What if...

What if supermarkets were like public schools.

Where to cut?

Michael Gerson on the continuing struggle with state and federal finances:

The cost of maintaining government structures is making it impossible to maintain government functions. To fund commitments made to the providers of services, services must be cut. So piles of money go to government pensions and benefits instead of roads, education or mental health services. This is one of the primary reasons the public resists tax increases. A tax increase used to provide an actual public service might have a shot at support. But a tax increase to prop up a system that consumes endless resources while cutting services is a harder sell.
 ....
But events in Madison are also a preview of the federal debt debate. On the continuum of pain, Obama has targeted home heating oil subsidies for the poor and Teach for America. House Republicans' reductions have been broader but included foreign aid and low-income housing. Few protesters have emerged to scream and chant. But these cuts are distractions from the problem of unsustainable entitlement obligations to the middle class and the wealthy, which threaten to eventually consume the other functions of the federal government. Structural change is required - reforming benefits to reduce costs while focusing benefits on those in the greatest need. 

What are they doing in Illinois? Cutting state funding to drug and alcohol abuse programs. Druggies do not demonstrate, state union workers do.

An IRS horror story

From the Seattle Times:

"I asked the IRS lady straight upfront — 'I don't have anything, why are you auditing me?' " Porcaro recalled. "I said, 'Why me, when I don't own a home, a business, a car?' "
The answer stunned both Porcaro and the private tax specialist her dad had gotten to help her.
"They showed us a spreadsheet of incomes in the Seattle area," says Dante Driver, an accountant at Seattle's G.A. Michael and Co. "The auditor said, 'You made eighteen thousand, and our data show a family of three needs at least thirty-six thousand to get by in Seattle."
"They thought she must have unreported income. That she was hiding something. Basically they were auditing her for not making enough money."
Seriously? An estimated 60,000 people in Seattle live below the poverty line — meaning they make $11,000 or less for an individual or $22,000 for a family of four. Does the IRS red-flag them for scrutiny, simply because they're poor?
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Driver quickly determined the IRS was wrong in how it was interpreting the tax laws. He sent in the necessary code citations and hoped that would be the end of it.
Instead, the IRS responded by launching an audit of Rachel's parents.
"I was floored," says Rob Porcaro, 59. "I get audited now and then in my business, so I've been through it before. But to have them go after me because of my daughter, well, I've never heard of anything like it."

The economics of heath care

Tigerhawk links to an excellent article in the Atlantic on health care. From the article:

All of the actors in health care—from doctors to insurers to pharmaceutical companies—work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results. Incentives that emphasize health care over any other aspect of health and well-being. That emphasize treatment over prevention. That disguise true costs. That favor complexity, and discourage transparent competition based on price or quality. That result in a generational pyramid scheme rather than sustainable financing. And that—most important—remove consumers from our irreplaceable role as the ultimate ensurer of value.
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But health insurance is different from every other type of insurance. Health insurance is the primary payment mechanism not just for expenses that are unexpected and large, but for nearly all health-care expenses. We’ve become so used to health insurance that we don’t realize how absurd that is.
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There was nothing natural or inevitable about the way our system developed: employer-based, comprehensive insurance crowded out alternative methods of paying for health-care expenses only because of a poorly considered tax benefit passed half a century ago.
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Is this really a big problem for our health-care system? Well, for every two doctors in the U.S., there is now one health-insurance employee—more than 470,000 in total.
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Many hospitals still exist in their current form largely because they are protected by regulation and favored by government payment policies, which effectively maintain the existing industrial structure, rather than encouraging innovation.

Read the whole thing if you want a good summary of why health care is the mess that it is.

Feldstein on health care

In The Wall Street Journal, Martin Feldstein cuts through the rhetoric and slogans about health care to get the heart of the matter: health care reform is about rationing.

Although administration officials are eager to deny it, rationing health care is central to President Barack Obama's health plan. The Obama strategy is to reduce health costs by rationing the services that we and future generations of patients will receive.

The key problem facing the government is the the explosion of costs in Medicare and Medicaid in the future.

There is, of course, no reason why limiting outlays on Medicare and Medicaid requires cutting health services for the rest of the population. The idea that they must be cut in parallel is just an example of misplaced medical egalitarianism.

He then goes on to explain how the present system of tax deductions and credits encourage too much spending on health care.

Like virtually every economist I know, I believe the right approach to limiting health spending is by reforming the tax rules. But if that is not going to happen, let's not destroy the high quality of the best of American health care by government rationing and misplaced egalitarianism.

Inequality

Last week the President took his wife on to a Broadway play, flying three planes from Washington to New York, taking a helicopter to Manhattan, and then shutting down traffic as he traveled by car to the theater. It was the kind of outing that even a very rich person would find it difficult to match.

Many of the Left are deeply concerned by the inequality that a market society generates. They seem to be unconcerned by the inequality that democracy, or any other form of government, generates. However, the inequality generated by the political system is greater than the inequality generated by the market. Bill Gates can do a lot of things that I cannot do. But what can he do that the President cannot do? Or senators and congressmen? A rich person can live luxuriously with a huge house, a private jet plane, and a big yacht. Those with political power can live luxuriously not because they personally own things but because they control publicly-owned resources, as the Obamas' trip to New York demonstrates. The rich can give away vast sums of money, but the amounts of money that those with political power can dispense is far greater. Those with political power can do most of the things that those with great wealth can do, and they can also do a variety of things that no amount of wealth allows. No rich person can tax others, or sentence them to jail or to death, or decree what behavior is permissible and what behavior is impermissible. Wealth requires the voluntary cooperation of others to be effective, whereas political power can rely on force and coercion.

Proposals to limit the inequality of the market almost always increase the role of political power, and thus increase the inequality due to the political structure. I do not understand why those who are so concerned with income or wealth inequality are not equally concerned about the inequality of power that is inherent in the political structure. (I also do not understand why they are not concerned about the inequality due to health, family, and natural ability, which also can dwarf income or wealth inequality.) Maybe it is because the political-caused inequality is not easily measured, whereas measuring and comparing different levels of income and wealth is easy.

California

Paul Krugman worries about the future of California and the nation. The problem? Republicans keep blocking higher taxes.

The seeds of California’s current crisis were planted more than 30 years ago, when voters overwhelmingly passed Proposition 13, a ballot measure that placed the state’s budget in a straitjacket. Property tax rates were capped, and homeowners were shielded from increases in their tax assessments even as the value of their homes rose.

And while the party’s growing extremism condemns it to seemingly permanent minority status — Mr. Schwarzenegger was and is sui generis — the Republican rump retains enough seats in the Legislature to block any responsible action in the face of the fiscal crisis.

Over at Commentary's blog the reaction to this and another column in the New York Times about California is this:

Sometimes you just have to wonder if there is sentient life on the opinion floor of the New York Times Building.

They also pick up on Krugman's banana republic line, which is different from the line here and here.

How the budget was formed

Beldar reacts to an article on how the Obama budget came to be.

You understand now how the Obama budget came about? Based on their "core beliefs," the "smart people" simply decided "what we need to do," and that's how much the federal government will now spend — with no effort being made to base the budget on what revenues the government may take in, and with no "top-line budget number" to limit the appetites of those "smart people" as they set about to vindicate their "principles" by hurling huge chunks of federal cash in their general direction. (Or did Nabors really mean "principals"?)

In other words, from the mouth of a senior Obama Administration official, as reported in a respected Leftist publication: There was no budgeting process, there was just a spending spree driven by political beliefs.