Coyote Blog

I have made this argument before -- your lifetime Medicare taxes cover only about a third of the benefits you will receive.   Social Security taxes are set about right -- to the extent we come up short on Social Security, it is only because a feckless Congress spent all the excess money in the good years and has none left for the lean years.

But Medicare is seriously mis-priced.  I have always argued that this is dangerous, because there is nothing that screws up the economy more than messed up price signals.  In particular, I have argued that a lot of the glowy hazy love of Medicare by Americans is likely due to the fact that it is seriously mis-priced.  Let's price the thing right, and then we can have a real debate about whether it needs reform or is worth it.

A recent study confirms my fear that the mispricing of Medicare is distorting perceptions of its utility.

As debate over the national debt and the federal budget deficit begins to heat up again, an analysis of national polls conducted in 2013 shows that, compared with recent government reports prepared by experts, the public has different views about the need to reduce future Medicare spending to deal with the federal budget deficit. Many experts believe that future Medicare spending will have to be reduced in order to lower the federal budget deficit [1] but polls show little support (10% to 36%) for major reductions in Medicare spending for this purpose. In fact, many Americans feel so strongly that they say they would vote against candidates who favor such reductions. Many experts see Medicare as a major contributor to the federal budget deficit today, but only about one-third (31%) of the public agrees.

This analysis appears as a Special Report in the September 12, 2013, issue of New England Journal of Medicine.

One reason that many Americans believe Medicare does not contribute to the deficit is that the majority thinks Medicare recipients pay or have prepaid the cost of their health care. Medicare beneficiaries on average pay about $1 for every $3 in benefits they receive. [2] However, about two-thirds of the public believe that most Medicare recipients get benefits worth about the same (27%) or less (41%) than what they have paid in payroll taxes during their working lives and in premiums for their current coverage.

Update:  Kevin Drum writes on the same study.  Oddly, he seems to blame the fact that Americans have been trained to expect something for nothing from the government on Conservatives.  I am happy to throw Conservatives under the bus for a lot of things but I think the Left gets a lot of the blame if Americans have been fooled into thinking expensive government freebies aren't really costing them anything.

Congress is again on the verge of conferring new Constitutional rights to a narrow subset of American citizenry.  Already the recipient of speech rights that the rest of us don't enjoy, the major media organizations are also about to receive a special pass from cooperating with law enforcement and criminal investigations.  The reason for granting these new rights is in part because the media, with their business model in tatters, has learned a lesson from the steel and airline industry about running to Congress for help.

First there were special speech rights for the Press:  McCain-Feingold

This special treatment began with the McCain-Feingold Campaign Finance Act, which gave journalists unique speech rights during elections by taking away the speech rights of every other non-media-credentialed American in the 30-90 days prior to an election.  Of course, those of us who don't work for the NY Times or CBS were kind of confused about how we had somehow lost our constitutional right to political speech.  Reasonably, many of us in the blogosphere wanted our speech rights back, and campaigned to be called journalists (i.e. to get the media exemption from campaign speech restrictions).  As I wrote back in June:

These past few weeks, we have been debating whether this media
exemption from speech restrictions should be extended to bloggers.  At
first, I was in favor.  Then I was torn.
Now, I am pissed.  The more I think of it, it is insane that we are
creating a 2-tiered system of first amendment rights at all, and I
really don't care any more who is in which tier.  Given the wording of
the Constitution, how do I decide who gets speech and who doesn't - it
sounds like everyone is supposed to...

I
have come to the conclusion that arguing over who gets the media
exemption is like arguing about whether a Native American in 1960's
Alabama should use the white or the colored-only bathroom:  It is an
obscene discussion and is missing the whole point, that the facilities
shouldn't be segregated in the first place.

Now, Congress is Considering Enhanced "Shield" Laws

Now Congress is ready to take another step in the same direction of giving the media special enhanced platinum-level Constitutional rights with the proposed Federal Shield Law.  No doubt inspired by the whole Valerie Plame / Judith Miller mess, this is yet another example of Congress feeling like it has to "do something" with a half-assed solution to a non-problem that no one at this point, except perhaps Ms. Miller, even really understands.  The Federal Shield Law, named in typical Orwellian fashion the "Free Flow of Information Act", would make reporters the only citizens of the United States who can evade subpoenas and legally stand in contempt of court, a right we have determined that not even presidents have.

These shield laws, which I have criticized before, are often justified as necessary supports for the First Amendment.  Beyond the fact that the press in this country has functioned for centuries quite nicely without such shield laws, and have toppled President's without these extra rights, they are somehow now "necessary to help the United States regain its status as an 'exemplar' of press freedom", according to bill sponsor Richard Luger  (a statement made without explaining either why this was true or even how or when the US stopped being an 'exemplar' of press freedom).

Luger is not even shy about admitting that this law effectively creates two classes of citizen in the United States:

Lugar acknowledged that the legislation could amount to a "privilege" for reporters over other Americans.

"I think, very frankly, you can make a case that this is a special
boon for reporters, and certainly for their role in freedom of the
press," he said. "At the end of the day what we will come out with says
there is something privileged about being a reporter, and being able to
report on something without being thrown into jail."

Um, reporters can already report things without being thrown in jail.  Judith Miller, the explicit reason for the bill's existence, according to Luger, was thrown in jail not for her reporting, but her refusing to participate in an investigation.  An investigation that her employer the NY Times cheer-led the government into starting.  She was put in jail for refusing to testify about a source who had in fact already given her verbal permission before she went to jail to reveal his name.

Glenn Reynolds has a nice quote about the proposal:

ONE CHARACTERISTIC OF THE TITLED NOBILITY was its immunity from some
legal rules laid on the commoners; that's why such titles were an
important boon that the King could bestow on favorites. Reading this statement by Richard Lugar on the proposed journalists' shield law, which probably won't cover bloggers, I wonder if we're getting into the same territory

The Licensing Issue:  Who is a Journalist?

This new special privilege afforded to journalists, when combined with the special speech rights conferred in McCain-Feingold, increases the importance of the question "So who is a journalist and who qualifies for these unique privileges?" I predicted way back in February that I thought some type of official licensing program was going to be proposed for journalists.  Well, here it is in black and white in the aforementioned article on the new shield law:

A key reason some journalists oppose the popular federal shield
proposal is fear that giving Congress the power to define who is and
isn't a journalist could lead effectively to the licensing of
journalists.

Back in February, I predicted that the effort at licensing would fail, but now I have changed my mind.  After all, you can't have all of us unwashed folks who actually got good grades in math so we didn't have to default back to a journalism degree in college getting hold of these special privileges.  Only elite people who have proved themselves worth of being beyond legal accountability, folks like Dan Rather or the Katrina reporters, can be trusted with these extra rights and privileges.

Whenever the government by legislation gives a group of people special powers, it always leads to licensing.  It HAS to, else the courts would forever be bogged down with fights over who is in and who is out.  It is much easier to say "the only people who have the right to evade subpoenas are people with this piece of paper."  Using medicine as a parallel example, once you decide the average person can't be trusted to educate themselves enough to make their own medication decisions, you end up with a process where only licensed MD's can issue prescriptions.  The same will be true in journalism.

What is Really Going On Here

To understand what is really going on here, think "steel industry" or "airline industry".  When technology or markets or customers or competition changed in industries like steel, the last desperate defense of the US steel industry was to run to the government begging for import restrictions and price supports and subsidies and pension bailouts and god-knows what else.  Boy-oh-boy wouldn't the steel industry in the US love to have a law that says only licensed steel makers can sell steel in the US, and by the way, the current steel industry participants will control the licensing board.

Think that is a ridiculous exaggeration?  It can't be any more stupid than this form of licensing (or this one;  or this one).  Here are the various trade-specific licenses
you need here in Scottsdale - I would hate to see the list for some
place like Santa Monica.  My favorite is the one that says "An
additional license is required for those firms which are going out of
business."  Or for an exact parallel to my steel industry hypothetical, try this law from Ohio to liscence new auctioneers:

Besides costing $200 and posting a $50,000 bond,
the license requires a one-year apprenticeship to a licensed auctioneer, acting
as a bid-caller in 12 auctions, attending an approved auction school, passing a
written and oral exam. Failure to get a license could result in the seller being
fined up to $1,000 and jailed for a maximum of 90 days.

And my commentary on it:

Note that under this system, auctioneers
have an automatic veto over new competition, since all potential
competitors must find an existing auctioneer to take them on as an
apprentice.  Imagine the consumer electronics business - "I'm sorry,
you can't make or sell any DVD players until Sony or Toshiba have
agreed to take you on as an intern for a year".  Yeah, I bet we'd see a
lot of new electronics firms in that system - not.

This is exactly what is going on with the media.  The world, at least for the US media, is changing.  Subscriptions and ad revenues have been falling year after year after year.  People either giving up this media all-together or switching to new competitors, such as online media, in large numbers and there is no indication that this trend will stop.  As a result, the traditional media finds itself with its back against the wall.

What to do?  What every other industry has done - run to Congress!  Major media groups were extraordinarily strong supporters of McCain-Feingold, knowing that by limiting speech of everyone else, it added to its own influence and power come election time.  Over time, Congress will continue to add new privileges for the media, like the shield law, in part because it knows that it needs to stay in good with the only group of people who have full speech rights come election time.

The one thing I disagree with in the quote above about licensing is the notion that many in the press oppose it.  They are right to see the prospect as scary (see unintended consequences below) but once a licensing system is in place, I GUARANTEE that the licensed press will be huge supporters of licensing.  Just like lawyers and doctors, the press will find a way to take control of their own licensing and use it to keep out competitors they don't like.  Those pajama-clad bloggers irritating you - well, just make sure that they don't get licensed.  Come election time, they will all have to shut up, because only licensed journalists will have the media exemption in McC-F.  Milton Freedman described this process years ago:

The justification offered [for licensing] is always the same: to protect the consumer. However, the reason
is demonstrated by observing who lobbies at the state legislature for
the imposition or strengthening of licensure. The lobbyists are
invariably representatives of the occupation in question rather than of
the customers. True enough, plumbers presumably know better than anyone
else what their customers need to be protected against. However, it is
hard to regard altruistic concern for their customers as the primary
motive behind their determined efforts to get legal power to decide who
may be a plumber.

And as I said here:

Such credentialing can provide a powerful comeback for industry insiders under attack.  Teachers, for example, use it every chance they get to attack home schooling and private schools,
despite the fact that uncertified teachers in both these latter
environments do better than the average certified teacher (for example,
kids home schooled by moms who dropped out of high school performed at
the 83rd percentile).  So, next time the MSM is under attack from the blogosphere, rather than address the issues, they can say that that guy in Tennessee is just a college professor and isn't even a licensed journalist.

Hit and Run described how doctors use the licensing process, and even hazing of interns, to keep their numbers down and therefore their salaries (and their fees to us) up:

When Kevin Drum commented on the New England Journal
article, he said that the system's defenders "sound like nothing so
much as a bunch of 50s frat boys defending hazing after some freshman
has been found dead in an arroyo somewhere."

Hazing is the right metaphor. The system serves the same
purpose: It's a brutal initiation to a privileged club. Medical hazing
is part of the set of barriers that limit entry to the profession;
whatever other reasons there are for it, it's ultimately a byproduct of
occupational licensing.
Those long shifts don't just undermine public health. They drive away
qualified men and women, reducing the supply of doctors and allowing
those who survive the trial to charge more for their services.

Unintended consequences

Of course, all this has unintended consequences, as does any government meddling in individual decisions, limitations of rights, or attempts to pick industry winners. 

The first unintended consequence, or more accurately I guess I should call it the first irony because I am not sure that it is unintended, is that laws meant to keep the elite from having undue influence vs. the little guy in politics (via spending limits) have done just the opposite - concentrated political speech in a few elites in the media and squashed the one medium, blogging and the Internet, that hold the promise of giving individuals like myself new, inexpensive ways of influencing politics.

The second unintended and really scary consequence is that in attempting to remove a lever of government control over media - the subpoena power - Congress is potentially creating a larger one - that of licensing.  Of all the news-oriented media in the world, which is the most bland?  I would answer local TV and radio (by this I mean their local programming, not the syndicated stuff they air).  Why?  Because they are already subject to government licensing that to this point other media, such as newspapers, have not.  Local broadcast outlets are VERY self-conscious about protecting their license, and tend to keep their programming bland to avoid irritating some government bureaucrat.  Just look at how many rolled over immediately and dropped Howard Stern when the government started looking cross-eyed at Stern's raunchiness.  Do we really want all the media subject to this kind of pressure?

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