Amanda Carpenter broke the news Tuesday that “The government Web site that promised to show exactly where the $787 billion in stimulus spending was going to ‘create or save’ jobs is allocating billions of tax dollars to hundreds of congressional districts that don’t exist.”

Researchers at the Franklin Center for Government & Public Integrity found 440 “phantom districts” listed on Recovery.gov, consuming $6.4 billion and creating or saving nearly 30,000 jobs. Their findings are listed HERE.

For example, Recovery.gov shows 12 districts, using up more than $2.7 billion, in Washington, D.C, which only has one congressional district. [Actually, it has none. - jhj]

Recovery.gov also shows 2,893.9 jobs created with $194,537,372 in stimulus funding in New Hampshire’s 00 congressional district. But, there is no such thing.

The site also shows $1,471,518 going to New Hampshire’s 6th congressional district, $1,033,809 to the 4th congressional district and $124,774 to the 27th congressional district. In fact, New Hampshire only has two congressional districts; inviting confusion about where the money listed for the 00, 4th, 6th and 27th districts is going.

After being beat over the head with this on the blogs, Twitter, and the late-night comic shows, the White House admitted error and has said it’ll put out a more accurate list, while muttering something about distractions.

Aside from the obvious 57 states joke (which an Instapundit reader beat me to), I’ve dismissed this story as mildly amusing but no big deal.

It seems, however, that the House Government Reform and Oversight Committee is less than amused and will hold hearings on the matter. Others in Congress were also upset — and not just the usual suspects.

The errors raised the ire of Rep. Dave Obey, D-Wisconsin, and chairman of the House Appropriations Committee. On Monday, he said the mistakes “are outrageous and the administration owes itself, the Congress and every American a commitment to work night and day to correct the ludicrous mistakes.”

“Credibility counts in government, and stupid mistakes like this undermine it. We’ve got too many serious problems in this country to let that happen,” Obey said.

While I agree in principle, the reality is that large bureaucracies continually make incredibly boneheaded mistakes of this variety. The key is transparency, which lets interested parties quickly spot problems and get them corrected — as happened in this case.

It is, however, refreshing to see Congress investigate something that is actually under their purview and to do so with a president of the same political party that controls both Houses.  That’s how the system is supposed to work but, alas, frequently doesn’t.

Well looks like the entire town of New London, Conn. is going to get screwed by Pfizer.

“Look what they did,” Mr. Cristofaro said on Thursday. “They stole our home for economic development. It was all for Pfizer, and now they get up and walk away.”

That sentiment has been echoing around New London since Monday, when Pfizer, the giant drug company, announced it would leave the city just eight years after its arrival led to a debate about urban redevelopment that rumbled through the United States Supreme Court, and reset the boundaries for governments to seize private land for commercial use.

Pfizer said it would pull 1,400 jobs out of New London within two years and move most of them a few miles away to a campus it owns in Groton, Conn., as a cost-cutting measure. It would leave behind the city’s biggest office complex and an adjacent swath of barren land that was cleared of dozens of homes to make room for a hotel, stores and condominiums that were never built.

[...]

After Pfizer completed its $67 billion acquisition of Wyeth, another drug giant, in October, Ms. Power said, “We had a lot of real estate that we had to make strategic decisions about.” She said Pfizer would try to sell or lease its buildings in New London and would “continue to pay our taxes to the city as scheduled.”

The complex is currently assessed at $220 million, said Robert M. Pero, a city councilman who is scheduled to become mayor next month. The company pays tax on 20 percent of that value and the state pays an additional 40 percent, Mr. Pero said. That arrangement is scheduled to end in 2011, around the time Pfizer, which is currently the city’s biggest taxpayer, expects to complete its withdrawal.

“Basically, our economy lost a thousand jobs, but we still have a building,” Mr. Pero said. Then again, he added, “I don’t know who’s going to be looking for a building like that in this economy.”

Basically you suck Mr. Pero. Good job wrecking your town’s economy. Not only has your economy lost thousands of jobs you’ve gone out and wrecked considerale amounts of private property…for nothing. On top of this you’ve spent millions of dollars that could have been spent elsehwere.

Mr. Pero said that he was offended that Pfizer did not notify city officials about the decision before Monday or give them a chance to argue against it or even fully understand it.

Oh the irony. Hmmm how did Ms. Kelo feel?

The Urban Institute’s Eugene Stuerle is not very happy with the health care expansion legislation that is likely to be passed into law. Stuerle argues that the legislation violates the standards of equal justice.

Of course, families in this income bracket pay far more than $14,700 for health care. They get hit by uninsured expenses or covered expenses they have to share-perhaps an average of $5,100 with the $14,700 policy just noted. They also pay fairly large amounts of tax to cover others, such as retirees. In fact, Americans spend about 24 percent of monetary income (wages and interest and the like) on health care. Using a more familiar metric, the total comes to 16 percent of the gross domestic product (GDP), though GDP includes many items that aren’t typically reported as income (such as the rent you save by owning a home).

Congressional health reformers believe that most households shouldn’t pay that much. They propose something closer to tithing. That way, no more than a tenth or an eighth of household income would go to purchase health insurance. This has a nice political ring to it, but here’s the reality: the 24 percent burden is rising and can’t drop without lower cost growth. Congress can only change who pays or temporarily borrow more from China and other creditors.

The problem gets serious when these arithmetical contradictions get woven into legislation. And we’re already on a slippery slope there.
Take the Senate Finance Committee efforts at health reform that have garnered so much attention. Under one version, households with $54,000 of income would get a subsidy of almost $10,000 toward the $14,700 health insurance policy that Congress has decided that they can’t afford. The first catch 22 is that since these subsidies are so expensive, Congress plans to exclude from getting the subsidy those households that get health insurance in lieu of higher cash wages from their employer.

This is unfair. It violates the fundamental principle of equal justice. People in similar circumstances should be treated similarly under the law.

The notion of justice here that Stuerle is referring to is often called horizontal equity and holds that people in similar circumstances should be treated similarly. In this case they are not.

There is also the distorting effect that related penalty on not providing health insurance for workers. There is a $400 cap on the penalty in one case. Could this lead to employers who are in that situation dumping their workers health care and taking the penalty? And, if you have less than 50 employees you are exempt from the penalty, and this provides a subisidy to small businesses.

Then there is the tax subsidy for employer provided benefits.

Here’s yet another complication. Congress is holding fast to today’s regressive tax subsidy for employer-provided health insurance, which can be worth $2,000 to $6,000 per family. This benefit, an exclusion from tax of compensation received as health insurance, would be valuable enough to some employers—especially those with highly paid employees who aren’t eligible for the new individual subsidies—to keep them from dropping insurance coverage. It is also probably one reason why the Congressional Budget Office estimated that a Senate Finance Committee version of health reform would cause a drop of only about 3 million in employer-provided coverage over the next 10 years. John Shields and Randy Haught of the Lewin Group, in a study for the Peter G. Peterson Foundation, estimated that when fully implemented, this same Senate Finance bill would cause one set of employers to drop insurance coverage for 19 million people but another set to add coverage for 12 million.

Considering the new and old subsidies together gets complicated. Still, many low- and middle-income earners paying through an employer by accepting lower cash wages would lose out big time. They would get thousands of dollars less in subsidy than families making an equivalent amount of total compensation in cash and then getting insurance from the type of insurance exchange that the reform bills would establish.

All in all, the current legislation is going to have many bizzare incentives and it could very well result in less desirable outcomes. For example, what if small employers who grow over time simply never offer health insurance like large employers today? If the penalty is not sufficiently large then these firms will essentially be getting a subsidy as will the workers. A wealth transfer from those who do work for employers who provide health care benefits to those who do not.

And the current legislation completely fails to address the issue of cost. So when President Obama stated,

Soaring health care costs are unsustainable for families, they are unsustainable for businesses, and they are unsustainable for governments, both at the federal, state and local levels.

It wasn’t serious enough to actually warrant addressing. And if one were to look at history we see that government has a rather bad record when it comes to health care and costs. As my co-blogger Dave Schuler has noted, for the past several years Congress has failed to reduce Medicare reimbursement rates. Also, the U.S. takes up the health care issue, legislatively, about once every decade or two. So the idea that the issue of costs will be addressed later is not very reassuring considering it might be 15 years later. At which time we can probably expect health care to be consuming at least 20 – 25% or GDP and who knows how much of our federal budget. And given the inability of politicians to reduce spending it will likely add to our already large debt and growing deficits. Or to put it differently, the trillion dollar deficits? Get used to them. You thought Bush was a spendthrift, you ain’t seen nothing yet.

This is why I don’t consider the legislation passed by the House of Representatives and what the Senate is working on to be health care reform. It will expand and entrench our current system. A system that people have already agreed is broken. Will it be easier to reform the cost side of the issue when you take the current system and expand and further entrench it? Such thinking is simply delusional. Refroming any system will create losers as well as winners. My guess is that the winners will be more motivated, a smaller group, and have better funded lobbyists.

So I agree with Eugene Stuerle when we rights,

Done the right way, I believe that Congress could get more equal justice, higher levels of basic insurance coverage for Americans, and lower costs all in the same package.

I agree from a theoretical perspective this is possible, but from a politically feasible standpoint I’m more inclined to think it is impossible.

Reason’s Nick Gillespie has a bit of fun with the UPS-FedEx fight to make a larger argument about unions.

What’s particularly amusing about this is that, rather than seeking to get the favorable regulatory treatment that FedEx enjoys, UPS is fighting to put FedEx under the same onerous rules.

I’m reminded of the old joke about the Russian who gets a wish from a genie and complains that his neighbor has two cows while he only has one.  The genie asks, “So, would you like a second cow?  Or a third?”   “No,” says the peasant.  “I want you to kill one of my neighbor’s cows.”

via Glenn Reynolds

Back when talks about bailing out General Motors started one potential issue was that GM would “encouraged” to make decisions based on political considerations vs. a sound business plan. Looks like there is evidence for such concerns with this story of how Montana’s Congressional Representative and two Senators are pushing to get a contract reinstated with a Montana palladium mine.

Montana Rep. Denny Rehberg was no fan of the $58 billion federal rescue of General Motors Co., saying he worried taxpayer money would be wasted and the restructuring process would be vulnerable to “political pressure.” Now the lawmaker says it’s his “patriotic duty” to wade into GM’s affairs.

Along with Montana’s two Democratic senators, the Republican congressman is battling to get GM to reinstate a contract with a Montana palladium mine nullified in bankruptcy court. “The simple fact is, when GM took federal dollars, they lost some of their autonomy,” Mr. Rehberg says.

Translation: I might lose votes next election so whether reinstating this contract makes sound business sense or not, I’m going to use my influence to get in reinstated and screw the tax payers.

Federal support for companies such as GM, Chrysler Group LLC and Bank of America Corp. has come with baggage: Companies in hock to Washington now have the equivalent of 535 new board members — 100 U.S. senators and 435 House members.

Yes, and those 535 new board members don’t answer to shareholders, they answer to their constituents. Obviously these new board members are going to be making very good business decisions. Just look at the U.S. budget….uhhhmmm…look at Social Security….hmmm…Medicare, wait no don’t look! In fact, these aren’t the droids you are looking for either. Move along now.

Some more juicy bits from the article,

In May, even before the government’s ownership became official, lawmakers erupted when GM disclosed it planned to produce a new subcompact car at its factories in China. Under congressional pressure, GM dropped those plans and promised instead to retool an existing U.S. facility in Michigan, Wisconsin or Tennessee for the new model.

Lawmakers from those states demanded and received high-level meetings in Washington to quiz GM on the criteria for site selection and to tout their states. GM in the end picked a site in Michigan.

That same month, GM dealer Pete Lopez in Spencer, W.Va., received notice that GM was giving him just over a year to shut down his Chevy, Pontiac and Buick dealership, which he’d acquired two years earlier. GM’s move to shutter more than 1,300 dealerships — about one-quarter of its network — was central to its restructuring because it cleared out underperforming showrooms and brought the network more in line with its shrunken sales.

With an assist from his mayor, Mr. Lopez took his complaint straight to one of his state’s senators, Jay Rockefeller, the Democratic chairman of the powerful Commerce Committee.

Sen. Rockefeller sent a letter to GM headquarters on Mr. Lopez’s behalf, according to a staff aide. He arranged for Mr. Lopez to come testify before a Senate panel in early June, alongside GM Chief Executive Frederick “Fritz” Henderson. The senator introduced the two men, giving Mr. Lopez a chance to make a personal pitch.

[…]

In addition to the dealership issue, lawmakers have jumped into a union fight that pits GM and Chrysler against two trucking companies that haul new cars around the country. The auto makers want to give some of the work to cheaper nonunion contractors. But that raised the ire of lawmakers who support the International Brotherhood of Teamsters.

Rep. Dale Kildee, a Democrat from Michigan, sent letters on Sept. 30 to the chief executives of both GM and Chrysler, demanding they explain their positions and advising them to stick with their unionized carriers. At least four other lawmakers sent similar letters.

[…]

GM for years was supplied by the Montana-based Stillwater Mining Co., which bills itself as the country’s only supplier of the precious metal. In early July, Frank McAllister, the mine’s chief executive, received news that GM, as part of its bankruptcy proceedings, planned to sever its ties with Stillwater in favor of cheaper suppliers in Russia or South Africa.

“I thought, for heaven’s sake, this doesn’t make any sense,” says Mr. McAllister. “Taxpayer dollars are keeping GM alive, just so it can turn away from U.S. workers?”

[…]

“I was elected to represent the interests of Montana, not General Motors, which is something that GM should have considered before letting the federal government assume control of their company,” Rep. Rehberg said recently.

Government Motors the new welfare program of the Obama Administration.

A USA Today report that “Nearly a year after he was elected on a pledge to change business-as-usual in Washington, Obama also has taken a cue from his predecessors and appointed fundraisers to coveted ambassadorships” and in fact has done so at “a rate higher than any president in more than four decades” combined with  story in The Hill that lobbyists are being routinely invited to fundraisers has, unsurprisingly, generated quite a bit of discussion in the blogosphere.

In my New Atlanticist post “Professional Ambassadors Needed,” I argue that “The real issue here isn’t corruption or even Obama’s hypocrisy” but rather “the fact that presidents have the discretion to appoint pretty much whomever they please to more than 5000 senior positions in the government, that vast number of which would be far better filled with career professionals.”

It makes good sense for presidents to appoint loyalists to key advisory and policymaking positions.  The Secretary of State and the National Security Advisor, for example, need to be people the new president trusts implicitly.  Ditto undersecretaries and other senior policymakers and, to a lesser extent, senior positions at NSC, independent policymaking boards, and the like.  There are legitimate partisan and ideological differences in the country and it’s perfectly reasonable that the public policy decision-making apparatus of the Executive Branch be staffed by people who largely agree with the elected president and serve at his pleasure.

Conversely, ambassadors and other working-level positions carry out policy rather than making it.   Professional officers of our foreign, intelligence, and military service (uniformed and civilian, in the case of the latter) can be trusted to faithfully and expertly carry out their orders.

Changing the law on this and drastically cutting back the number of appointed positions (which, practically, would have to be done prospectively, going into effect with Obama’s successor) would greatly improve the efficiency of our government.  Not only would it ensure that these positions are filled by competent professionals rather than enthusiastic amateurs but it would mean that they are filled, period.  We’re nearly a quarter into Obama’s term and a substantial number of these slots remain unfilled.  The process of selecting, vetting, and confirming individuals for such a large number of vacancies is a tremendous drain of resources.

And, yes, I’ve held this view during Republican administrations as well.

Photo credit: Reuters Pictures.

Yes, that headline is not an exaggeration. The Chief of the Jericho Fire Department went to court and was shot by the police for disputing two tickets requiring two trips to the court house.

JERICHO, Ark. – It was just too much, having to return to court twice on the same day to contest yet another traffic ticket, and Fire Chief Don Payne didn’t hesitate to tell the judge what he thought of the police and their speed traps.

The response from cops? They shot him. Right there in court.

Now the police chief has disbanded his force “until things calm down,” a judge has voided all outstanding police-issued citations and sheriff’s deputies are asking where all the money from the tickets went. With 174 residents, the city can keep seven police officers on its rolls but missed payments on police and fire department vehicles and saw its last business close its doors a few weeks ago.

“You can’t even buy a loaf of bread, but we’ve got seven police officers,” said former resident Larry Harris, who left town because he said the police harassment became unbearable.

But lets not be hasty, these brave men in blue are putting their lives on the line after all.

“When I first moved out here, they wrote me a ticket for going 58 mph in my driveway,” 75-year-old retiree Albert Beebe said.

Well obviously Albert Beebe was going 58 miles per hour in his drive way because why would the police lie. Oh…wait, they aren’t sure where all the traffic fine money went, hmmmm….

It was anger over traffic tickets that brought Payne to city hall last week, said his lawyer, Randy Fishman. After Payne failed to get a traffic ticket dismissed on Aug. 27, police gave Payne or his son another ticket that day. Payne, 39, returned to court to vent his anger to Judge Tonya Alexander, Fishman said.

It’s unclear exactly what happened next, but Martin said an argument between Payne and the seven police officers who attended the hearing apparently escalated to a scuffle, ending when an officer shot Payne from behind.

I’m sure it was totally justified and in line with departmental policies. After all, who knows Payne might have had a pencil or paper clip on him. Those are danerous weapons you know.

Prosecutor Lindsey Fairley said Thursday that he didn’t plan to file any felony charges against the officer or Payne. Fairley, reached at his home, said Payne could face a misdemeanor charge stemming from the scuffle, but that would be up to the city’s judge. He said he didn’t remember the name of the officer who fired the shot.

What a shock the prosecutor backs up the cop who discharges his gun at an unarmed person in a crowded room and also wounds a fellow cop in the process. Police professionalism at its highest.

Alexander, the judge, has voided all the tickets written by the department both inside the city and others written outside of its jurisdiction — citations that the department apparently had no power to write. Alexander, who works as a lawyer in West Memphis, resigned as Jericho’s judge in the aftermath of the shooting, Fairley said. She did not return calls for comment.

Meanwhile, sheriff’s deputies want to know where the money from the traffic fines went. Martin said that it appeared the $150 tickets weren’t enough to protect the city’s finances. Sheriff’s deputies once had to repossess one of the town’s police cruisers for failure to pay on a lease, and the state Forestry Commission recently repossessed one of the city’s fire trucks because of nonpayment.

City hall has been shuttered since the shooting, and any records of how the money was spent are apparently locked inside. No one answered when a reporter knocked on the door on Tuesday.

So lets do a quick recap.

• The police shot an unarmed man from behind when in scuffle with 6 other police officers.
• No charges will be brought against the police officer from the local prosecutor.
• Nobody knows where the money from the various speeding tickets went.
• The police were writing tickets outside their jurisdiction.
• City Hall is shut down.

Anyone doubt that the cops saw this as their own private racket and were using the tickets to line their own pockets? And what is up with the police officers in Jericho? Are they all totally out of shape morons that couldn’t fight their way out of a paper bag? Six of them are scuffling with one man and they can’t subdue him and the seventh feels he has the justification to shoot the “perp”?

Over at his web site Dave has put up a post discussing how resources are allocated. I’ve touched on this very briefly in comments and a post or two, but nothing this extensive. As such, go read it, it’s good. Here is a snippet,

Despite the author’s attempt to assuage concern by pooh-poohing the idea of rationing, rationing or resource allocation goes on all of the time whether by government, insurance companies, or by the relative preferences of individual healthcare producers and consumers. As long as wants are infinite and supplies are limited there are must be some mechanism for allocating the resource.

There are only three methods of allocating resources: fiat, the political process, and markets.

Needless to say, I tend to prefer the latter. I prefer the last option because it often gives people the best chance to meet their specific wants and needs.

President Obama, seeing that he is taking a beating in the polls, and that health care is starting to founder took to the pages of the New York Times to lay out the case for health care reform. I think he did a rather bad job of it. He could have done it with far, far fewer words, IMO. Anyhow, lets take a look at what he wrote,

These are people like Lori Hitchcock, whom I met in New Hampshire last week. Lori is currently self-employed and trying to start a business, but because she has hepatitis C, she cannot find an insurance company that will cover her.

I hate it when politicians do this. This is something politicians do all the time, put a face on the issue. One can argue it is to show the issue impacts people’s lives. Well no kidding. Most of what the government does impacts people’s lives. So I find this explanation weak. What I think it is, is an appeal to emotions. “Don’t pass my legislation and you are going to make people like Lori Hitchcock suffer.” I find it rather dishonest since it skirts the actual issues with reforming health care and instead is an attempt to get people to make a decision based on emotion instead.

However, there is a second bit of dissembling here as well. Of course Lori Hitchcock can’t get insurance, she has a pre-existing condition. Insurance cannot and was never designed to cover pre-existing conditions. Its like saying, I can’t cut down a tree with a spoon therefore we need national legislation so that we can cut down trees with spoons. Really? Are you just dishonest or stupid? James laid out the reasoning by looking at car insurance. If you get into a wreck then buy insurance the insurance company is not going to cover your “pre-existing” wreck of a car. Why? The accident already happened, there is no question of “if you get into an accident” you were already in one. Same thing here.

Now maybe we should figure out a way to cover pre-existing conditions, but is insurance really the right vehicle for doing that? Maybe there is some other policy we could put in place to deal with it, or not. But to say insurance companies are being bad in this case is just irresponsible and dishonest pablum. The insurance companies are looking out for their shareholders and possibly even their workers. That is not bad, that is being a good corporation.

I hear more and more stories like these every single day, and it is why we are acting so urgently to pass health-insurance reform this year. I don’t have to explain to the nearly 46 million Americans who don’t have health insurance how important this is. But it’s just as important for Americans who do have health insurance.

Wait one minute. Not all of those 46 million are people with pre-existing conditions. Some of that 46 million are people who have elected not to have health care. Some don’t even need it. Some do. To throw them all in and pretend like it is due to the vile depredations of health insurance companies is like blaming ADM for starvation in Africa.

First, if you don’t have health insurance, you will have a choice of high-quality, affordable coverage for yourself and your family — coverage that will stay with you whether you move, change your job or lose your job.

I’d love to see the mechanism for this. For example, suppose I like my current employer provide insurance, but I lose my job and my coverage. Then what? What if the public option or whatever takes it place doesn’t offer the coverage I had? What then?

In places like France, the Netherlands, and Switzerland they have choice and health care that will follow them. However, there is no public option, and no employer provided health care. In France health care is provided by non-profit health insurance funds, and in the Netherlands and Switzerland via competing health insurance companies.

Second, reform will finally bring skyrocketing health care costs under control, which will mean real savings for families, businesses and our government. We’ll cut hundreds of billions of dollars in waste and inefficiency in federal health programs like Medicare and Medicaid and in unwarranted subsidies to insurance companies that do nothing to improve care and everything to improve their profits.

As I noted earlier, if there are billions and billions to be saved in Medicare and Medicaid, then start there. Hard to argue with clamping down on waste, fraud, and abuse, and I bet the Republicans would get behind it as well. But instead we have to have this massive pile of crap legislation that is hundreds and hundreds of pages long that nobody can read by themselves and who knows what is in there.

Second, this is just not in line with what the non-partisan CBO says about much of the legislation currently out there. The view is that the current legislation will add to costs and any savings are small or years down the road which we can’t wait for. In short, this paragraph is just…well its just downright misleading.

Third, by making Medicare more efficient, we’ll be able to ensure that more tax dollars go directly to caring for seniors instead of enriching insurance companies.

And here Obama reveals what he is really on about. Not controlling costs or the rate of growth in costs, but in throwing out the goodies to the voters. If the issue is saving money and controlling costs and moving towards providing the best quality health care that is sustainable…why spend any savings on the elderly? This is where the bulk of our costs are already. Spending even more here is just simply astoundingly wrong.

This will not only help provide today’s seniors with the benefits they’ve been promised; it will also ensure the long-term health of Medicare for tomorrow’s seniors.

So…we spend more today so we can keep spending more tomorrow? Is that the argument?

And our reforms will also reduce the amount our seniors pay for their prescription drugs.

Look, more free stuff for seniors.

Lastly, reform will provide every American with some basic consumer protections that will finally hold insurance companies accountable. A 2007 national survey actually shows that insurance companies discriminated against more than 12 million Americans in the previous three years because they had a pre-existing illness or condition.

Yes, yes we get it already Mr. President those insurance companies are evil and their executives are agents of Satan. Never mind that by separating out those who have pre-existing conditions insurance companies are doing precisely what they are supposed to be doing: providing insurance for those who are healthy in the event of becoming unhealthy. I don’t doubt there are insurance companies that engage in bad behavior such as trying to deny valid claims, but dealing with pre-existing conditions is not one of them.

In the coming weeks, the cynics and the naysayers will continue to exploit fear and concerns for political gain. But for all the scare tactics out there, what’s truly scary — truly risky — is the prospect of doing nothing.

No, what is truly scary is making an already unsustainable and dysfunctional system even worse. We are looking at spending considerably more money than we currently are and any saving that reform provides President Obama is promising to spend on seniors.

Premiums will continue to skyrocket. Our deficit will continue to grow. And insurance companies will continue to profit by discriminating against sick people.

Aside from the last part, none of this will likely change under the reform plans President Obama endorses. In fact, the last part will likely result in an increase in premiums and maybe even the deficit.

In the end, this isn’t about politics.

I love it when someone tells a bald faced lie. Of course this is about politics. It was one of his big promises during the campaign. If it isn’t about politics then why campaign on it. I’d also offer this suggestion, when you are trying to sell the public on something, try not to close with such an obvious lie.

The Obama Administration may be dropping the public option requirement from its health care agenda.

PHOENIX — The White House, facing increasing skepticism over President Obama’s call for a public insurance plan to compete with the private sector, signaled Sunday that it was willing to compromise and would consider a proposal for a nonprofit health cooperative being developed in the Senate.

Along with mounting skepticism President Obama has been seeing his poll numbers drop as well. Similar to what happened to President Clinton when he tried to pass health care reform the public backlash is causing President Obama to re-evaluate and re-trench.

The “public option,” a new government insurance program akin to Medicare, has been a central component of Mr. Obama’s agenda for overhauling the health care system, but it has also emerged as a flashpoint for anger and opposition.

Right, not like there is no savings to be had in Medicare…oh wait….

Second, reform will finally bring skyrocketing health care costs under control, which will mean real savings for families, businesses and our government. We’ll cut hundreds of billions of dollars in waste and inefficiency in federal health programs like Medicare and Medicaid and in unwarranted subsidies to insurance companies that do nothing to improve care and everything to improve their profits.

That was what President Barack Obama wrote in his New York Times op-ed this weekend. This immediately raises the question…why the public option? If we can save not just billions, but hundreds of billions by cutting waste, fraud and abuse in Medicare and Medicaid…why not do that first? Why not put out a bill for doing that separate of the public option? Could it be there is an ulterior motive? Hmmm, a politician being dishonest and misleading…nawww couldn’t happen.

I see this as a good move. President Obama has come out in favor of single payer health care like we see in Canada and England. The problem is that while on the accounting ledger both systems are cheaper, they also have had issues with waiting for procedures (more here and here). Given that health care resources are scarce and costs are rising quite fast in these countries making people wait for care for issues that are non-life threatening is a good way to control costs.

It is much like externalities. These costs are not represented anywhere really in terms of money. However, if a person is sitting at home waiting for treatment and is in pain, has diminished mobility, etc.—i.e. a diminished level of welfare due to lack of treatment it is still a cost for society. It really isn’t all that different than having an insurance company denying a claim again and again before finally paying for the care. The difference is that with an insurance company you can take them to court and ask the government to make a decision. With a government run health care system if the government tells you to go home and not come back for 12 weeks is complaining to the government going to get you very far?

The public option has never been essential. When looking at some of the more successful European models such as the Netherlands and Switzerland don’t have public options. The government is still heavily involved in health care, but the requirement is that individuals purchase health care from private insurance firms. And it was seen by many that the public option was a way to backdoor a single payer system. First introduce the public option, then down the road start subsidizing it and squeeze out the private insurers.

In answer to James’ query below about when a state or county have forced unmarried people not to live together, meet Olivia Shelltrack, Fondray Loving and their three children.

Welcome to Wednesday afternoon at 12475 Parkwood Lane in Black Jack, Mo.: In his room on the second floor, 8-year-old Cortez Loving wages an intergalactic battle with dozens of action figures; next door, sister Katarina, 10, practices her electronic keyboard; and down the hall, 15-year-old Alexia watches TV.

It might seem like a typical family scene—except that in this particular town in the St. Louis suburbs, the three children and their parents, Olivia Shelltrack and Fondray Loving, don’t meet the local definition of “family.” Last month the engaged couple, who have lived together for 13 years, were denied an occupancy permit for their home because they are in violation of a 1998 ordinance that allows no more than three “unrelated” individuals to share a single residence. On March 21 the city council will decide whether to allow the five to stay in Black Jack—or force them to move out.

The Nanny State, its for your own good. Sorry James.

The CBO has analyzed some of the suggested methods for controlling health care costs, and the Independent Medicare Advisory Council (IMAC) in particular. The findings so far is not all that good,

In particular, CBO reviewed draft legislation transmitted to the Congress by the Administration on July 17, 2009, titled the Independent Medicare Advisory Council Act of 2009. CBO estimates that enacting the proposal, as drafted, would yield savings of $2 billion over the 2010–2019 period (with all of the savings realized in fiscal years 2016 through 2019) if the proposal was added to H.R. 3200, the America’s Affordable Health Choices Act of 2009, as introduced in the House of Representatives. This estimate represents the expected value of the 10-year savings from the proposal: In CBO’s judgment, the probability is high that no savings would be realized, for reasons discussed below, but there is also a chance that substantial savings might be realized. Looking beyond the 10-year budget window, CBO expects that this proposal would generate larger but still modest savings on the same probabilistic basis.

So we can expect $2 billion in savings over 10 years, there is a large probability of no savings. One reason we might get no savings is that the President will have to either approve or disapprove of whatever recommendations IMAC makes. I can’t imagine a President having issues with his approval ratings and looking at re-election being too keen on implementing cost saving measures that could be used by an opponent as being harmful to the elderly. Remember a while back the cartoon of Bush pushing a wheelchair bound elderly person over a cliff regarding Social Security?

Now to be fair CBO does estimate greater savings past the 10 year window, but that isn’t going to help us for the shorter term with addressing the massive costs over the next 10 years of the current health care “reform” legislation. IMAC might be a good idea for longer term savings, but for shorter terms savings the numbers just aren’t there. Any attempt to claim otherwise is…well what are politicians best noted for?

And the CBO does offer some suggestions on how to use IMAC to get greater savings in the next 10 years.

• Setting explicit and feasible quantitative goals for reducing outlays in the Medicare program.
• Providing clear authority for the council to recommend broad changes in coverage, benefit design, and payment and delivery systems.
• Incorporating an explicit fall-back mechanism (such as an across-the board reduction in payments) if goals for cost reduction are not met.
• Requiring independent verification of the expected reduction in program spending from implementing the recommendations.
• Expanding the direction and authority of the council to include making recommendations for changes to Medicaid and other government health care programs, with specific goals set for each program.
• Expanding the council’s mandate to include making recommendations for changes to the broader health care system. (Some such changes might be implemented through federal regulation, while others might require future legislation.)
• Ensuring that the composition of the council is heavily weighted toward medical and other health policy experts who will actively seek to improve the efficiency of the health care system.
• Ensuring the council’s access to the resources necessary to develop and test ideas for cost reduction. These resources would include access to appropriate program data, the ability to tap technical expertise available through the Department of Health and Human Services (HHS), and explicit authority to coordinate such work with the Secretary of
• HHS.
• Providing mandatory funding to enhance the independence of the council.

The CBO indicates while there would be larger savings, they would be limited by the time frame in terms of implementation (the council wouldn’t be created until 2015, and wouldn’t start issuing recommendations until 2016). So the idea that IMAC is going to have much impact over the next 10 years is not very likely.

OMB Director Peter Orszag basically agrees that IMAC is a longer term cost containment strategy.

The point of the proposal, however, was never to generate savings over the next decade. (Indeed, under the Administration’s approach, the IMAC system would not even begin to make recommendations until 2015.) Instead, the goal is to provide a mechanism for improving quality of care for beneficiaries and reducing costs over the long term.

Now compare this to President Obama’s press conference from July 22nd,

In addition to making sure that this plan doesn’t add to the deficit in the short term, the bill I sign must also slow the growth of health care costs in the long run. Our proposals would change incentives so that doctors and nurses are free to give patients the best care, just not the most expensive care. That’s why the nation’s largest organizations representing doctors and nurses have embraced our plan.

We also want to create an independent group of doctors and medical experts who are empowered to eliminate waste and inefficiency in Medicare on an annual basis — a proposal that could save even more money and ensure long-term financial health for Medicare. Overall, our proposals will improve the quality of care for our seniors and save them thousands of dollars on prescription drugs, which is why the AARP has endorsed our reform efforts.

The above paragraphs aren’t really true when considering what the OMB Director and the CBO Director are saying. The IMAC proposal will likely not prevent increasing the size of the deficit in the short run.

Via Greg Mankiw comes this quote from Michael Kinsley

But people, even liberals, are starting to get unnerved by the cost of all this. We now talk of trillions the way, even a few months ago, we spoke of billions. In mid-June, the Senate health committee put out its version of reform and was horrified when the Congressional Budget Office figured that it would cost a trillion dollars over 10 years (over current spending) and would still leave millions uninsured. The committee retreated to its lair and re-emerged in early July with a revised plan “scored” by the CBO as costing only $600 billion and leaving only 3 percent of the population uninsured. Six hundred billion doesn’t sound like all that much to achieve, or come close to achieving, an important and long-standing goal such as universal health care. But keep in mind that health-care reform is supposed to save money. Its premise is that the current path is unaffordable. In that sense, a “mere” $600 billion extra is total defeat.

We have spent or will spend $787 billion on the stimulus, President Obama’s budget is a bloated monster, TARP is $700 billion, and now we are looking to add $600 billion for health care reform. I am reminded about what Rahm Emanuel said they would do, “Not let a good crisis go to waste” and it appears they are not letting the crisis go to waste and are using it to expand the size, scope and power of government.

I actually like this article by Ezra Klein. Often I’ve found his articles lacking in understanding of economics, an appreciation for incentives, etc. But this looks quite good. Well balanced and displaying a healthy skepticism about why Medicare’s adminstative costs are lower and if we can get such low costs in general for health care and if it is even desireable. Here are the last two paragraphs, and read the whole thing,

It’s also important to note that you don’t necessarily want administrative costs as low as they could possibly be. Some activities that are considered “administrative” are useful. Disease management, for instance, which accounts for some of the difference between Medicare and Medicare Advantage. Mental health counselors who are available by phone. Good-faith investigations into waste, fraud and abuse. Care coordination. Nurses who use e-mail or telephones to remind patients to take their drugs. Administration is not always wasteful.

But no matter how good you got at slashing administrative costs, they will never be a panacea to the problems of the system. Rick Kronick, a political scientist at the University of California at San Diego, has done some of the best work on administrative costs, and he summed the situation up quite well. “The main question,” he said, “is why are health care costs going up at 2.4 percent a year faster than GDP? And most of the answers to that question have nothing to do with administrative costs. The answers are that we do more stuff and have more technology. Even if we could wring administrative savings out of the system, which I’m all in favor of and would be a good thing, we’d still be facing the question of how to slow the rate of cost growth.”

Precisely.

For the sake of argument let us assume that Medicare’s administrative costs are lower than those of the typical health insurance company. Does this imply that Medicare is more efficient than the private company? I’ve been skeptical of this view point since one thing I’ve learned in economics is that firms want to maximize profits. You don’t do this by wasting money. In fact, at the profit maximizing level of output the firm is minimizing its costs. So, does it make sense that a health insurance firm is going to spend money it doesn’t have to on administrative costs?

One commenter put forward the idea that a CEO of a $10 billion dollar health insurance company is probably going to get paid more than the CEO of a $5 billion dollar health insurance company. Probably so, however, I’d also argue that the first CEO wont be CEO for long if he gets to the $10 billion mark by incurring losses of $5 billion. So I think we can rule this one out, or at the very least it needs quite a bit more to explain it than mere assertion.

So I’m still left thinking, “Really, the government is our model for efficiency?” This is the same government that has lost billions in the Pentagon and can’t find and probably never will. But when it comes to Medicare, which is an even bigger portion of the Federal government, nope they are so efficient we should implement the same standards globally. Even Paul Krugman indicates that this is true.

But the root source of Krugman’s beliefs disputes his views.

The higher administrative costs of private plans do not imply that those plans are less efficient than the traditional FFS program. Some of the plans’ administrative expenses are for functions, such as utilization management and quality improvement, that are designed to increase the efficiency of care delivery.—page 12

And via Greg Mankiw we now have this portion of testimony by Malcolm K. Sparrow, Professor of the Practice of Public Management at Harvard’s Kennedy School of Government,

The units of measure for losses due to health care fraud and abuse in this country are hundreds of billions of dollars per year. We just don’t know the first digit. It might be as low as one hundred billion. More likely two or three. Possibly four or five. But whatever that first digit is, it has eleven zeroes after it. These are staggering sums of money to waste, and the task of controlling and reducing these losses warrants a great deal of serious attention….

By taking the fraud and abuse problem seriously this administration might be able to save 10% or even 20% from Medicare and Medicaid budgets. But to do that, one would have to spend 1% or maybe 2% (as opposed to the prevailing 0.1%) in order to check that the other 98% or 99% of the funds were well spent. But please realize what a massive departure that would be from the status quo. This would mean increasing the budgets for control operations by a factor of 10 or 20. Not by 10% or 20%, but by a factor of 10 or 20.

Now at this juncture I want to say, “Why?” Why are Medicare’s Administrative costs so much lower, if they are indeed lower, than private industry? There has to be a reason and nobody that I know of has offered one. It is simply spouted as if it is true, always has been true, that private health insurance companies are dolts, always will be true, and if we just emulated Medicare we could save lots and lots of money that we could use to insure some of the uninsured you vile evil jerks!

In other words, Medicare’s really low administrative costs might come at a cost of hundreds of billions of dollars. If we emulate them in private health insurance then we will not be saving any money but losing money. Not only that, but we will likely accelerate the rate of increase of health care costs. After all we are going to having more wasteful spending on procedures that are not needed and any legislation on the issue will likely make access to health care easier for those who don’t already have access.

Now let us take a look at a graph that Dave Schuler dug up and posted today. Notice that for the 0-64 age range the U.S. is quite competitive with other countries, including the vaunted France. In fact, in eye-balling the chart the U.S. does better in terms of spending.

Note that the problem for U.S. health care spending is due to those 65 and older. Without them the U.S. spending on health care would be very low, even compared to places like France. If part of the reason why the spending on those 65+ is due to low administrative costs of Medicare and we force private health insurance to become more like Medicare then we could end up making the portion of the graph that is 64 and younger larger. We could exacerbate the problem, not make it better.

So answering this question of why are Medicare’s administrative costs lower is somewhat important. If there is research that answers this, I’d like to see it. But the distinct lack of such evidence leads me to believe it doesn’t exist. That nobody has asked the question let alone answered it.