Daily Read - 3/1/10

Sen. Jim Bunning of Kentucky is taking a lot of heat today for blocking a bill containing extensions for unemployment benefits because he is concerned about the impact to the deficit - he wanted the benefits to come from existing stimuls funds.  Getting less attention is the $1 billion (out of the $10 billion cost of the bill) that would postpone a 21% Medicare physician pay one more month.  AMA President J. James Rohack, MD wants the Senate to "stop playing games with Medicare patients and the physicians who care for them."  The related WSJ story is titled "Senate Gridlock Triggers Medicare Payment Cuts," which is a very ironic headline because the Medicare cuts are legally required, and "gridlock" in this case meant the Senate was unable to prevent the enforcement of its own laws.  In the meantime, the Centers for Medicare and Medicaid Services is not making payments to doctors for 10 days, hoping the Senate can get its act together and postpone enforcement of its own laws even further.  Is it any wonder many Americans don't think the government can control health care costs?

"The Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers," reports the NY Times.  "Although the details are still being worked out," the plan would send more government contracts to companies that pay higher wages and offer better benefits.  With union membership moving from private companies to public jobs (see chart), would this policy effectively put the government in the historial role of unions?  The Marginal Revolution blog shares concerns "about the long term consequences of creating a dual labor market in which insiders with government or government-connected jobs are highly paid and secure while outsiders face high unemployment rates, low wages and part-time work without a career path."  "Outsiders" then have a large incentive to become "insiders," which further entangles government and business.

The article also notes that many workers under federal contracts "— like cafeteria workers, security guards and landscaping workers at federal buildings — earn less than $22,000 a year, the federal poverty line for a family of four."  Some are arguing the policy could actually lower government costs, because raising the pay of these contractors would reduce their eligibility for food stamps, Medicaid, and other government programs.  I previously noted that the roll-back of these subsidies, combined with new subsidies under health care reform, may result in a 70% marginal tax rate for people at the poverty level.  Therefore, this new policy would simply take benefits away with one hand, and provide a higher salary with the other through yet another layer of bureaucratic nonsense.

The Economist asks whether last week's health care summit was a "waste of breath."  The article says President Obama made "some progress on bipartisanship," because he "was often seen scribbling notes," acknowledged both political parties have similar goals, and "asked the Republicans to think of ways to bridge the divide on them."  For a President who promised bipartisanship would be a mark of his presidency, how is pushing the burden for bridging the divide onto the opposition "progress on bipartisanship"?  It may be progress on passing blame, but not on leadership and taking responsibility.

Fannie Mae recently reported a fourth quarter loss of $16.3 billion, but president and CEO Mike Williams says "we are helping homeowners across the country, supporting affordable housing, and providing financing to keep the residential markets functioning."  When he says affordable housing, does he mean affordable to the homeowner, or to taxpayers?  A Wall Street Journal editorial says "losing money is now Mr. Williams's job...the Obama Administration has ordered them to modify hundreds of thousands of mortgages in an attempt to avoid foreclosures."  "Add Fan and Fred together, and taxpayer losses so far are $126.9 billion, and counting."  So, instead of fixing the problem, the government won't even propose a plan for reforming Fannie and Freddie until next year, while purposefully running massive losses and keeping it off the government's books.  I guess they are putting this politically difficult work off until after the election, like the deficit commission.

I'm finally reading Freakonomics, and got a kick out of former Illinois Governor Rod Blagojevich's "plan to mail one book a month to every child in Illinois from the time they were born until they entered kindergarten".  Statistically, children from homes with more books usually do better in school, because "books are a proxy for well-educated parents".  Blagojevich apparently believed the mere presence of books caused the better performance.  Fortunately, the legislature voted against his plan.  (referenced on the Freakonomics blog, here)