not on the way they would prefer it to work. They deride liberals as sentimentalists who never let facts interfere with their preferred policy prescriptions, whether in favor of the minimum wage or arms control. Yet there are some issues on which conservatives will not let any amount of evidence shake their own faith-based politics. Global warming is a prime example.

Last week the United Nations International Panel on Climate Change released its fourth Summary for Policymakers, a publication representing the consensus view of hundreds of scientists from around the world. The experts found with “very high confidence” (meaning 90 percent certainty) that human activity is responsible for a substantial increase in greenhouse gases, and they warn that if left unchecked, these trends could have catastrophic ecological consequences within our lifetime. Similar reports have been issued by other expert bodies such as the National Academy of Sciences and the American Meteorological Society.

I’ve always been skeptical of global-warming arguments, but as a scientific illiterate, it’s hard for me to argue with the consensus of the scientific community. Many of my fellow conservatives, by contrast, refuse to concede the possibility that Al Gore may be right after all. Check out, among others: George Will, the Wall Street Journal editorial page, Senator James Inhofe, the Cato Institute, the American Enterprise Institute, and even Kevin Shapiro in the September 2006 issue of COMMENTARY.

I am sympathetic to some of their arguments, in particular when they point out the problems with the Kyoto Protocol, which mandates major emissions reductions by the U.S. and other rich nations while allowing growing pollution by developing nations such as China and India. In fact, some of the most effective answers to global warming may be politically incorrect—for instance, substituting nuclear energy for oil or coal.

But too many on the Right still refuse to acknowledge the basic reality that the climate is changing in potentially dangerous ways due to human activity, and that we need to reduce carbon emissions to address this looming crisis. Skeptics can always dredge up a rogue scientist or two to buttress their case, just as liberals can always find an economist or two to make the case for raising the minimum wage. But why should a few fringe figures dictate governmental policy?

I would think supporters of the invasion of Iraq would be more sympathetic to arguments for preventative action based on the best available intelligence.

Conservatives like to think of themselves as hard-headed, flinty-eyed realists who draw conclusions based on the way the world actually works, not on the way they would prefer it to work. They deride liberals as sentimentalists who never let facts interfere with their preferred policy prescriptions, whether in favor of the minimum wage or arms control. Yet there are some issues on which conservatives will not let any amount of evidence shake their own faith-based politics. Global warming is a prime example.

Last week the United Nations International Panel on Climate Change released its fourth Summary for Policymakers, a publication representing the consensus view of hundreds of scientists from around the world. The experts found with “very high confidence” (meaning 90 percent certainty) that human activity is responsible for a substantial increase in greenhouse gases, and they warn that if left unchecked, these trends could have catastrophic ecological consequences within our lifetime. Similar reports have been issued by other expert bodies such as the National Academy of Sciences and the American Meteorological Society.

I’ve always been skeptical of global-warming arguments, but as a scientific illiterate, it’s hard for me to argue with the consensus of the scientific community. Many of my fellow conservatives, by contrast, refuse to concede the possibility that Al Gore may be right after all. Check out, among others: George Will, the Wall Street Journal editorial page, Senator James Inhofe, the Cato Institute, the American Enterprise Institute, and even Kevin Shapiro in the September 2006 issue of COMMENTARY.

I am sympathetic to some of their arguments, in particular when they point out the problems with the Kyoto Protocol, which mandates major emissions reductions by the U.S. and other rich nations while allowing growing pollution by developing nations such as China and India. In fact, some of the most effective answers to global warming may be politically incorrect—for instance, substituting nuclear energy for oil or coal.

But too many on the Right still refuse to acknowledge the basic reality that the climate is changing in potentially dangerous ways due to human activity, and that we need to reduce carbon emissions to address this looming crisis. Skeptics can always dredge up a rogue scientist or two to buttress their case, just as liberals can always find an economist or two to make the case for raising the minimum wage. But why should a few fringe figures dictate governmental policy?

I would think supporters of the invasion of Iraq would be more sympathetic to arguments for preventative action based on the best available intelligence.

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From COMMENTARY: Health Care in Three Acts

As President Bush prepares to address the issue of health care in his State of the Union address, COMMENTARY is fortunate to have a trenchant analysis of the wider problem, “Health Care in Three Acts,” by Eric Cohen and Yuval Levin, coming out in the February issue. Here is an advance look.

Americans say they are very worried about health care: on generic lists of voter concerns, health issues regularly rank just behind terrorism and the Iraq war. And politicians are eager to do something about it. To empower consumers, the White House has advanced the idea of Health Savings Accounts; to help the uninsured, it has explored using Medicaid more creatively. Senator Edward Kennedy of Massachusetts, the Democrats’ leader on this issue, has backed “Medicare for all.” The American Medical Association has called for tax credits to put private coverage within reach of more Americans. A number of recent books have proposed solutions to our health-care problems ranging from socialized medicine on the Left to laissez-faire schemes of cost containment on the Right. In Washington and in the state capitals, pressure is building for serious reforms.

But what exactly are Americans worried about? Untangling that question is harder than it looks. In a 2006 poll, the Kaiser Family Foundation found that while a majority proclaimed themselves dissatisfied with both the quality and the cost of health care in general, fully 89 percent said they were satisfied with the quality of care they themselves receive. Eighty-eight percent of those with health insurance rated their coverage good or excellent—the highest approval rating since the survey began 15 years ago. A modest majority, 57 percent, were satisfied even with its cost.

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As President Bush prepares to address the issue of health care in his State of the Union address, COMMENTARY is fortunate to have a trenchant analysis of the wider problem, “Health Care in Three Acts,” by Eric Cohen and Yuval Levin, coming out in the February issue. Here is an advance look.

Americans say they are very worried about health care: on generic lists of voter concerns, health issues regularly rank just behind terrorism and the Iraq war. And politicians are eager to do something about it. To empower consumers, the White House has advanced the idea of Health Savings Accounts; to help the uninsured, it has explored using Medicaid more creatively. Senator Edward Kennedy of Massachusetts, the Democrats’ leader on this issue, has backed “Medicare for all.” The American Medical Association has called for tax credits to put private coverage within reach of more Americans. A number of recent books have proposed solutions to our health-care problems ranging from socialized medicine on the Left to laissez-faire schemes of cost containment on the Right. In Washington and in the state capitals, pressure is building for serious reforms.

But what exactly are Americans worried about? Untangling that question is harder than it looks. In a 2006 poll, the Kaiser Family Foundation found that while a majority proclaimed themselves dissatisfied with both the quality and the cost of health care in general, fully 89 percent said they were satisfied with the quality of care they themselves receive. Eighty-eight percent of those with health insurance rated their coverage good or excellent—the highest approval rating since the survey began 15 years ago. A modest majority, 57 percent, were satisfied even with its cost.

Evidently, though, this widespread contentment with one’s own lot coexists with concern on two other fronts. Thus, in the very same Kaiser poll, nearly 90 percent considered the number of Americans without health insurance to be a serious or critical national problem. Similarly, a majority of those with insurance of their own fear that they will lose their coverage if they change jobs, or that, “in the next few years,” they will no longer be able to afford the coverage they have. At least as troubling is what the public does not seem terribly bothered about—namely, the dilemmas of end-of-life care in a rapidly aging society and the exploding costs of Medicare as the baby-boom generation hits age sixty-five.

All of this makes it difficult to speak of health care as a single coherent challenge, let alone to propose a single workable solution. In fact, America faces three fairly distinct predicaments, affecting three fairly distinct portions of the population—the poor, the middle class, and the elderly—and each of them calls for a distinct approach.

For the poor, the problem is affording coverage. Forty-six million Americans were uninsured in 2005, according to the Census Bureau. This is about 15.9 percent of the population, which has been the general range now for more than a decade, peaking at 16.3 percent in 1998.

But that stark figure fails to convey the shifting face and varied make-up of the uninsured. On average, a family that loses its coverage will become insured again in about five months, and only one-sixth of the uninsured lack coverage for two years or more. In addition, about a fifth of the uninsured are not American citizens, and therefore could not readily benefit from most proposed reforms. Roughly a third of the uninsured are eligible for public-assistance programs (especially Medicaid) but have not signed up, while another fifth (many of them young adults, under thirty-five) earn more than $50,000 a year but choose not to buy coverage.

It is also crucial to distinguish between a lack of insurance coverage and a lack of health care. American hospitals cannot refuse patients in need who are without insurance; roughly $100 billion is spent annually on care for such patients, above and beyond state and federal spending on Medicaid. The trouble is that most of this is emergency care, which includes both acute situations that might have been prevented and minor problems that could have been treated in a doctor’s office for considerably less money. The real problem of the uninsured poor, then, is not that they are going without care, but that their lack of regular and reliable coverage works greatly to the detriment of their family stability and physical well-being, and is also costly to government.

For the middle class, the problem is different: the uncertainty caused in part by the rigid link between insurance and employment and in part by the vicissitudes of health itself. America’s employment-based insurance system is unique in the world, a product of historical circumstances and incremental reforms that have made health care an element of compensation for work rather than either a simple marketplace commodity or a government entitlement. This system now covers roughly 180 million Americans. It works well for the vast majority of them, but the link it creates between one’s job and one’s health coverage, and the peculiar economic inefficiencies it yields, result in ever-mounting costs for employers and, in an age of high job mobility, leave many families anxious about future coverage even in good times.

The old, finally, face yet another set of problems: the steep cost of increasingly advanced care (which threatens to paralyze the government) and the painful decisions that come at the limits of medicine and the end of life. Every American over sixty-five is eligible for at least some coverage by the federal Medicare program, which pays much of the cost of most hospital stays, physician visits, laboratory services, diagnostic tests, outpatient services, and, as of 2006, prescription drugs. Established in 1965, Medicare is funded in part by a flat payroll tax of 2.9 percent on nearly every American worker and, beyond that, by general federal revenue. Most recipients pay only a monthly premium that now stands at $88.50, plus co-payments on many procedures and hospital stays.

But precisely because Medicare is largely funded by a payroll tax, it suffers acutely from the problems of an aging society. In 1950, just over 8 percent of Americans were over sixty-five. Today that figure stands at nearly 15 percent, and by 2030 it is expected to reach over 20 percent, or 71 million Americans. Moreover, the oldest of the old, those above the age of eighty-five, who require the most intense and costly care, are now the fastest growing segment of the population; their number is expected to quadruple in the next half-century.

For Medicare, therefore, just as for Social Security, the number of recipients is increasing while the number of younger workers to pay the bills is declining. But Medicare faces a greater danger still. Its costs are a function not only of the number of eligible recipients but of the price of the services they use. Over the past few years, health-care spending in America has increased by about 8 percent each year, most steeply for older Americans who have the most serious health problems. As these costs continue to rise much faster than the wages on which Medicare’s funding is based, the program’s fiscal decline will be drastic, with commensurately drastic consequences for the federal budget.

Three different “crises,” then, each of a different weight and character. The crisis of the uninsured, while surely a serious challenge, has often been overstated, especially on the Left, in an effort to promote more radical reforms than are necessary. The crisis of insured middle-class families has been misdiagnosed both by the Right, which sees it purely as a function of economic inefficiency, and by the Left, which sees it as an indictment of free-market medicine. And the crisis of Medicare has been vastly understated by everyone, in an effort to avoid taking the painful measures necessary to prevent catastrophe. In each case, a clearer understanding may help point the way to more reasonable reforms.

In the case of the uninsured, the best place to begin is with the solution most frequently proposed to their plight: a government-run system of health care for all Americans.

Under such a system—which exists in some form in most other industrialized democracies—the government pays everyone’s medical bills, and in many cases even owns and runs the health-care system itself. The appeal of this idea lies in its basic fairness and simplicity: everyone gets the same care, from the same source, in the same way, based purely on need. In one form or another—actual proposals have varied widely, with Hillary Clinton’s labyrinthine scheme of 1993 merely the best known of many—this “single-payer” model remains the preferred health-care solution of the American Left. But it is ill-suited to the actual problems of America’s uninsured, and adopting it would greatly exacerbate other problems as well.

Everywhere it has been tried, the single-payer model has yielded inefficient service and lower-quality care. In Britain today, more than 700,000 patients are waiting for hospital treatment. In Canada, it takes, on average, seventeen weeks to see a specialist after a referral. In Germany and France, roughly half of the men diagnosed with prostate cancer will die from the disease, while in the United States only one in five will. According to one study, 40 percent of British cancer patients in the mid-1990’s never got to see an oncologist at all.

Such dire statistics have in fact caused many Western democracies with single-payer systems to turn toward market mechanisms for relief. The Swedes have begun to privatize home care and laboratory services. Australia now offers generous tax incentives to citizens who eschew the public system for private care. To send a message to the government, the Canadian Medical Association recently elected as its president a physician who runs a private hospital in Vancouver, actually illegal in Canada. “This is a country in which dogs can get a hip replacement in under a week,” the new president told a newspaper interviewer, “while humans can wait two or three years.”

Defenders of the single-payer concept often point out that, despite patient complaints about the quality of care, overall measures of health in countries with such systems are roughly equivalent to those in America. That may be so, but the chief reason lies in social and cultural factors—crime rates, diet, and so forth—that make life in many other Western nations safer and healthier than life in America, and that would not be altered by a single-payer health system. Besides, citizens in those other nations benefit enormously from medical innovations produced and made possible by America’s dynamic private market; if that market were hobbled by a European-style bureaucracy, their quality of care would suffer along with ours.

And quality of care, it is important to remember, is one thing that most Americans are happy with. Any reform that promises to replace immediate access to specialists with long waiting lines, or the freedom to choose one’s own doctor with restrictive government mandates, is certain to evoke deep hostility, and thereby to cut into public support for efforts to help the uninsured.

On this score, proponents of socialized medicine would do well to consult the cautionary example of the health-maintenance organization (HMO). HMO’s are insurers who contract directly with providers, often for a flat fee, reviewing physician referrals and medical decisions in order to prevent unnecessary procedures or expenses. By the mid-1990’s, this capacity for cost-containment had made HMO’s very attractive to policy-makers and families alike. And they delivered on their cost-cutting promise. In those years, as David Gratzer notes in his recent book The Cure (Encounter, 325 pp., $25.95), private health-care spending per capita grew by just 2 percent annually (today the figure is nearly 10 percent, though the reasons for this, as we shall see below, go beyond just the decline of HMO’s).*

But the public soon chafed under the authoritarian character of a system in which case managers were entrusted with decisions that often seemed arbitrary, while doctors resented having their medical judgment questioned by bureaucrats. Participation soon declined, and HMO’s themselves began to take on the characteristics of traditional insurance plans. By the middle of this decade, they had joined the bipartisan list of stock American villains: in the 2004 presidential campaign, President Bush accused Senator John Kerry of getting “millions from executives at HMO’s,” while Kerry pledged to “free our government from the dominance of the lobbyists, the drug industry, big oil, and HMO’s—so that we can give America back its future and its soul.”

In a single-payer government system, everything Americans dislike about HMO’s would be worse: rationing, top-down control, perverse incentives, and, for patients, very little say. As has happened in Europe, a single-payer approach would also turn health-care costs entirely into government costs, grossly distorting public spending and threatening to crowd out other important government functions. The result would be a political, fiscal, and social disaster.

There is a better way to assist the uninsured: not universal government health care but universal private insurance coverage. Such an effort could begin by identifying the populations in need. Those who are uninsured by their own choice could be offered incentives to purchase at least some minimal coverage, or be penalized for failing to do so. Those who cannot afford insurance could be given subsidies to purchase private coverage based on their level of income, and then pooled into a common group to give them some purchasing power and options. Their coverage would still not equal that available to people in the most generous employer-based plans, but it would offer reliable access to care without destroying the quality and flexibility of the American system.

Although such a plan might not be cheap, it would not be nearly so expensive or complex as a single-payer system. The money for it could be taken, in part, from Medicaid funds now used to pay doctors and hospitals for care already provided to the uninsured, with such “uncompensated-care” programs gradually transformed into a voucher system for purchasing private coverage. But though it might rely on some federal dollars, the reform itself would best be undertaken and managed at the state level. After all, health insurance is regulated by the states, Medicaid is largely managed by the states, and different states face different challenges and possess different resources.

In Massachusetts and Florida, ideas like these are already being tested, although it is too early to judge the results. The federal government can help other states try this more practical approach by clearing away regulatory obstacles and by providing incentives for experiments in creative reforms.

This brings us to the health-care anxieties of middle-class Americans. Although these concerns are in most respects much less pressing than those of the poor, they are real enough. Middle-class families are, besides, the heart and soul of America’s culture and economy, as well as the essential political force for any sober assessment and improvement of America’s health-care system.

Generally speaking, the worries expressed by these Americans stem from the peculiarities of our employer-based insurance market. It is, indeed, a very odd thing that more than 180 million Americans should be covered by insurance purchased for them by their employers. The companies we work for do not buy our food and clothing, or our car and home insurance. They pay us for our labor, and we use that money to buy what we want.

No less odd is the character of what we call health insurance. Insurance usually means coverage for extreme emergencies or losses. We expect auto insurance to kick in when our car is badly damaged in an accident, not when we need a routine oil change; homeowner’s insurance covers us after a fire, flood, or break-in, not when we need to repair the deck or unclog the gutters. But when it comes to health, we expect some element of virtually every expense to be covered, including routine doctor checkups and regular care.

America’s insurance system is largely a historical accident. During World War II, the federal government imposed wage controls on American employers. No longer able to raise salaries to compete for employees, companies turned instead to offering the lure of fringe benefits, and the era of employer-based health care was born. Thanks to a 1943 IRS ruling allowing an exemption for money spent by employers on health insurance, an enormous tax incentive was created as well. Rather than giving a portion of every dollar to the government, employees could get a full dollar’s worth of insurance through their company.

Of course, wage controls are long gone, but the system they inadvertently created, including the tax exemption, remains in place. Although this system has served most Americans very well, it has two significant drawbacks. First, by forging a tight link between one’s job and one’s health insurance, it makes losing a job, or changing jobs, a scary proposition, especially for parents. Second, it lacks any serious check on costs. Because insurance often pays the bulk of every single bill (instead of kicking in only for emergencies or extreme expenses), most American families do not know, or attend to, the actual cost of their health care.

Any car owner can tell you the price of a gallon of gas or an oil change. But what is the price of knee surgery? Or even a regular doctor’s visit? Does one hospital or doctor charge more than another? Most patients pay only a deductible that, while often not cheap, bears almost no relation to the price of the service they receive. As a result, they do not behave like consumers, shopping for the best price and thereby forcing providers to compete for their dollar.

Inured to such issues, families worry most about the lack of portability of their insurance, leaving it to economists to worry about the distorting effects of price inefficiencies. To gain the support of middle-class parents, any reform to the system would therefore need to address the former issue first.

Policy-makers on the Left have tended to understand this, but have over-read the anxiety of families, seeing it as a broad indictment of America’s free-market health care. They have thus offered the same bad solution to the problems of the insured as they do to the problems of the uninsured: a government-run system that will replace our present one. As for conservative policy-makers, they sometimes tend to overlook the concerns of middle-class families altogether, focusing on inefficiency before portability.

The conservative health-care solution of the moment is the health savings account, or HSA. It has two components: a savings account to which individuals and employers can make tax-free contributions to be drawn on exclusively for routine health-care costs, and a high-deductible insurance plan to help pay for catastrophic expenses.

Since individuals can take their HSA’s with them when they change jobs (provided the new employer allows it), this option can indeed help promote insurance portability. But, generally speaking, that is neither its foremost aim nor its effect. Instead, it is seen by its proponents as helping to level the playing field by giving to individuals the same tax breaks that employers get in purchasing coverage, and as helping to train people to think like consumers, since in spending their own money they will have an incentive to spend as little of it as possible. In short, proponents of the HSA want to use market mechanisms to achieve lower costs and improved quality.

This is certainly a worthy goal—but does it meet the concerns of most Americans? David Gratzer, an advocate of the HSA, tells the story of a woman who used such an account in exactly the desired way. Needing foot surgery, and impelled to spend her own money wisely, she

took charge of the situation and thought about what she really needed. When a simple day-surgery was suggested, she looked around and decided on a local surgery center. She asked about clinic fees and offered to pay upfront—thereby getting a 50-percent discount. When she found out that an anesthetist would come in specifically to do the foot block, she asked her surgeon just to do it. She also negotiated the surgeon’s compensation down from $1,260 to $630. Finally, she got a prescription from her doctor for both antibiotics and painkillers, but only filled the former. “In the past, my attitude would have been, ‘just have all the prescriptions filled because insurance was paying for it, whether or not I need them.’”

Although Gratzer offers this as an ideal example, it will surely strike many people as a nightmare. Haggling with doctors, ignoring prescriptions, bypassing a specialist to save money—is this the solution to middle-class health-care worries? Who among us feels confident taking so much responsibility for judgments over his own health, let alone over the care of his children or his elderly parents?

If the HSA is to have wide appeal, it must be sold first and foremost as a means not of efficiency but of portability—and as part of a broader effort to expand the portability of health insurance generally. Nor should such an effort be aimed, at least at first, at undoing our employer-based system. Perhaps, given a blank slate, no sensible person would ever have designed the current system. But we do not have a blank slate. We have a system providing care that the vast majority of insured Americans are quite happy with—and that has also helped America resist the pressure for government-run health care of the kind for which every other developed nation is now paying a heavy price.

We have, in other words, a system that works but is in need of repairs, most notably in the realm of improved portability. Making this happen will require better cooperation between state and federal policy-makers. An exclusively national solution would require federalizing the regulation of health insurance, which is both undesirable and politically unachievable. Instead, states should be encouraged to develop insurance marketplaces like the one now taking shape in Massachusetts. Mediating between providers and purchasers, these would allow employers, voluntary groups, and individuals to select from a common set of private options. Whether working full-time, part-time, or not at all, individuals and families could choose from the same menu of plans and thus maintain constant coverage even as their job situations or life circumstances change. For those who cannot afford insurance and do not receive it from an employer, Medicaid dollars could be used to subsidize the purchase of a private plan.

The federal government, meanwhile, could ensure that Medicaid dollars allotted to states can be used to support such a structure of subsidies. It could also pursue other, smaller measures, like extending or eliminating the time limit on the COBRA program, which allows individuals leaving a job to keep their employment-based plan by paying the full premium. As states begin implementing marketplace reforms, the federal government could also find ways to encourage regional and eventually national marketplaces, which would enable the purchase of insurance across state lines.

In any such scheme, Health Savings Accounts would surely have a place. So would other measures of cost containment like greater price transparency. But the key to any large reform must be its promise to address the real worries of insured American families by preserving what is good about the current system while facing up to its limits and confronting its looming difficulties.

Unfortunately, when it comes to paying for the health care of older Americans, there are few attractive options. Costs have risen steeply in recent years, while the economic footing of the Medicare program has been steadily eroding. Nor are demographic realities likely to change for at least a generation; to the contrary, they may only worsen. So the solution must involve some form of cost containment.

This will not be easy. As Arnold Kling points out in Crisis of Abundance (Cato Institute, 120 pp., $16.95), costs are rising not because of increasing prices for existing medical services but because of a profound transformation in the way medicine is practiced in America. Between 1975 and 2002, the U.S. population increased by 35 percent, but the number of physicians in the country grew by over 100 percent. The bulk of these were specialists, whose services cost a great deal more than those of general practitioners. New technologies of diagnosis (like MRI exams) have also become routine, and not just for the old, and the number and variety of treatments, including surgeries, have likewise increased. We spend more because more can be done for us.

All of this spells heavier demands on the Medicare budget, to the point where the program’s fiscal prospects have become very bleak. Already accounting for roughly 15 percent of federal spending, Medicare will be at 25 percent by 2030 and growing. In David Gratzer’s words, “Medicare threatens to be the program that ate the budget.”

Worse yet, one of the most expensive and complicated burdens of an aging society is not even covered by Medicare. This is long-term care, involving daily medical and personal assistance to people incapable of looking after themselves. The Congressional Budget Office estimates that Americans spent roughly $137 billion on long-term care in 2000, and that by 2020 the figure will reach $207 billion. Longer lives, and the high incidence of dementia among the oldest of the old, are bound to impose an extraordinary new financial strain on middle-income families, whose consequent demand for government help will only worsen our already looming fiscal crisis.

Medicaid, which covers health care for the poor, does pay for some long-term care in most states. To qualify for this, and to avoid burdening their children, a growing number of the elderly have opted to spend down their assets when the need arises. But this ends up burdening their children anyway, if less directly. States already spend more on Medicaid than on primary and secondary education combined; if Medicaid comes to shoulder the bulk of long-term costs in the coming decades, it will bankrupt state coffers and place enormous strains on the federal budget.

Of course, the challenges of an aging society reach well beyond economics. As more and more Americans face an extended decline in their final years, elderly patients and their families will confront painful choices about how much care is worthwhile, who should assume the burdens of care-giving, and when to forgo additional life-sustaining treatment. Compared to this profound human challenge, fiscal dilemmas can seem relatively paltry. But they too necessitate hard and unavoidable choices.

One way or another, the Medicare program will have to be adjusted to a society with radically different demographics from the one it was designed to serve. If “seventy is the new fifty,” as a popular bumper sticker tells us, then the age of Medicare eligibility must begin to move up as well. That will inevitably impose a hardship on those who are already not vigorous in their sixties, as well as on those whose jobs are too physically demanding for even a healthy sixty-five-year-old. So hand in hand with raising the age of eligibility will need to go programs encouraging (or requiring) health-care savings earlier in life. At the same time, Medicare benefits will gradually have to become means-tested, so that help goes where it is most needed and benefits are most generous to those with the lowest incomes and fewest assets.

More fundamentally, the structure of the Medicare program will have to change. Its benefits now increase in an open-ended way that both reflects and drives the upward movement of health costs; if Medicare is to remain sustainable, constraints will gradually have to be put in place, so that benefits grow by a set percentage each year. The program will also need its own distinct and reasonably reliable funding source, which will require an adjustment in the design of the payroll tax.

Any such reforms will be politically explosive, to put it mildly. No politician in his right mind would run on a platform of limiting Medicare eligibility and capping its benefits. And yet, a decade from now, caring for aging parents will have become a burning issue for a great swath of America’s families as parents find themselves squeezed between the needs of their own parents and the needs of their children. Every politician will be expected to offer a solution, and will be subject to dangerous temptations: promising limitless care at the very moment when fiscal responsibility requires setting limits, or promising to “solve” our fiscal problems by abandoning the elderly. The least that responsible policy-makers can do now is to familiarize Americans with the realities of our aging society, so that when the time comes for difficult choices, we will not be blind-sided.

Understanding America’s three distinct health-care challenges, and the deficiencies of conventional responses to them, is the first step toward reform. Any approach we take will assuredly cost the taxpayers money. Already, nearly a third of the federal budget is spent on health-care, and that portion is certain to grow. The choice, however, is between paying the necessary price to ameliorate our genuine problems or paying far more to satisfy ideological whims or avoid politically painful decisions.

Neither socialized medicine nor a pure market approach is suited to America’s three health-care challenges, while the bipartisan conspiracy to ignore the looming crisis of Medicare in particular will return to haunt our children. Coming to grips with the true nature of our challenges suggests, instead, a set of pragmatic answers designed to address the real problems of the uninsured, of middle-class families, and of the elderly while protecting America’s private health-insurance system and looking out for the long-term fiscal health of the nation.

Even as we pursue practical options for reform, however, it behooves us to remember that health itself will always remain out of our ultimate control. Medicine works at the boundaries of life, and its limits remind us of our own. While our health-care system can be improved, our unease about health can never truly be quieted. And while reform will require hard decisions, solutions that would balance the books by treating the disabled and debilitated as unworthy of care are no solutions at all. In no small measure, America’s future vitality and character will depend upon our ability to rise to this challenge with the right mix of creativity and sobriety.

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