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Volume 14, Issue 33: August 14, 2012

  1. The Market for Healthcare Risk
  2. The Ominous Growth of Executive Powers
  3. Big-Spending Colleges Cost Students Dearly
  4. The Slippery Slopes of Syria and Southern Sudan
  5. New Blog Posts

1) The Market for Healthcare Risk

According to the 1980 census, less than 1 percent of the U.S. population had been denied health insurance due to a health condition. Unfortunately, policymakers addressed that small problem in ways that created much bigger problems. In his latest piece for Psychology Today, Independent Institute Research Fellow John C. Goodman explains how government regulations helped undermine the market for healthcare insurance.

One way they have done so is by worsening the problem of free riders. For example, requirements that insurers take all applicants (guaranteed-issue regulations) and requirements that all customers be charged the same premiums (community-ratings regulations) have encouraged people to remain uninsured while they are healthy. This in turn has led to higher premiums on those who have remained in the insurance pools. Goodman argues that the Affordable Care Act worsens the perverse incentives to stay uninsured until one gets sick.

“Basically, anyone who is uninsured will be able to obtain insurance for the same premium as a healthy individual, regardless of how long or why the person is uninsured,” Goodman writes. “As in Massachusetts today, there will be fines for being uninsured, but the tax penalty will be small compared to the cost of insurance. And it may be weakly enforced, even at that.” In addition, insurers will have stronger incentives to avoid insuring high-risk individuals. Healthcare providers will also have incentives to avoid treating high-cost patients. “Precisely because payments to providers also do not reflect expected costs, they, too, have an incentive to avoid attracting the hard cases, especially among the chronically ill.”

The Market for Healthcare Risk, by John C. Goodman (Psychology Today, 8/6/12)

See John C. Goodman at these exciting upcoming events:

Priceless: Curing the Healthcare Crisis, by John C. Goodman


2) The Ominous Growth of Executive Powers

Civil libertarians were justifiably outraged when President Obama issued Executive Order 13618, an administrative directive that grants emergency powers over civilian telecommunications to the Department of Homeland Security. The order, signed in July, allegedly promotes safety by giving the feds more tactics for dealing with crises—such as during a terrorist attack. But does this restriction on liberty in fact promote safety? One need invoke only a single example to show why this claim is doubtful. As Independent Institute Senior Vice President Mary L. G. Theroux notes, had the feds possessed such power on 9/11 and used it to shut down all cell-phone communications on that day, the hijackers of Flight 93 might well have reached their target rather than being thwarted by the brave passengers.

Executive Order 13618 is ominous, but it did not arise in a vacuum, Theroux notes. Like a decree signed earlier this year that gives the feds broader powers to commandeer economic resources for the sake of “national defense,” the new telecom directive merely extends powers already authorized by long-standing federal legislation. “In fact, when we pause to consider every ‘unprecedented’ extension of executive power, we find precedents galore,” Theroux writes.

Unfortunately, presidents show more eagerness to issue executive orders than ever before: whereas FDR and Truman signed seven during World War II, George W. Bush signed 62 during his two terms, and Obama has already signed 61. Given the tremendous discretionary authority that an executive order creates, one might expect—or at least hope for—a bipartisan backlash against the trend, if for no other reason than that executive orders are a double-edge sword. Liberals should fear that a conservative president would use the federal powers created by Obama to infringe on the rights and liberties that they cherish, just as conservatives should fear that a liberal president would use the powers created by Bush to infringe on the rights and liberties that they favor. “Perhaps it’s thus time for a serious reconsideration of the entire trend to government by decree,” Theroux concludes.

Emergency Powers Spell Corrosion of Liberty and Safety, by Mary L. G. Theroux (The Huffington Post, 7/25/12)


3) Big-Spending Colleges Cost Students Dearly

Interest rates on federal student loans have fallen precipitously in recent years, from 6.8 percent during the 2007-08 academic year to 3.4 percent in 2011-12. In June, Congress voted not to raise those rates for at least another year, but students will have little to show for this gesture, at least not in terms of higher graduation rates or speedier matriculation, according to Independent Institute Research Fellow Vicki Alger. “The percentage of students at public universities receiving their degrees within six years of enrolling as freshmen has remained just below 55 percent for a decade,” writes Alger. “The percentage graduating in four years has been stuck around 30 percent.”

One cause, according to Alger, is that colleges have long been in the habit of misallocating their federal dollars. Perhaps the most telling statistic: over a fifteen-year period, the hiring rate for administrators, some of whom command six-figure salaries, has been twice the hiring rate for instructors.

As a partial remedy, lawmakers should require greater accountability for colleges that take federal money—such as requiring them to inform prospective students about their graduates’ success in the job market, making aid contingent on graduate rates, and providing more lower-cost alternatives such as online learning. “Such innovative reforms would do far more than a one-time, one-year interest rate freeze to make—and keep—college affordable,” Alger concludes.

Making College Affordable, by Vicki Alger (StarTribune, 8/9/12)


4) The Slippery Slopes of Syria and Southern Sudan

The United States is moving ahead with grandiose plans to remodel post-Assad Syria. For Syrian activists such as Rafif Jouejati, who fears that U.S. intervention would do to his country what it did in occupied Iraq, it’s an unwelcomed effort. But even if the United States avoided repeating the mistakes made in post-Saddam Iraq, it might still be counterproductive, according to Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty. U.S. assistance to the Syrian opposition has already intensified civil strife in that country, Eland argues.

Moreover, U.S. intervention runs the risk of getting the United States bogged down in another quagmire. The most recent support for this hypothesis may be South Sudan. The State Department has invested diplomatic capital in getting the new country to negotiate peacefully with its northern neighbor over an oil pipeline transit fee. If this strategy fails in the long term, Uncle Sam may increase its presence to maintain its influence and “prestige.”

“Thus, one American intervention begets another,” Eland writes. “To avoid getting enmeshed in quagmires—one step at a time—in areas in the world not strategic to U.S. security, the United States should rely more on regional powers and organizations, such as the Arab league and the African Union, to ensure peace and stability.”

Quagmires Are Often Just a Few Steps Away, by Ivan Eland (8/7/12)

No War for Oil: U.S. Dependency and the Middle East, by Ivan Eland


5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

You can find the Independent Institute’s Spanish-language blog here.


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