The Independent Institute


The Carbon Tax: Welfare Triangle, or Welfare Obelisk?

The Welfare Triangle ... and Obelisk

The Welfare Triangle ... and Obelisk

Two recent position papers from the conservative Niskanen Center and the libertarian Cato Institute take diametrically opposite positions on the desirability of a Carbon Tax.

Jerry Taylor, president of the Niskanen Center, argues in his 2015 “The Conservative Case for a Carbon Tax” that, “conservatives should embrace a carbon tax ... in return for elimination of EPA regulatory authority over greenhouse gas emissions, abolition of green energy subsidies and regulatory mandates, and offsetting tax cuts to provide for revenue neutrality.”

On the other hand, Robert P. Murphy, Patrick J. Michaels, and Paul C. Knappenberger conclude in their 2015 Cato working paper, “The Case Against a Carbon Tax,” that “In both theory and practice, a US carbon tax remains a very dubious policy proposal.” (References are given below in order of appearance.)

In 2007, the Supreme Court ruled that the 1970 Clear Air Act gave the EPA authority to restrict carbon dioxide emissions if it found that they are harmful to the environment, so that the only way to undo this authority now is to amend that act. This will require a majority in both houses, including a filibuster-proof majority in Senate, plus the President’s signature. By their choice of a presidential nominee, Republicans have all but conceded control of the White House to the Democrats for another four years, and are increasingly likely to lose control of one or both houses of Congress in January. Time is therefore quickly running out for Republicans in Congress to offer to exchange a carbon tax for elimination of EPA command-and-control restrictions of carbon emissions, as proposed by Taylor. Hillary Clinton is already proposing a vast expansion of extra-legislative carbon restrictions under the assumption that Republicans will never go along with a carbon tax. (“Clinton’s Climate Change Plan Avoids Mention of Carbon Tax,” New York Times, July 3, 2016) Grover Norquist might disapprove of any tax increase, but these are desperate times.

Another Obamacare Architect Recognizes Its Unintended Consequences

Dr. Bob Kocher, an Obamacare architect turned venture capitalist, has admitted the law has had a significantly negative unintended consequence:

When I joined the Obama White House to advise the president on health-care policy as the only physician on the National Economic Council, I was deeply committed to developing the best health-care reform we could to expand coverage, improve quality and bring down costs.

What I got wrong about ObamaCare was how the change in the delivery of health care would, and should, happen. I believed then that the consolidation of doctors into larger physician groups was inevitable and desirable under the ACA.

Well, the consolidation we predicted has happened: Last year saw 112 hospital mergers (up 18% from 2014). Now I think we were wrong to favor it.

(Bob Kocher, “How I Was Wrong About Obamacare,” Wall Street Journal, July 31, 2016.)

Dr. Kocher joins Dr. Zeke Emanuel as another Obamacare architect who has realized giving the federal government this much power to shape the heath system is not having the outcome he anticipated. Back in 2009 and 2010, Dr. Kocher believed that the consolidation of physicians and hospitals into large health systems would lead to higher-quality care at lower cost. As Dr. Kocher notes, the systems are consolidating, but they are not hitting cost and quality targets.

Instead, smaller, physician-led practices do better at such improvements. Now that he is a professional investor in medical innovation, Dr. Kocher sees something that was not apparent when he worked in government. He recognizes that smaller practices are nimbler and more responsive to patients’ needs.

However, practices are consolidating because larger, bureaucratic health systems are better able to comply with the massive regulatory burden imposed by Obamacare. Dr. Kocher pleads with the federal government to rewrite the rules to allow smaller, nimbler practices to succeed.

Dr. Kocher, and other former Obama administration officials who are now pursuing entrepreneurial opportunities in the health system they wrought, are in the best position to advocate for such reform. Unfortunately, it is just not in the nature of big government to favor smaller, nimbler competitors over large, bureaucratic ones.

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For the pivotal alternative to Obamacare, see the Independent Institute’s widely acclaimed book, Priceless: Curing the Healthcare Crisis, by John C. Goodman.

Chemotherapy Payment Reform: Medicare Is Missing the Elephant in the Room

37468903 - iv dripLast May I wrote about the uproar over Medicare’s proposed changes to how it will pay doctors who inject drugs at their offices. This largely concerns chemotherapy. Currently, physicians buy the drugs and Medicare reimburses them the Average Sales Price (ASP) plus 6 percent. The proposed reform would cut the mark-up to 2.5 percent and add a flat fee of $16.80 per injection.

I did not think the reform would have a positive impact, but I also thought criticism was overblown. Well, Medicare has managed to irritate all the affected interest groups to such a degree that it is likely to toss the proposal and go back to the drawing board.

A new analysis published by Memorial Sloan Kettering Cancer Center explains where Medicare went wrong, politically. The agency irritated both drug makers and physicians because the reform would have cost both groups money. If Medicare had raised the flat fee to $24.66, then 55 of 100 most prescribed chemotherapy drugs would have been more profitable for doctors and 45 would have been less profitable. The higher the flat fee, the more likely oncologists would embrace the reform.

However, here is the kicker: The high cost of chemotherapy is not driven by the current reimbursement; rather, it is driven by an increasing share of injections taking place in hospital outpatient wards instead of doctors’ offices. Hospitals have a different Medicare reimbursement scheme.

First, Do No Harm

7111309_MLPrimum non nocere, or, in English, “first, do no harm,” is a venerable maxim often traced to the Hippocratic Oath. It has long served as an important admonition in the ethics of physicians and other healthcare providers. It seems an eminently sensible rule. In a way it resembles the provision in Catholic moral teaching that one must not do evil in the hope or even the expectation that good will come of it.

The idea merits much wider application. Indeed, it would be a godsend if governments applied it to all their actions.

However, if applied consistently across the board, it would shut down government as we know it completely. Such involuntary government cannot even exist without first doing great harm, namely, compelling tribute from one and all for supporting the government, notwithstanding that many of those forced to pay may want nothing to do with the government and others may want the government but not value its services as much as they value the funds they are forced to cough up. In short, all governments as we know them rest on a clear wrong, namely, extortion (euphemistically called taxation), often supplemented by outright robbery in the form of fines, fees, civil forfeitures, and other confiscations backed by threats of violence against those who refuse to comply with the government’s demands.

Privacy Rights, Cronyism, and Jason Bourne

Jason-Bourne-Movie-PosterHollywood’s rediscovery of freedom is cropping up in interesting places more and more. I’ve discussed themes emphasizing individual responsibility and skepticism about government in films such as Captain America: Civil War, the Divergent trilogy, and other media, but these ideas might have real staying power if what I just saw in Jason Bourne, the Matt Damon vehicle based on the Robert Ludlum novels, is an indicator. The danger of government infringement on privacy rights through mass surveillance is central to the film’s story as well as society and the tech community more specifically—see the new Independent Institute book, American Surveillance, by Anthony Gregory on this issue—even though the inclusion of this theme is creatively awkward in the film. In other words, the film’s creators seem to be making a statement.

On the surface, Jason Bourne is what viewers have come to expect from this franchise—well packaged, tightly packed action films featuring excellent performances by A-list actors such as Damon, Tommy Lee Jones, and Julia Stiles. The plots in the movies tend to be a bit thin, and this film is thinner than most.

After vanquishing the undercover CIA assassination programs Treadstone and Blackbriar, Jason Bourne is off the grid. He earns a living as an underground fighter, dispatching opponents with power and aggression. Bourne is brought back to the surface when Nicky Parsons (Julia Stiles) discovers files linking his father to the founding of Treadstone, the original covert operation, and Jason Bourne’s recruitment into the program. It’s Bourne’s quest for the truth about this familial link, and what it means for his character, that drives the film’s main plot.

Voting Reform: Putting Lipstick on the Collective Pig Is a Dumb Idea

23097571 - pig in lipstick - saying, idiomIn 2010, California voters approved a “top-two” primary system for congressional and statewide elected positions where primary voters choose among all candidates in all parties for each position. The top two vote getters in the primary, regardless of party affiliation, move on to the general election to face each other. The argument at the time was that this system would produce more “moderate” candidates with more “moderate” policy positions, and increase competition. There is little indication that it has moderated anything. In fact, it has worked to exclude third-, fourth-, and nth-party candidates from the general election.

Case in point is this November’s U.S. Senate race in California between extreme liberal Democrat Kamala Harris and somewhat less extreme liberal Democrat Loretta Sanchez. No other parties will be represented on the ballot. Harris will win. According to a new poll, half of Republicans and 34 percent of independents in California said they will not vote in this senate race.

Another voting reform, touted as producing more moderate outcomes, is approval voting, where each voter can vote for as many candidates as they wish on the ballot for each elected position. The single winner is the most-approved candidate, the person with the most total votes. The idea dates back to 1977 when Guy Ottewell first described the approach. In 1978, a couple smart guys, political scientist Steven Brams and mathematician Peter Fishburn, fully developed the concept in the American Political Science Review. More smart guys are promoting approval voting at the Center for Election Science (CES).

When Should We Have to Present a Photo ID?

18833633 - man handing a police officer her licenseThis article explains that a Federal Appeals Court recently struck down a requirement that voters in North Carolina must show a photo ID to vote. I realize that this is a partisan issue and I’m not trying to make a partisan argument. I’m just wondering when it is reasonable to be required to show a photo ID.

If I’m driving a car, the law requires that I carry my driver’s license and present it when asked by law enforcement personnel. Why should I need to present a photo ID to drive a car, when I don’t need one to vote?

One answer might be that voting, unlike driving, is a right protected by the Constitution. But then, so is the right to bear arms. But if I want to carry a gun, my state requires that I also must carry a concealed weapons permit, a photo ID. Why do I need a photo ID to exercise my constitutional right to bear arms but not my constitutional right to vote?

(Note that this varies from state to state. Why do I not have the same constitutional rights in one state as another? I live in Florida, where concealed carry is allowed for people who have a permit, but open carry is prohibited even to those with permits.)

The court’s rationale was that their ruling addresses the legacy of racial discrimination in North Carolina. But in that case, requiring a concealed carry permit to exercise one’s Second Amendment rights would appear to be even more discriminatory. First, there is the cost of acquiring the permit, which places a disproportionate burden on the poor. Second, a disproportionate number of blacks have felony convictions, often for victimless “crimes” like drug use, which bars them from getting a permit. The requirement to have a concealed carry permit seems more discriminatory to me than the requirement to show a photo ID to vote.

I’m an economist, not a legal scholar, so maybe there is some legal rationale I don’t understand. But I can’t figure out why the law would allow people to vote without showing a photo ID, but requires one to drive, or to carry a firearm.

Politics and American Surveillance

american_surveillance_1800Editor: Today is the publication date of the Independent Institute’s newest book, American Surveillance: Intelligence, Privacy, and the Fourth Amendment, by Anthony Gregory (Research Fellow, Independent Institute). Published for Independent by the University of Wisconsin Press, this widely acclaimed new book traces the history of government surveillance in the U.S. that transcends party divides, urging us to look deeper into government policy and how best to protect individual privacy.


Whatever else it might be, November’s election won’t be a referendum on surveillance and privacy. Hillary Rodham Clinton voted as Senator for the USA PATRIOT Act in 2001 and 2006, and Donald Trump has approved its renewal, saying he tends to “err on the side of security.” In the Democratic debates, Clinton harshly criticized NSA whistleblower Edward Snowden, insisting, probably wrongly, that he “could have gotten all of the protections of being a whistleblower” and “raised all the issues” without breaking the law. Trump has called Snowden a traitor, promised to get Russian president Vladimir Putin to hand him over, and in the past even suggested him worthy of execution. Both candidates want to expand foreign intelligence. Clinton recently told Fox television host Bill O’Reilly that among her “priorities is to launch an intelligence surge” and more information-sharing to combat terror. Trump told CBS journalist Leslie Stahl that, to defeat ISIS, “we’re going to have unbelievable intelligence, which we need [and] right now, we don’t have.”

Both major political parties have nominated surveillance hawks for the highest office in 2016, but we could excuse the public for discerning partisan differences. In recent years, both sides have postured as disagreeing fundamentally. Barack Obama ran for president echoing fellow Democrats’ condemnation of President George W. Bush’s attempts to immunize telecoms implicated in NSA warrantless wiretapping. Under Obama’s presidency, the Republican National Committee denounced the NSA’s “dragnet program” as likely “the largest surveillance effort ever launched by a democratic government against its own citizens” and its mass data collection as “contrary to the right of privacy protected by the Fourth Amendment.” Inconsistent politicians have mirrored a shift among constituents. The Pew Research Center in 2006 found that 37% of Democrats and 75% of Republicans considered Bush’s surveillance program acceptable. In 2013, 64% of Democrats and 52% of Republicans approved NSA surveillance under Obama.

The Democratic Platform on Health Care: Bad, but Not Universally Bad

20802345_MLThe Democratic National Convention has produced a 51-page campaign platform that devotes five pages to health care. Leaving aside the promotion of abortion as a partisan wedge issue, the platform asserts the goal of “universal health care,” which is “a right, not a privilege.”

The notion of health care as a “right” is now widespread, although a banal platitude has dangerous implications. Whenever I am asked whether a person has a “right to health care,” I answer: “A person has the right to spend as much of his money on health care of his choice as he prefers.” This generally results in confused looks. I then describe how that right is infringed by Medicare payroll taxes, and government programs like Medicaid, the Veterans Health Administration, and Children’s Health Insurance Program. Taxes funding those programs are taken from people’s incomes, and cannot therefore be spent on health care which the earners prefer.

A “right” to health care is likely more dangerous than a right to food (which can result in severe shortages due to government confiscation and distribution). If worse comes to worst, at least you might be able to keep some chickens and grow some fruit and vegetables on your own plot of land. Modern health care, on the other hand, requires highly skilled practitioners and capital investment in medical innovation. Suppliers of both can go on strike in response to government control, and the ordinary person can hardly perform his own knee replacement or make his own hypertensive drug.

Should the Feds Regulate Physicians’ Scope of Practice?

33919068 - doctor typing on a computer keyboard at officeWriting in the Wall Street Journal, economics professor Shirley Svorny of California State University, Northridge, and the Cato Institute argues that Congress should use the power granted by the U.S. Constitution’s Commerce Clause to pre-empt states’ historical power to regulate physicians’ scope of practice:

Telemedicine has made exciting advances in recent years. Remote access to experts lets patients in stroke, neonatal and intensive-care units get better treatment at a lower cost than ever before. In rural communities, the technology improves timely access to care and reduces expensive medevac trips. Remote-monitoring technology lets patients with chronic conditions live at home rather than in an assisted-living facility.

Yet while telemedicine can connect a patient in rural Idaho with top specialists in New York, it often runs into a brick wall at state lines. Instead of welcoming the benefits of telemedicine, state governments and entrenched interests use licensing laws to make it difficult for out-of-state experts to offer remote care.

(S. Svorny, “Telemedicine Runs Into Crony Doctoring,” Wall Street Journal, July 22, 2016)

Professor Svorny urges Congress to pass a law allowing interstate portability of licensure. The state where a physician practices, not where the patient stands (or sits or lies), would be the locus of regulatory control. That is, Idaho would lose its sovereign power to prevent New York-licensed physicians from providing telemedicine services to Idaho patients.