Support for school choice has been steadily increasing nationwide, and, according to a recent survey, residents of New Jersey are leading the way. In a Monmouth University poll released this week by Excellent Education for Everyone (E3), an overwhelming majority of Garden State residents supported publicly-funded scholarship programs.

Specifically, 74 percent of residents supported establishing a corporate tax credit scholarship program for students in four urban districts. Also, 54 percent supported giving parents a voucher to pay for tuition at the public, private, or religious school of their choice.

The study comes in the wake of a flurry of activity in the Camden school district in New Jersey. The inefficiencies, fraud, and failure that have been associated with the district are well documented in a report by E3. As a result, NJ parents filed a class-action lawsuit against the district, demanding that the state fulfill its constitutional requirement to provide a “thorough and efficient” education. The lawsuit calls for meaningful public school choice or the ability to use public funds to attend private schools of choice.

While school choice has traditionally been championed by Republicans, the study found that Democrats overwhelmingly support these proposed scholarship programs. In fact, 80 percent of Democrats surveyed were in favor, as well as 85 percent of minorities.

This study shows that parents want to exercise more choice in their children’s education. While many parents have taken the next step in their fight for educational freedom, parents everywhere are realizing that parental choice in education is the most effective way to achieve reform.

Posted by Evan Feinberg at 12:50 PM | Permalink | TrackBacks (0)

Heritage's Peter Brookes moonlights as a blogger at FamilySecurityMatters.org. Today he blogged his take on the declassified National Intelligence Estimate (NIE):

So the declassified NIE is out for the entire world to see. In it, the intelligence community concludes that the Iraq conflict has become a "cause celebre" (perhaps best translated from French into English--in this case--as a rallying cry) for jihadists.

I don't think there is any surprise there.

Of course, the jihadists are going to use any excuse to promote their evil agenda. They've use/used the Israel-Palestinian conflict, U.S. troops in Saudi Arabia, Islam's eviction from southern Spain in the Middle Ages, the Crusades and a whole host of other reasons to advance their deadly cause.

But even more striking was the sentence that followed the now celebrated "cause celebre" sentence in the NIE document: "Should jihadists leaving Iraq perceive themselves, and be perceived, to have failed, we judge fewer fighters will be inspired to carry on the fight."

So, basically, the NIE is saying that victory in Iraq would be a victory in the fight against extremism. A pretty important judgment...

Notice that no one leaked this key judgment to the mainstream media.

But why should we be surprised? The leaker, of course, didn't reveal that positive conclusion because leaking it in tandem with the "cause celebre" clause would have completely undermined the political impact of the key judgment they did leak.

But then again, maybe they did leak both conclusions-and the mainstream media just decided not to report it? Unfortunately, we'll probably never know.

Posted by J. Lawrence Scholer at 09:19 AM | Permalink | TrackBacks (0)

No, not morally or culturally bankrupt, but is the United States fiscally bankrupt?

In the Tax Foundation's latest podcast, economist Lawrence Kotlikoff says yes. Government health policy is primarily to blame, he says. He suggests a voucher-based program for health care, as outlined in this paper. Also on the agenda: tax reform, accounts in Social Security, and drastic cuts in discretionary spending. Without action? "Meltdown is inevitable."

But does Congress have the willpower to enact reform? "They're not paying any attention," says Kotlikoff. "The country is broke."

One bright point: fundamental tax reform could make a big difference on America's long-term fiscal balance sheet.

Listen to the podcast here (mp3 link) and subscribe here.

Posted by Andrew Grossman at 12:37 PM in Federal Spending | Permalink | TrackBacks (0)

Oddly enough, one of the freest markets for health care in the United States is run by the federal government. The Federal Employees Health Benefits Program (FEHBP) is the health insurance market in which federal workers, from lowly bureaucrats to senators, purchase coverage. FEHBP participants have access to much more choice and are much more likely to be satisfied with their health coverage than other Americans.

Most Americans receive health coverage through the third-party payer system. Incentivized by the tax code, employers offer their workers coverage, often with little choice. Sometimes these plans are Cadillac plans, and sometimes they are stripped-down. Usually, the employee bears little of the direct costs of his medical expenses--the insurance company pays the bills directly and the employer pays the insurance company. Workers face few incentives, then, to keep down costs.

This is not just idle speculation; it is fact. A week ago, the U.S. Office of Personnel Management, which administers the FEHBP, announced the program's 2007 premiums. Here's the important part:

The U.S. Office of Personnel Management today announced premiums in the 2007 Federal Employees Health Benefits Program will rise an average 1.8 percent, marking the smallest rate increase in more than a decade.... Approximately 63 percent of FEHBP enrollees will not have a premium increase in 2007; another 15 percent will see a premium increase of less than 5 percent.

This increase in FEHBP premiums is below the rate of inflation.

Compare that to the third-party-payer market in which most Americans are insured. With that market's lack of choice, lack of competition, and poor incentives, is this mixed news--reported by AP this morning--really so surprising?

Workers won't find much comfort in the smallest increase in health insurance premiums since 1999. The 7.7 percent increase this year was still more than twice the rate of inflation.... Since 2000, health insurance premiums have gone up 78 percent; wages 20 percent.

So for the privileges of less choice and less control, American workers get to pay more, too. This is unfortunate.

But we know what works. Competition keeps costs down, even the face of massive health care inflation. The FEHBP's success proves this year after year. With Massachusetts set to open its statewide health insurance exchange (scroll down to "Component #1")--based on Heritage Foundation proposals that follow key parts of the FEHBP design--the next few years will be really interesting.

Posted by Andrew Grossman at 10:13 AM in Health Care | Permalink | TrackBacks (0)

Before Congress adjourns for the midterm elections, both the House and the Senate will take a look at Health Savings Accounts (HSAs). Today, the Senate Finance Committee is holding hearings on HSAs, and tomorrow, the House Ways and Means Committee is marking up HSA legislation.

Health Savings Accounts allow individuals to put funds in a tax-preferred account that can be used to pay for health care expenses, including deductible. This arrangement couples low-premium health insurance with a pre-tax savings option, an affordable alternative to traditional health coverage models.

HSAs date back to 2003 when the Medicare Modernization Act of 2003 was signed into law. As of January 2006, over three million people receive health insurance coverage from HSA-qualified high-deductible plans. In the individual market, nearly one-third of HSA-qualified policies were purchased by individuals who previously had no health coverage.

HSA legislation wending its way through Congress looks at ways of improving HSAs and access to them. In “Getting Health Savings Accounts Right,” Nina Owcharenko outlines both the right and wrongs ways of improving HSAs. Although HSAs have been a success thus far, lawmakers should resist the temptation to manipulate the market in favor of HSAs. Instead, they should focus on improving the administration and management of HSAs.

There is some temptation to manipulate the market in favor of HSAs through the tax code. Lawmakers should avoid this approach so that they can gauge the true success of HSAs. As Owcharenko writes, “The true success of Health Savings Accounts can be tested only in a fair and equitable marketplace in which consumer choice—not the government—determines winners and losers. Congress should be cautious when considering policy initiatives that tilt the market in favor of a specific product, even if that product is an economically rational choice.”

Posted by J. Lawrence Scholer at 09:42 AM | Permalink | TrackBacks (0)

Look to the coming entitlements crunch--when federal spending balloons to unprecedented levels, putting pressure on taxes and other government programs--and one program stands out, head and shoulders above the others. That's Medicare, which is expected to more than triple in cost, as proportion of the entire American economy, by 2040. By 2040, we'll spend about five times more subsidizing seniors' health expenses than we spend on national defense, according to GAO projections; today, we spend about 20 percent more on defense than Medicare.

In short, Medicare's explosive growth will squeeze the economy in every possible way. With the baby boomers on the verge of retirement, this problem begins...about now.

Congress is not serious about the coming entitlements explosion. It balked on reforming Social Security, a task comparatively easy compared to tackling Medicare. But still, it has made some small progress: introducing means testing into Medicare so that Bill Gates gets to pay a little more per month in premiums than a low-income senior. And interestingly enough, many of the same voices that led the charge against Social Security reform are speaking out against means-testing.

In a thoughtful editorial, the Chicago Tribune explains why means-testing really matters:

This is a monumental shift in thinking about Medicare, long overdue. The dollars aren't huge: The charge is expected to raise an extra $20.8 billion over 10 years, said Medicare chief Mark McClellan. That's nowhere near enough to offset the long term Medicare-funding shortfall, caused by spiraling health-care costs and aging Baby Boomers. But it is a refreshing dose of reality.

There is another monumental shift underway that could make an even bigger difference:

Health and Human Services Secretary Michael Leavitt recently told the Tribune editorial board about the federal government's initial efforts to create a more transparent system, so that patients know what things cost and can judge efforts by doctors and hospitals to deliver quality care. He described a system that would give patients, at a glance, vital information to judge cost and quality when deciding on a doctor or a hospital. Creating market competition in medical care is one of the main hopes for controlling health-care costs. That way, affluent seniors asked to shoulder more of their own medical costs will get their money's worth.

Introducing market mechanisms and competition into Medicare is (unfortunately) radical thinking, but there's plenty of evidence that it would work in keeping costs down and providing better value. As the Tribune argues, this--like means-testing--is just common sense.

Posted by Andrew Grossman at 07:53 AM in Health Care | Permalink | TrackBacks (0)

Ten years after Congress first passed a line-item veto to allow presidents to help control spending—and nine years after the Supreme Court ruled it unconstitutional in that form—Congress has the opportunity to try again. A line-item veto bill has already passed in the House, 247-172, in late June and has been awaiting action in the Senate ever since.

Most of the reform effort at the end of this session has focused on two proposals: the Federal Funding Accountability and Transparency Act of 2006, otherwise known as the Coburn/Obama on-line database, and the rule changes in the House that now require all earmarks to include the identities of their sponsor in the Congressional Record. Since President Bush challenged the Senate to pass the line-item veto in the last days of June, not much attention has fallen on the effort.

It’s a shame because, although the line-item veto has its limitations, it represents yet another step towards accountability and fiscal discipline. As Brian Riedl noted in March, this line-item veto gives the executive additional tools with no real downside:

The Line Item Veto Act of 1996 allowed the president to veto specific provisions that allocate discretionary budget authority, increase entitlement spending above the baseline, or create limited tax benefits.[1] This operated as a regular veto, with Congress needing a two-thirds vote to override it.[2] The Supreme Court struck down this authority, ruling that it violated the separation of powers. With a straightforward line-item veto forbidden, crafting an effective tool to eliminate wasteful, unnecessary individual spending provisions without running afoul of the Court now requires some creativity.

Thus, President Bush does not propose to create a traditional veto for line items, as the 1996 law did. Rather, his proposal would enhance the president’s existing rescission authority. Rescission is the process whereby the president sends legislation to Congress to cancel budget authority that was previously enacted but not yet spent. Like any legislation, rescission bills must be passed by the House and Senate and then signed by the president. Currently, however, Congress can kill a rescission request by voting it down or simply ignoring it. The President’s Legislative Line-Item Veto Act of 2006 improves on existing rescission authority in several ways:

• The president could “veto” entitlement changes and special tax breaks, as well as all discretionary appropriations;
• Congress would have to act on “veto” packages within 10 days of the president submitting them;
• Congress would have to hold up-or-down votes that could not be amended on the “veto” package bills;
• Senators could not filibuster a “veto” package bill; and
• Only a simple majority would be required to pass a “veto” package bill.

The question about the line-item veto isn’t whether it would do damage to the Constitution, it’s whether it would get used. This administration has been the most reluctant in American history to veto legislation, although it has used the threat of veto. The Senate probably takes this proposal less seriously considering this track record and may have thought to put more effort into the other reforms as a result.

The White House already can simply choose not to spend the monies appropriated by Congress, especially the earmarks in conference and committee reports. In fact, the line-item veto won’t apply to such earmarks—only those line items listed in the official budget. And nothing will get trimmed if the White House refuses to challenge Congress on spending, an effort sadly lacking in this particular administration over the past six years. But, President Bush’s support for the line-item veto indicates that he wants to change that in his final two years in office as evidenced by the hard push OMB Director Portman and other administration officials are making for this change

While some may object to this version of the line-item veto as doing too little, it’s important not to let the perfect become the enemy of the good. Later Congresses can address its shortcomings as they become clear and as voters demand more discipline in spending. Having this tool in the hands of the executive will allow for some challenge to the sillier projects attached to the federal budget, forcing Congress to vote on a number of embarrassing efforts, such as the $3 million allocated to the Charles Rangel Center for Public Service. Any tool that can shame Congress into reduced spending is worthwhile to the American taxpayer.

Posted by Ed Morrissey at 01:25 PM in Captain Ed , Federal Spending | Permalink | TrackBacks (0)

Ed Haislmaier sends along his thoughts on the dynamics of Wal-Mart's plan to offer generic drugs for four dollars. He writes,

The current economic dynamics of the U.S. pharmaceutical market have produced a situation in which all pharmacies—whether big chains like CVS, large retailers with pharmacies like Wal-Mart or grocery stores, or independent mom-and-pop pharmacies— sell on-patent drugs at little or no mark-up. Virtually all of their profits come from their mark-ups on generic drugs, plus any mark-ups on whatever else they sell in the store.

Thus, the effect of what Wal-Mart is doing is to lower the prices consumers pay by cutting its own profit margin on the products. It’s the same basic business strategy Wal-Mart has applied to everything else it sells—low per-unit profits, compensated for by high unit sales volume. The effects on Wal-Mart's competitors are the same—to compete on price they have to match Wal-Mart's volume, but to compete on volume they have to match Wal-Mart's prices.

The underlying economics of pharmaceutical markets that make generics the source of retail pharmacy profits can be illustrated with the following example:

Assume there are several branded products in a particular class of drugs, for instance statin drugs for lowering cholesterol. They all cost hundreds of millions of dollars to develop, test and bring to market, but pennies a pill to produce. So, let's assume their makers each sell them at about $100 for a 30 day supply. The innovator companies are using the mark-up to recoup their enormous up-front investment. They can do so because their patents prevent, for a limited time, anyone else from making and selling the drugs.

Because of the drugs' high wholesale price, there is little room for pharmacies to charge customers extra for dispensing the pills. The only way for pharmacies to get a better deal for their customers is to negotiate a better deal from the manufacturer, often a cut or rebate off the wholesale price, usually in exchange for higher sales volume. Most pharmacies don't have the volume to do that.

However, because of the similarities among drugs in any given class, it is possible for many, though not all, patients that two or more of the drugs in a class will work equally well. Thus, despite the monopoly rights granted each manufacturer, and even if all drugs in a particular class are still on-patent, some level of competition does exist, and manufacturers are willing to pay (through various forms of wholesale discounts) to have patients switched to their drug. Pharmacy benefit managers (PBMs) came into existence based on a business model for applying expertise at exploiting this opportunity for price competition between on-patent drugs on a large scale.

When one or two of those drugs go off-patent, generic companies can legally make and sell them. Like the original manufacturer they can make the drugs for pennies a pill, but they have a much smaller up-front investment to recoup. Thus, the wholesale prices for generics will be much closer to the marginal production costs. This will particularly be the case if two or more generic companies make the same drug, since competition between them prevents either from raising prices.

Now, pharmacies can buy the generic drugs wholesale at much lower prices. For purposes of the example, lets say that the wholesale price to the pharmacy for a 30 day supply of the generic is $5.

Now comes the fun part. The reference price in the mind of the customer, either individuals or a third-party like the employer or the insurer, is not the wholesale price of the generic, but rather the retail price of the on-patent drugs. So, if the pharmacy charges, say, $20 for the generic, that represents an 80 percent saving off any alternatives that are still on-patent. To the customer, that looks like a very good deal. But, it is also a 400 percent mark-up for the pharmacy over the wholesale price it paid for the generic.

Thus, pharmacies can keep their retail prices for on-patent drugs down close to their wholesale acquisition cost for those products, and offer much cheaper generic alternatives (both of which please their customers), while still making a profit out of their high (in percentage terms) mark-ups on generics.

Another piece of data helps to further illustrate these economics: Today in the U.S., half of all prescriptions are filled with generics, but that half represents only 10 percent of total spending on drugs.

Clearly, innovative drug makers could never afford to develop new drugs if all they could charge were generic prices. So, one can infer that about 90 percent of total current drug spending supports the research and development of new drugs—through not only direct R&D spending but also the associated sales and marketing costs of on-patent products and, yes, the high shareholder returns and salaries needed to attract big investment and top talent to the very high risk business of pushing ever forward the frontiers of medical science.

In contrast, if pharmacies can mark-up half the prescriptions they fill (the generics) by $5, $10, or $15 each, they can comfortably afford to make no profit whatsoever on the other half of the prescriptions they fill (on-patent drugs).

This works just fine until one of the pharmacies decides to cut its own profits from generics, in order to attract customers away from competing pharmacies—figuring it can make up the difference out of higher sales volume. That is what Wal-Mart just initiated.

Friday's Wall Street Journal (sub. req'd.) has more analysis of Wal-Mart's plan.

Posted by J. Lawrence Scholer at 10:44 AM | Permalink | TrackBacks (0)

In our efforts to expose the petty corruption involved in earmark abuses, we should remember that not all earmarks are pork and not all pork comes through earmarks. Earlier this week an AP story highlighted some questionable spending at the Legal Services Corporation, the federal agency that carries a mandate to provide legal assistance, at taxpayer expense, to those unable to afford it. Unfortunately, more of them do without legal assistance because some of the federal funding for the agency gets spent on other priorities:

Agency documents obtained by The Associated Press detail the luxuries that executives of the Legal Services Corp. have given themselves with federal money - from $14 "Death by Chocolate" desserts to $400 chauffeured rides to locations within cab distance of their offices.

The government-funded corporation also has a spacious headquarters in Washington's tony Georgetown district - with views of the Potomac River and a rent significantly higher than other tenants in the same building.

And board members wrote themselves a policy that doubled the amount they could claim for meals compared with their staff. …

The headquarters has multiple conference rooms and kitchen/pantry areas. Yet, the corporation's 11-member board of directors holds its meetings at hotels around the country, including Washington, at costs ranging from $20,145 to $55,125 - the latter in San Juan, P.R.

National Review picked up same story and provided more background. The tony Georgetown digs cost the LSC $17.1 million in leases, of which its Inspector General Kirt West estimates at least $1.3 million to be overpayment. West also noted that the lease includes arrangements for $2 million in payments to Friends of the Legal Services Corporation—an organization with “close ties” to the LSC’s board members. That, West told Congress, could represent a criminal conflict of interest.

Despite this track record of waste and abuse, Congress has voted to increase the agency’s funding, even while it had to intervene to keep the LSC’s board from firing West. The Senate has approved a $31.5 million increase, while the House gave the LSC $25 million more. No doubt the impetus for more funding came from reports that the LSC only services 50 percent of eligible clients, and that only 20 percent of all legal needs of low-income Americans are being met. However, one would think that Congress would insist on better money management by the LSC—and perhaps a more responsible board of directors—before giving them even more money to waste.

Or perhaps they would be better advised to cut all funding to the Legal Services Corporation. As Heritage Foundation President Edwin J. Feulner wrote earlier this month, plenty of questions surround the LSC’s own legal status. Despite explicit restrictions on representation of clients outside the U.S., the LSC actively recruited migrant workers in Mexico to join a lawsuit against American farmers. It also has violated prohibitions on allowing its resources to be used in class-action lawsuits in Georgia and California. Edwin Meese outlined these offenses to Congress in 2002—and the response to the waste and the abuse has been to give the LSC ever-expanding increases. Nor are these problems recent; Virginia Thomas and Ryan Rogers reported in 1999 that the LSC inflated its case workload in order to justify increased funding. This was no mere fudging, or a case of excessive rounding—LSC reported handling 370,000 cases in a year when they only handled 198,000, an overstatement of 86 percent. That’s significant even by Congressional budget standards, and indicates a systemic honesty issue at the LSC.

Reforming the mechanisms of appropriations in Washington, D.C. is an important first step in eliminating waste, fraud, and corruption. We need to make sure we’re keeping a close eye on all the other means that our government wastes money and under-delivers its services.

Posted by Ed Morrissey at 01:37 PM in Captain Ed , Federal Spending | Permalink | TrackBacks (0)

Roll Call reported yesterday on the effect that the new House rule requiring each earmarks to carry the identification of its sponsor. Because the House and Senate could not agree on terms that would cement this commonsense approach to open government in law, the House had to settle for a rule change. That hasn’t kept reformers in the Senate from trying to get a similar rule in the upper chamber, but they are using a rather strange strategy to accomplish it. According to the report, they’re deferring the matter to the Rules Committee chair, a Senator who has already established a long track record of opposing such reforms:

The two Senators taking the lead on reforming their chamber’s earmark rules need to come up with a measure that can sail through the Senate before GOP leaders approve it, a senior leadership aide said.

The Senate is struggling to match the reform enacted last week by their House colleagues, and with the clock ticking down to adjournment, it is unclear whether Senators will be able to produce any workable rules changes.

For now, Senate Republican leaders are deferring to Rules and Administration Chairman Trent Lott (R-Miss.) and ranking member Chris Dodd (D-Conn.), a GOP leadership aide said.

Similarly imperiled is a plan that Lott and Dodd want to push to eliminate the long-standing Senate tradition of secret holds, in which Senators can block legislation without identifying themselves. Republican leadership in the chamber remains opposed to the proposal.

Senator Lott’s track record indicates that he is unlikely to move quickly to reform earmarks. A Roll Call article from last year quotes the former Majority Leader as openly boasting of his ability to bury funding in bills so deeply that other Senators might never realize they’ve approved it. It also indicates that eliminating the secret hold might further enable other Senators in disguising their pork just long enough to be successful:

Still, during his more than 30 years in Congress, Lott said he has learned something about how to keep the likes of Coburn from stopping his pet projects from becoming law.

“The way I do it is, I fold them into bills where you can’t find it,” Lott said. “I’ve been around here long enough to know how to bury it.”

Indeed. There is little mystery about why Senator Lott and others want to end secret holds, especially given this rather telling admission. The hold notifies leadership that a Senator plans to object to a call for unanimous consent, a delaying tactic that allows members extra time to review the language in a proposed bill or resolution. It can’t stop the bill from receiving a vote, but as we saw earlier, it can complicate its path enough to get a lot of attention. While the value of secrecy in the holds is certainly debatable, the hold itself provides a longer feedback loop on legislation and spending. It makes it much more difficult for politicians to “bury” pork long enough to escape the red pencil during debate.

Rules on earmarks should clearly identify their source to allow voters to hold their elected officials responsible for the spending. However, reform should not have unintended consequences that make finding pork projects more difficult.

Posted by Ed Morrissey at 03:12 PM in Captain Ed , Federal Spending | Permalink | TrackBacks (0)

If the politics of appropriations seems somewhat different lately, you aren’t the only one to notice. The Examiner notes that the signing of the federal spending database bill this week will allow taxpayers to find and identify wasteful spending and hold politicians accountable for their actions:

First, for most of our history, the vast majority of Americans lacked the time or resources to keep track of how the federal government was spending our tax dollars. Even with the coming of the spreadsheet programs, personal computers and the Internet’s infancy in the early 90s, it was all but impossible for any but the most determined and technically savvy citizen to see where the tax dollars were going. Among the most visible contemporary results of that situation are congressional earmarks in which anonymous Members of Congress are able to insert spending projects that can enrich campaign donors, family members, favored special interests or the Member himself. Coburn has called earmarks “the gateway drug to spending addiction.” Progress is being made on that front, too.

Now with Coburn-Obama, every citizen with access to the Internet will be within a few mouse clicks of knowing where their tax dollars are going and who is benefitting from them. Such access moves our democracy beyond Government 1.0 web sites that mainly just provide passive information and encourages more active and informed citizenry. Call it the dawn of Government 2.0. It is especially fitting that a database of federal spending — the blood flow of governance — marks the opening of the new era.

We’ve covered this topic many times here, but the point is well worth emphasizing. As the federal government grows, its accounting has become more and more opaque—to the point where even its architects have no real specific understanding of how the money gets spent. That development has put a barricade between government and the governed, and one could argue that the power inherent in such an incomprehensible budgetary system substantially reduces our freedom, at least in terms of informed consent.

John Fund notes that neither party has truly come to terms with the new era for openness, and that the party in charge will pay the price if they do not do so soon:

As modest as it is, the transparency bill spent much of August in limbo after Senate Commerce Committee Chairman Ted Stevens of Alaska, chief defender of the infamous "Bridge to Nowhere," put a hold on it, using the tradition allowing any senator to secretly block a bill. These games feed the perception of an out-of-touch Congress and demoralize many GOP voters. "Every event I go to, someone complains about overspending and pork," says Rep. Chris Chocola of Indiana, one of the most embattled GOP incumbents. "They still don't think we get it." Many members simply don't believe the political costs of pork can ever exceed the benefits. Democrats have been largely silent. After all, they get about 45% of them even as a minority. "One man's pork is another man's steak," is how many members dismiss reform. …

The federal government is now an astounding 185 times as big in real terms as it was a century ago. A general sense that Republicans have forgotten why they were sent to Washington is a big reason why only 43% of Republicans approve of Congress in this month's Fox News poll. If Republicans can't better explain how they plan to get a grip on spending, many voters will conclude they both deserve and need a time-out from power.

The GOP contingent and a significant portion of the Democratic caucus addressed the issue last week, which perhaps indicates that some old dogs can still learn new tricks. The House passed a new rule defining earmarks and requiring earmark language to include the sponsor in the bill or conference report. While this does not create a searchable database that President Bush will sign into law, it does put all earmarks and their source into the Congressional Record. Combined with the new budget database, it will provide a powerful tool with which to investigate the influence of special interests.

All of this new oversight should cause some hesitation on the part of our representatives to associate themselves with needless outlays and vanity projects. Even more importantly, our efforts to put sunlight on processes that had been hidden in darkness for decades or longer will remind our legislators who works for whom in a representative democracy.

We have not yet won all the battles to shove the workings of federal appropriations into the open, but we have started well.

Posted by Ed Morrissey at 03:02 PM in Captain Ed , Federal Spending | Permalink | TrackBacks (0)

Yesterday Swedes dealt a blow to the almost-always-in-power Social Democrats by voting "in favor of a conservative candidate who has pledged to revise the Swedish welfare state," the New York Times reports. The Social Democrats, who have basically had a lock on the Swedish government for much of the past century, received 35.2 percent of the vote, their lowest total since universal suffrage in 1921.

The loss by the Social Democrats should deal a blow to Sweden's "social model," its high tax program often praised by Western liberals. (See this article in yesterday's Washington Times) While the center-right party, the Moderates, did, as their party name suggests, moderate some of their positions, the Social Democrats tied them to conservative views. As the Times reports,

But in a series of television and radio debates, [Prime Minister Goran] Persson tried to portray his opponent as a classic conservative in disguise, saying the conservatives would tamper with the country’s successful formula of high taxes, a large public sector, and generous benefits.

The fear tactics didn't work--hopefully it's a sign that curtailing the welfare state is not something that's fear-inducing.

The center-right voices in Sweden appear to be pleased. Johnny Munkhammar of Swedish free-market think tank Timbro has this to say,

A shift away from the corrupt and power-centered Social Democrats without ideas except to administer big government was important in itself. But there will be a shift of policy, particularly in the labor market. Problems will be attacked with reforms. Stepwise, of course, but substantial in the long run. And this is a government with a positive agenda. It is indeed a new start.

Munkhammar is the author of Beyond the European Social Model and European Dawn: After the Social Model. He spoke about the latter book here at Heritage in February.

Posted by J. Lawrence Scholer at 10:43 AM | Permalink | TrackBacks (0)

Heritage's James Gattuso, posting on the Tech Liberation Front, finds an interesting provision in the Senate's latest telecoms bill:

Guess the State and Win a Subsidy

Are you good at geography? If so, you may enjoy the small geography quiz buried deep inside of the telecommunications bill now pending in the U.S. Senate. Hidden on page 121 is a paragraph directing the FCC to expand universal service payments to "insular areas, including any insular area that is a State comprised entirely of islands..."

Can you name all the states that are comprised entirely of islands? No, Rhode Island isn't one of them. As it turns out, the list of states covered by this provision is quite short:

1.Hawaii.

And, by total coincidence, a senator from that state -- Daniel Inouye -- is the co-chairman of the Senate Commerce Committee -- which wrote the bill.

The provision stems from a decision by the FCC last year to change the way that telephone subsidies are calculated for "insular" areas such as Puerto Rico and Guam, thus increasing the amount they could get. That led, in turn, to a request by Hawaiian Telcom that Hawaii also be considered an "insular" area. The term usually includes only U.S. territories and possessions, not states, thus leaving Hawaii in the cold, so to speak. The provision in the Senate bill -- proposed by Senator Inouye as a committee amendment -- solves that problem, by creating a brand-new class of insular areas: states comprised entirely of islands.

The provision illustrates how far the bill has strayed from a hoped-for focus on eliminating unneeded regulation. At its core, there still is substantial positive reform: streamlining of the video franchising process. But that important change is surrounded by a luau of special interest provisions.

Commerce Committee Stevens yesterday said that due to controversies over the net neutrality issue "may well lead to [the telecom measure's] total defeat this year after 19 months of work..." But given provisions such as the one on page 121, one has to wonder how well that 19 months was spent.

Posted by Andrew Grossman at 08:47 AM in Regulation | Permalink | TrackBacks (0)

One derives a certain amount of pleasure from being able call out the NY Times. That gratification is only intensified when the paper admits that it made a mistake.

Last week, the Times ran an article on Wal-Mart and conservative research organizations. Wal-Mart money has flowed to conservative organizations, and members of these conservative organizations have voiced support for various free enterprise Wal-Mart policies. The Times thought it had a damaging pay-for-policy expose.

It didn't, and many people commented on the lack of a story. In response to the article, Tim Kane, who was named in the article, fired off a letter, which we noted in this blog, to the paper. The Times obviously read the letter because today it issued a correction and pointed out its errors in the research and execution of the piece.

Posted by J. Lawrence Scholer at 01:00 PM | Permalink | TrackBacks (0)

In a piece in this morning's Examiner, Stuart Buck and Megan McArdle explain how the Detroit Free Press screwed up in its map purportedly showing that household income across the country fell off a cliff:

If the journalists had checked the helpful section of the Census Bureau Web site called “Using the Data”, they would have discovered this warning: “Users should exercise care when comparing income figures from the American Community Survey with those of Census 2000.”

They might also have found another Census Web page warning that “[E]stimates from any one survey will almost never exactly match the estimates from any other (unless explicitly controlled), because of differences such as in questionnaires, data collection methodology, reference period, and edit procedures.” Or had they Googled “Comparing the ACS and the Census,” they’d have discovered a helpful document on the comparison problems, available from multiple state governments. It calls the two income numbers “not comparable.”...

What does this mean? Simple: If you start with income from the 2000 census, and then compare it to income from the 2005 ACS, which we know tends to be much lower because of survey differences — you’ll find a much greater decline than really was the case.

McArdle and Buck, on their respective weblogs, did yeoman's work in figuring this one out. And Heritage's Rea Hederman and James Sherk made a few good points on the matter, as well.

Posted by Andrew Grossman at 08:24 AM in Economy | Permalink | TrackBacks (0)

Yesterday, the Senate Judiciary Committee held hearings on the Justice Department's corporate prosecution guidelines. As the New York Times reports, Sen. Arlen Specter, the committee's chairman, and Sen. Pat Leahy, the ranking member, want the Justice Department to amend the guidelines.

Former attorney general, and current Heritage Fellow, Ed Meese also spoke before the committee. The Times reports,

The committee also heard from Edwin Meese III, who was attorney general during the Reagan administration. He said that the Justice Department should eliminate the two guidelines on the disclosure of legal communications and the termination of legal fees as factors for avoiding indictment. Otherwise, Mr. Meese said, Congress should pass legislation to protect those rights.

In an August webmemo, Prof. John Hasnas wrote on DOJ's "hardball policies." Hasnas explains that, while reforms that prevent coercion of corporations are a good idea, it's important to look to what causes these coercive policies, namely "the federal standard that assigns criminal responsibility to corporations regardless of corporate culpability."

As Hasnas writes,

Changing the legal standard for corporate criminal responsibility to require wrongful corporate action for corporate conviction would restore the balance of power between the prosecution and the corporate defendant to one more appropriate to our adversarial system of justice and thus remove the source of DOJ’s coercive power. No less important, such a reform would renew business leaders’ incentives to ensure legal compliance and good corporate citizenship.

Hasnas also has a book on white-collar crime, Trapped: When Acting Ethically Is Against the Law.

Posted by J. Lawrence Scholer at 10:19 AM | Permalink | TrackBacks (0)

Heritage's Jim Weidman sends these remarks on a recent NY Times story:

Friday’s New York Times Business section led with what sounded like a terrific expose: “Conservatives Help Wal-Mart, and Vice Versa.” But, as blogger Daniel Drezner notes, “Little Money Flowing Between Wal-Mart and Washington Think Tanks" would have been a far more honest headline.

The story points a finger at Heritage’s own Tim Kane, making the sinister observation that he once wrote an op-ed which expressed the view that Maryland’s “Wal-Mart Health bill,” designed by unions to punish Wal-Mart, was lousy economic and health policy. Dr. Kane has responded to the Times,

It's usually a treat to see one's name in the paper. Not so today, when the Times… insinuates I’m a paid-for voice for Wal-Mart. As the story “explains,” (1) I’m a Heritage Foundation analyst and have written about the company, and (2) Heritage has received $20,000 from the Walton Family Foundation over the last five years. The latter was news to me, but I’m puzzled why the Times views such modest donations (a hair over one one-hundredth of one percent of our budget) as newsworthy.

I’m further embarrassed for the reporters, who never spoke with me, never bothered to do even basic research before impugning my integrity. A simple Google search on my name and Wal-Mart would have produced a top link that leads to my paper titled "Wal-Mart's Perverse Strategy on the Minimum Wage"— where I took the company to task for its hostility to free markets and fair competition, and which was published by Heritage last October.

The truth is that I have been vocal about free markets, not Wal-Mart. To imply that I am some sort of conservative hired gun was both lazy and false.

The Times happily and repeatedly labels the Bad Guys (Heritage, AEI and the Manhattan Institute) as conservatives, but it describes one of its Good Guys (the National Committee for Responsive Philanthropy) merely as “a research and watchdog group.” Apparently it would be unseemly to characterize the group as “liberal,” even though a glance at its web site or a peek at its funding sources leaves no room for doubt as to which side of the ideological aisle it occupies. (At $75,000, the 2004 grant from George Soros’s Open Society Institute, for instance, leaves the Walton family’s gift to Heritage in the dust.)

On the same page, the Times runs a glowing story on Clinton Treasury Secretary Robert Rubin. That article recounts how Rubin has started “a small research group aimed at generating policy ideas for Democratic presidential candidates, as well as elevating the next generation of Democratic-supporting financiers.” Only after the jump do we learn that (1) the project is “housed in the Brookings Institution;” (2) it’s funded primarily by “Rubin and his financial backers, all of whom contribute an equal amount each year—said to be between $100,000 and $150,000” each; and (3) he does this while pulling down $15 million/year from Citigroup, where he has “no operational responsibility” and his contract gives him free rein to “indulge” his outside interests and use Citigroup’s planes in the process.

The top story on the page, remember, raises an eyebrow because Tim Kane had the nerve to write an op-ed that opposed beating up on Wal-Mart. So how does Times view Rubin’s Citigroup-based fundraising on behalf of a liberal think tank that aims specifically to influence Democratic presidential candidates and “elevate” Democrat-supporting financiers? According to the headline, that makes Ruben a “Policy Guru.”

Posted by J. Lawrence Scholer at 10:56 AM | Permalink | TrackBacks (0)

Yesterday, Bill Frist surprised everyone by seizing a propitious moment to demand a floor vote on S. 2590, the Coburn-Obama bill creating a searchable online database for all federal spending. Taken aback, no senator present objected to a call for unanimous consent to the vote, and the bill passed by acclamation. Senators Tom Coburn and Barack Obama released a statement crediting the energy of American citizens for pressing Washington to adopt the measure to increase openness and accountability in government:

“This bill is a small but significant step toward changing the culture in Washington. Only by fostering a culture of openness, transparency and accountability will Congress come together to address the mounting fiscal challenges that threaten our future prosperity.”

“The group that deserves credit for passing this bill, however, is not Congress, but the army of bloggers and concerned citizens who told Congress that transparency is a just demand for all citizens, not a special privilege for political insiders. Their remarkable effort demonstrates that our system of government does work when the people take the reins of government and demand change,” Dr. Coburn said.

“By helping to lift the veil of secrecy in Washington, this database will help make us better legislators, reporters better journalists, and voters more active citizens,” Obama said. “It’s both unusual and encouraging to see interest groups and bloggers on the left and the right come together to achieve results. This powerful grassroots alliance shows that at the end of the day, Americans want to see Congress work together to get something done and not continue to engage in the partisan gridlock that so often brings Capitol Hill to a grinding halt.”

The effect of the combined power of common-citizen activism and cross-spectrum partnerships of newspapers and think tanks has been nothing short of amazing. Perhaps the most gratifying part of the experience has been to see politicians who attempted to engage in old-school procedural obstruction get publicly shamed into changing their ways. In a way, we just saw a million Mr. Smiths go to Washington—and Washington recognized it.

However, the effort is far from complete. The House passed a different version of the legislation last June. H.R. 5090, sponsored by Rep. Tom Davis, excluded government contracts from the database, which is a mistake given the nature of earmarks. Normally, when the two chambers pass significantly different legislation, they form a conference committee to reconcile the two bills and resubmit the modified bill to both houses for approval. This process takes quite a bit of time, however, and the session has precious little of that left.

And so some are now pressing for House Speaker Dennis Hastert to submit S. 2590 for a vote in the House and drop H.R. 5090 altogether. This would eliminate the need for a conference committee, especially since Rep. Davis, the House bill’s sponsor, has agreed to include contracts in any case. Minor issues, such as separating contracts and grants, could be quickly resolved, so long as the final version retains the core of S 2590: downloadable and complete federal budget data.

Whatever the two chambers’ leaders choose as their legislative strategy to make it happen, they should work quickly and not allow a handful of politicians to use procedural obstacles in order to keep the federal government’s expenditures under wraps. This job is not finished, and citizens should remain focused on ensuring that Congress acts on fiscal transparency this session.

Posted by Ed Morrissey at 10:02 AM in Captain Ed , Federal Spending | Permalink | TrackBacks (0)

As a few members of the Senate continue to play games with S.2590, the Coburn/Obama bill creating an online searchable database for federal spending, the enthusiasm for smoking them out has declined considerably. The Hill reports that watchdogs such as Porkbusters and OMB Watch have begun counseling their supporters to put less energy into detective work to unmask the secret holders and to put more pressure on the leadership of both Senate caucuses to bring the bill to the floor:

Bloggers on both sides of Washington’s partisan chasm called for a halt to Senate blocks on the bill, which would set up a public database of all federal grants and contracts, including those resulting from earmarks. Senate Commerce Committee Chairman Ted Stevens (R-Alaska) and an unnamed Democrat were said to have active holds as of midday, but congressional sources said Stevens removed his late yesterday.

At this point, supporters’ playing Sherlock Holmes produces less benefit and may play into a strategy of tactical delays. In the end, it really doesn’t matter whose hold remains on the bill if a handful of senators intend to deny unanimous consent to a floor vote. One hold or a dozen will still force the bill to survive up to three cloture motions over six legislative days before proceeding to an up-or-down vote.

Under normal circumstances, this would present little difficulty. However, the Senate is running out of legislative days before the upcoming election; according to Majority Leader Bill Frist, the Senate has only 15 days before it goes home for the election. Squeezing the database bill into an already-packed legislative agenda and keeping up with the cloture motions will require some effort. That doesn’t take into account the time needed to reconcile S.2590 with its House cousin.

For this reason, activists would be better served by channeling their energies into demanding immediate action on the bill now despite the holds. Frist has already gone on record saying that he will take all action necessary to get S.2590 passed before the election. The Hill notes that Minority Leader Harry Reid, who has offered public support for the bill, has not made any similar commitment to pushing against procedural obstacles. To see if Reid is indeed serious about increasing the transparency of federal spending, activists might ask him for a signal against the three-card monty of holds in which senators from both caucuses have engaged.

Posted by Ed Morrissey at 03:19 PM in Captain Ed , Federal Spending | Permalink | TrackBacks (0)

A map in the Detroit Free Press has been making the rounds among economic naysayers. The map purports to show major drops in nearly every state's median household income between 1999 and 2005. Income is down 12 percent in Michigan, for example, and 3.6 percent in California. If these statistics were accurate, they would paint a compelling picture of a troubled economy.

But as economics journalist for the Economist Megan McArdle explains, the analysis is bogus. The problem is that the baseline numbers, from 1999, are from the Census, while the more recent ones come from a new report called the American Community Survey. But the two datasets are basically incompatible--they're measuring slightly different things. McArdle decided to use the Free Press's methodology to look at the difference in incomes between 1999 and 2000. The results are shocking, reflecting how broken the methodology is:

I went to the 2000 Census (which tracked 1999 income) and compared it to the figures from the 2000 ACS state ranking table of median income. You can see my results in this spreadsheet. Even in nominal dollars, using this methodology, most states experienced a drop in median income in 2000. If I inflate the 1999 figures by the 3.36% inflation figure derived from the BLS's inflation calculator, all but three states saw median household income fall. If you look at the CPS page, by contrast, it alleges that median income for the United States as a whole rose by about $1,300, or roughly 3.2%, which is more in line with what most of us remember from those halcyon days (sigh). Indeed, as Stuart discovered, the Census itself noted this disparity.

The bottom line:

Given that there was huge divergence between the 1999 income figures from the Census, and the 2000 figures from the ACS--a rather obvious spot check--I personally would never have dared make such a comparison in print, even with footnotes. All their graph really tells us is that the new ACS produces lower estimates of median income than the Census long form. The ACS may well be more accurate. But it doesn't matter; you can't compare apples to oranges just because the apples are prettier.

Exactly.

Posted by Andrew Grossman at 12:29 PM in Economy | Permalink | TrackBacks (0)

Now that Congress has returned to business after the summer recess, perhaps the leadership can address the coming disaster in entitlement spending. As Brian Riedl notes, the demographics and added benefits to Medicare and Social Security will see entitlements metastasize from 8.4 percent of GDP today to 18.9 percent in 2050, or almost the entire amount used for the current federal budget.

One hopes that the political class can do better than D.C.’s latest effort to show Medicare savings, however. As the AP reported two weeks ago, Medicare will simply delay payments in an attempt to shove a few billion dollars out of this year’s ledger:

Many health care providers will have to make do next month without a government paycheck or two. The Bush administration says it will not make any Medicare reimbursements to hospitals, doctors and scores of other providers during the last nine days of the current budget year, from Sept. 22-30. Congress ordered the hold.

The providers taking care of older people and the disabled will get paid in full after the new budget year begins Oct. 1. They should not count on any interest on the amount they are owed.…

By delaying payments, the government moves $5.2 billion in Medicare expenses to next year's budget, rather than the current one.

This type of shell game has been tried in the past during the 1980s. Congress allowed it to occur on one occasion, but stopped it on the other. As we can see, the “check’s in the mail” method of saving money does little to reform the system, but instead penalizes health-care providers for participating in the system.

While entitlement spending remains one of the nation’s sacred cows, we can expect little substantial effort for reform. Eventually, however, politicians will have to address the demographic time bomb, and the longer we wait the more painful it will be. As Heritage wrote last December, this “is merely an accounting gimmick and an insult to doctors and other medical professionals.” Robert E. Moffit presented a much more effective plan to address the critical flaws of the current system, and reformers should use it as a starting point for real change.

Posted by Ed Morrissey at 02:34 PM in Captain Ed , Federal Spending , Health Care | Permalink | TrackBacks (0)

The Hill takes a revealing look at the nature of earmarks and their correlation to electoral opportunities today. Jonathan Allen notes that not all incumbents get served equal portions of pork and that the amount of money allocated by earmarks in a particular district has a high degree of correlation to the difficulties of an incumbent’s re-election bid:

Veteran House Republican Ed Whitfield is poised to take home $650,000 in Labor-HHS-Education appropriations earmarks this year, a sum that will no doubt be welcome in his hardscrabble western Kentucky district but which pales in comparison to the federal largesse due to arrive across the rest of the Bluegrass State.

Whitfield, who is neither a member of the Appropriations Committee nor in danger of losing on Election Day, will see his district haul in less than one-third of the $2 million lined up for the northeastern 4th District, where freshman Republican Rep. Geoff Davis is battling to hold his seat in the face of a fierce challenge from his predecessor, Democrat Ken Lucas.

Whitfield’s take is barely more than a quarter of the $2.4 million slated to flow into appropriator Rep. Hal Rogers’s southeastern 5th District, and is paltry compared to the money headed to the Louisville-based 3rd District where Rep. Anne Northup has used her slot on the Appropriations Committee and its Labor-HHS-Education subcommittee to help protect her perenially precarious seat for the GOP. Northup’s district is in line to get a dozen earmarks worth a total of $3.6 million.

These funds come from just one appropriation bill, the proposed Labor-HHS funding that Congress will take up now that their summer vacation has concluded. The Hill’s analysis shows that a whopping 30 percent of all earmarked funds (out of a total of $146 million in pork) go to 15 Representatives – all of them appropriators. In fact, the average pork chop for appropriators comes to $2.76 million, while endangered incumbents get $1.35 million – and everyone else averages $663,000.

In other words, we get to pay for their re-election campaigns, not through voluntary contributions, but from the tax money extracted from us by the federal government. Perhaps this is a new version of campaign finance reform, but I suspect it’s a far older type of politics that has spun out of control.

This bill is only one of a series of appropriations that Congress has to finish before the end of this session. Even with that limited scope, the Hill reports that 97 percent of all House districts benefit from earmarks in this one bill. Imagine the scope of the problem when Congress appropriates funding for the rest of the government.

Posted by Ed Morrissey at 01:27 PM in Captain Ed , Federal Spending | Permalink | TrackBacks (0)

The U.S. completed a successful missile defense test this morning. Here's the press release from the Missile Defense Agency.

The Missile Defense Advocacy Alliance has more.

The Heritage Foundation has a number of resources on missile defense, which you can find here.

Posted by J. Lawrence Scholer at 01:59 PM | Permalink