One of ObamaCare’s selling points was that it would supposedly reduce costs through such innovations as “accountable care organizations” or ACOs. I have explained how ACOs are an innovation with many benefits, how markets developed ACOs decades before the government’s central planners caught on, and have predicted that ObamaCare’s centrally planned ACO program would fail to deliver on the promised savings. The reason is simple, and explained by industry expert Robert Laszewski:

Here’s a flash for the policy wonks pushing ACOs. They only work if the provider gets paid less for the same patient population. Why would they be dumb enough to voluntarily accept that outcome?

Turns out, health care providers are not that dumb. They have threatened to bolt ObamaCare’s ACO program in the past, and are doing so again [$] if Medicare tries to cut their pay:

One of CMS’ highest profile health care delivery reform initiatives is on rocky ground as most of the Pioneer ACOs are threatening to drop out of the demonstration if CMS makes them start meeting quality measures instead of merely requiring that they report the measures, according to a letter [$] obtained by Inside Health Policy…The Pioneer ACOs were supposed to be the few shining examples of organizations that could handle outcomes-based pay…

CMS often touts the high level of participation in ACOs, and it would seem that CMS has too much at stake to ignore the Pioneers’ requests and let the demo implode, a health care consultant says. However, it’s difficult to believe that this is the first time that the ACOs have brought these concerns to CMS – some innovation center officials come from the very organizations in the Pioneer demo – all of which indicates that negotiations have not gone well with the agency, the sources say. CMS could make changes to the quality metrics without announcing them in the Federal Register because the Pioneer ACOs are a demonstration, but the cat is out of the bag now, the sources note.

The Pioneer ACOs account for a little more than 30 of the some 250 ACOs in Medicare, and the Pioneers are supposed to be the most advanced, integrated systems of them all.

And thus ObamaCare’s false promise of cost savings comes into sharper focus. File this one under “markets are smart, government is stupid.”

I’m a week late on this, but Holman Jenkins has an excellent discussion of why health care costs and pricing (not the same thing!) are insane, and why ObamaCare will only make it worse:

Duke University’s Clark Havighurst [wrote] a brilliant 2002 article that describes the regulatory, legal and tax subsidies that deprive consumers of both the incentive and opportunity to demand value from medical providers. Americans end up with a “Hobson’s choice: either coverage for ‘Cadillac’ care or no health coverage at all.”

“The market failure most responsible for economic inefficiency in the health-care sector is not consumers’ ignorance about the quality of care,” Mr. Havighurst writes, “but rather their ignorance of the cost of care, which ensures that neither the choices they make in the marketplace nor the opinions they express in the political process reveal their true preferences.”

You might turn next to an equally fabulous 2001 article by Berkeley economist James C. Robinson, who shows how the “pernicious” doctrine that health care is different—that consumers must shut up, do as they’re told and be prepared to write a blank check—is used to “justify every inefficiency, idiosyncrasy, and interest-serving institution in the health care industry.”

Hospitals, insurers and other institutions involved in health care may battle over available dollars, but they also share an interest in increasing the nation’s resources being diverted into health care—which is exactly what happens when costs are hidden from those who pay them.

Put aside whether President Obama could have pushed real reform if he wanted to. ObamaCare as it emerged from Congress fulfills the insight that any highly regulated system ends up benefiting those with influence, i.e., health-care providers and high-end customers, not those of modest means.

What are ObamaCare’s mandates on individuals and employers except an attempt to force back into the insurance market those who have been priced out by previous “reforms” so their money can be used to prop up a system of gold-plated coverage that mostly benefits those in the highest tax brackets? What are ObamaCare’s minimum coverage standards except a requirement that these customers buy more costly coverage than they would choose for themselves so their money can be used for somebody else?

I include a lengthy excerpt from Robinson’s excellent article in my chapter for the Encyclopedia of Libertarianism.

That’s the title of a quarter-page advertisement in the Washington Post on Wednesday.

When it comes to inside-the-Beltway economics, black is white, up is down, and lobbyists for some of the most government-coddled farmers in America are calling other people greedy.

For people familiar with the government’s Byzantine sugar program, the text from the American Sugar Alliance (ASA) ad is frankly hilarious:

• Jeopardizing 142,000 U.S. jobs and America’s food security isn’t a game. It’s a travesty.
• So why are Big Candy executives lobbying Congress to outsource America’s sugar production?
• To boost their already bloated profit margins at the expense of American farmers, workers and consumers.
• Winners: A few corporate executives.
• Losers: America.

I described the basic features of federal sugar subsidies in this study. Essentially, the government confers monopoly power on U.S. sugar growers, which comes at the expense of food manufacturing companies and consumers. 

The ASA ad claims that there are 142,000 jobs in the sugar-growing industry, but there are roughly 1,000,000 jobs in the food manufacturing firms that are hurt by current sugar policies. The Department of Commerce produced this study looking at the negative employment effects of the current sugar program.

One silly claim in the ASA ad regards outsourcing. The sugar program raises U.S. sugar prices, which induces U.S. manufacturers—such as candy makers—to move their production abroad. Thus current federal policies unfairly protect Big Sugar at the expense of Big Candy, but here Big Sugar is claiming the reverse. 

The other silly thing about the outsourcing claim is that the biggest of ASA’s Big Sugar companies are owned by the Fanjuls of Florida. And yet the Fanjuls themselves outsource sugar production to the Dominican Republic.

And note that whatever lobbying is done by Big Candy is surely dwarfed by Big Sugar’s legendary efforts to buy political protection. Just ask Monica Lewinsky.

A policy wonk quoted in this piece summarized the sad reality of sugar growers: “They are unlike any other industry in Florida in that they aren’t in the agricultural business, they are in the corporate welfare business.” 

I normally resist the temptation to pay attention to George Washington University law professor John Banzhaf, given his reputation as a bit of a publicity chaser, but this Monday press release from him was enough to get me to forsake my usual practice: 

Undergrads Required to Lobby for Obama Policy

At 4 PM today, undergraduate students in a major university will be assigned homework requiring them to lobby their local legislators in favor of a major Obama policy – fighting obesity.

FOR IMMEDIATE RELEASE PRLog (Press Release) — Mar. 4, 2013 — More specifically, some 200 undergrads will be asked to contact legislators in their home cities, counties, or states asking them to adopt legislation similar to that already adopted in New York City – and apparently to be considered in D.C., Cambridge, Mass, New York State, and perhaps elsewhere – banning restaurants, delis, movie theaters and many other businesses from selling high-sugar drinks in cups or containers larger than 16 ounces.

Because asking the students to lobby on behalf of whatever opinions they themselves actually consider worth lobbying for would just be too old-school. Readers at Overlawyered have met Prof. Banzhaf before in various of his academic and activist capacities: proposing lawsuits against parents of obese children and against doctors who do not adequately warn their patients against obesity, urging that parents who smoke not be allowed to adopt kids, threatening school officials in Massachusetts with lawsuits naming them personally if they allow soft drinks to be sold on school property, promoting suits against individual administrators at his own institution, GWU, and filing a losing complaint against single-sex dorms at crosstown rival Catholic University of America.

Monday’s Banzhaf press release does mention that students will be given other optional topics to lobby about if they don’t pick the NYC-style soda ban. All the other examples given, however, involve alternative ways of extending regulation and taxation in the food and beverage realm. Presumably any student that believes that the government should stay out of this area has had the foresight to drop the course.

My letter to the editor was published in today’s Wall Street Journal. In response to the obituary of Prof. Alchian, the WSJ published on 20 February 2013, I wrote the following:

David R. Henderson’s obituary of the great economist and pedagogue Armen Alchian (“An Economist Who Made the Science Less Dismal,” Feb. 20) brings back fond memories from the summer of 1966, when I was one of Prof. Alchian’s students.

One of the many take-aways from Alchian’s 1966 lectures was his “95% Rule”—95% of what you read in professional journals that passes for economics is either wrong or irrelevant. Over the years I have verified this and regularly conveyed Alchian’s rule to my students.

Prof. Steve H. Hanke

The Johns Hopkins University

Baltimore

Prof. Alchian met his maker on 19 February 2013. He was 98 years old.

During last week’s oral argument in Shelby County v. Holder – the challenge to Section 5 of the Voting Rights Act — Chief Justice Roberts questioned the Solicitor General concerning the rationality of the VRA’s coverage formula (Section 4(b)) by comparing non-covered Massachusetts with Mississippi, which remains subject to federal preclearance based on registration and voting data from 1964. As the Chief Justice pointed out (page 32 of the transcript), Massachusetts has the “worst ratio of white voter turnout to African American voter turnout” while Mississippi “has the best.” Massachusetts likewise “has the greatest disparity in registration between white and African American” while Mississippi is third best in the nation, “where again the African American registration rate is higher than the white registration rate.”

The Chief Justice’s remarks apparently angered the Massachusetts Secretary of State. According to a Politico story, Secretary William Galvin found it “just disturbing that the chief justice of the United States would spew this kind of misinformation” and that the “2010 numbers don’t support what Roberts is saying.” Galvin continued: “He’s wrong, and in fact what’s truly disturbing is not just the doctrinaire way he presented by the assertion, but when we went searching for an data that could substantiate what he was saying, the only thing we could find was a census survey pulled from 2010 … which speaks of noncitizen blacks .… We reached out to academics at many institutions … and they could find no record either, they were puzzled by [Roberts’s] reference.”

But it’s Secretary Galvin who has his facts wrong—a mistake he could have avoided simply by reviewing the lower court decision that the Supreme Court is considering. In his dissenting opinion, D.C. Circuit Judge Stephen Williams examined the voter registration and voting statistics from the 2004 presidential election — not the 2010 mid-term elections—because it was the last national election before Congress reenacted Section 5 in 2006. The question the Supreme Court is considering—which seems to be lost on Galvin — is whether Congress acted appropriately in retaining the same coverage formula that has been in place since 1975 despite significant changes in the country. To answer that question, the Court must of course look at the statistics that were in the 2006 legislative record. And those statistics, which are publicly available and come directly from the Census Bureau, fully vindicate the Chief Justice’s statement.

Other media reports have criticized the Roberts’s reliance on these statistics by pointing to the margin of error in the Census data. But the margin of error works in both directions. While some may want to seize on the margin of error to suggest that the differences between Massachusetts and Mississippi aren’t as pronounced as the data suggests, it’s equally possible that the differences are even starker. In any event, the margin of error cannot wipe away the significant differences between these two states. Painting Massachusetts in the most favorable light within the margin of error, it would still have a white/​black registration disparity of 13.2%, and painting Mississippi in the most unfavorable light, it would still have a white/​black registration disparity of 3.9%. On the other end of the error-margin spectrum, however, Massachusetts’ disparity is as high as 36% (higher white registration) while Mississippi’s is as low as ‑11.5% (higher black registration) — a massive 47.5% gulf between the two.

Using the 2010 data — as Secretary Galvin prefers — also doesn’t solve the problem. Again, painting Massachusetts in the most favorable light within the margin of error, it would still have a registration disparity of 21.3%, while Mississippi under the most unfavorable light within the margin of error would still have a disparity of only 6.9%. On the other end of the error-margin spectrum, Massachusetts’ disparity is as high as 44.7% (higher white registration), and Mississippi’s is as low as ‑8.5% (higher black registration) — a 53.2% gulf. Put simply, there is no scenario in which Mississippi has a racial registration disparity that’s anywhere close to Massachusetts.

Moreover, this argument over the margin of error obscures the more important point: Mississippi is the state subject to intrusive federal oversight, not Massachusetts. Clever statistical arguments that Massachusetts might not be as far behind as Mississippi can’t save a law that depends on a showing that covered states are substantially worse than their non-covered counterparts. No matter how those defending the statute contort registration and turnout data, they can’t come anywhere close to showing the massive disparity in registration and turnout needed to uphold the law.

Finally, it’s worth noting that the Chief Justice actually went easier on Massachusetts than he could have. The Bay State’s record with regard to Hispanics is even worse than its record with regard to African-Americans. According to the 2004 Census, Massachusetts has a 54% registration gap between whites and Hispanics and several localities have been subject to suit under Section 203 of the Voting Rights Act for failing to provide language assistance to minority voters. That includes a 2006 claim brought by the (Bush) Justice Department against Springfield, alleging “that the city failed to provide an adequate pool of bilingual workers to serve its Spanish-speaking voters, and that its poll workers interfered with the ability of voters to receive assistance from the persons of their choice.” 

Massachusetts also has seen an increase in Section 2 litigation. As NYU law professor Samuel Issacharoff — no raving conservative — testified before Congress in 2006, “[i]f you look at the history of recent Section 2 litigation under the Voting Rights Act, one sees Section 2 moving more and more to areas where you have recent immigrants coming into the country, and those tend to be as likely as not, as best I can tell, places that are not under covered jurisdictions, places like Lawrence, Massachusetts, some of the smaller towns of Pennsylvania.”

To be clear, I’m not suggesting that Massachusetts is a hotbed of racism and should be subject to Section 5. Instead, I’m saying that Mississippi — the whole broader South — has changed, obviating the need, and therefore constitutional justification, for Section 5.

Hugo Chavez is dead. He leaves behind a country ruined by populist policies he referred to as “Socialism of the 21st Century.” Venezuela under 14 years of Chavez’s leadership benefited from about $1 trillion in revenues from the oil bonanza but has little to show for it. Instead, the country has largely followed the path described by economists Rudi Dornbusch and Sebastian Edwards in their 1991 classic, The Macroeconomics of Populism in Latin America.

Again and again, in country after country, policymakers have embraced economic programs that rely heavily on the use of expansive fiscal and credit policies and overvalued currency to accelerate growth and redistribute income. In implementing these policies, there has usually been no concern for fiscal and foreign exchange constraints. After a short period of economic growth and recovery, bottlenecks develop provoking unsustainable macroeconomic pressures that, at the end, result in the plummeting of real wages and severe balance of payment difficulties. The final outcome of these experiments has generally been galloping inflation, crisis, and the collapse of the economic system.

Venezuela’s economy, kept afloat by the long commodity boom, has not yet collapsed. But it is headed for crisis. A devaluation of more than 30% this year brought the official exchange rate to 6.3 bolivars to the dollar. The black market exchange rate—about 26 bolivars to the dollar—shows how much further it has to go. Inflation in 2012 reached 20%. Uncontrolled spending, expropriations, price controls, monetary expansion, capital controls and other misguided policies have also led to scarcities of basic goods, recurrent power outages, water rationing, increased dependency on imports and on oil exports, and a rising public debt and fiscal deficit.

Chavez also centralized political power as he gained control of the main institutions of Venezuelan society—the military, the judiciary, the congress, the central bank, the electoral council, the most important broadcast media, etc.—and did so by trampling on due process and basic civil and political liberties.

The vast expansion of state power led to a neglect of traditional functions of government such as security or keeping up infrastructure, and to an increase in corruption. Crime under Chavez skyrocketed. When he came to power in 1999, the country experienced less than 6,000 homicides per year; in 2012 that number reached about 21,700. By 2012, Venezuela’s ranking in Transparency International’s Corruption Perceptions Index fell to 165 out of 174 countries. The systematic corruption of the Chavez regime that Gustavo Coronel documented in a 2006 Cato study only got worse in subsequent years.

The economy did grow under Chavez and poverty was reduced as occurred through most of the region, but annual growth in Venezuela averaged 3.3 percent from 1999 to 2011, below the rates experienced by Chile, Peru or Colombia—all market democracies that didn’t sacrifice basic liberties in an attempt to achieve such progress. The complete economic record of Chavez’s rule will take into account the decline in wages and per capita income that result from any future crisis his policies engendered. Only then will Venezuelans be able to fully assess the extent to which the last 14 years were recklessly squandered, and hopefully move away from the state-dominated development model which has afflicted Venezuelan society for decades.