Every year, the Kaiser Family Foundation and the Health Research & Educational Trust produce the leading survey of employee health benefits. Yesterday, KFF and HRET issued their survey of health benefits in 2010 with a news release that begins:

Family Health Premiums Rise 3 Percent to $13,770 in 2010…

Premiums rose by just 3 percent? Great news! Last year, KFF/HRET guesstimated that the average cost of family coverage could hit $14,539 in 2010. Working families saved hundreds of dollars!

Not so fast, says KFF/HRET. The main reason premiums rose less than expected is that “businesses have been shifting more of the costs of health insurance to workers through … deductibles and other cost-sharing,” said KFF president and CEO Drew Altman. Actually, deductibles and other cost-sharing do not shift health insurance costs; they reduce the amount of insurance. What they shift is the cost of health care, from the insurance pool to individual members of the pool.

Nevertheless, greater cost-sharing does appear to be a significant factor behind the minimal growth in premiums:

Many employers are … raising the annual deductibles workers must pay before their health plans begin to share most health care costs. A total of 27 percent of covered workers now face annual deductibles of at least $1,000, up from 22 percent in 2009, the survey finds. Among small firms (3–199 workers), 46 percent face such deductibles…

Among other plan types, only consumer-driven plans (which are high-deductible plans that also include a tax-preferred savings options such as a Health Savings Account or Health Reimbursement Arrangement) saw growth in their market share. Such plans now enroll 13 percent of covered workers, up from 8 percent last year…

“Consumer-driven plans have clearly established a foothold in the employer market, tripling their market share from 4 percent in 2006 to 13 percent today,” said study lead author Gary Claxton, a Kaiser vice president and director of the Healthcare Marketplace Project.

“This may be helping to stem the rapid rise in premiums that we saw in the early 2000s, but it also means employer coverage is less comprehensive,” says Altman.

Yes, and that’s generally good news too. Federal tax law encourages workers to increase their consumption of employer-sponsored insurance at the expense of other stuff they value more. In a 2004 study for the Cato Institute, Christopher Conover estimated the tax preference for employer-sponsored insurance leaves Americans more than $100 billion worse off each year. That same tax preference also fuels the “relentless” rise in health insurance premiums. The trend toward greater cost-sharing shows that private markets are responding to rising prices the way they should: by limiting consumption of low-value items.

Maulik Joshi, who is “president of HRET and senior vice president for research at the American Hospital Association,” worries, “High out-of-pocket expenses … affect health care decisions for patients… [H]ouseholds will face difficult choices, like forgoing needed care, or reexamining how they can best care for their families.” Exactly. Someone needs to choose between health care and other uses of money. Avoiding those difficult choices is not an option. The best available evidence suggests that consumers do a remarkably good job with those decisions. The only lamentable part is that employers are deciding how to make health insurance less comprehensive (greater cost-sharing vs. managed-care controls), instead of workers making those decisions for themselves.

But isn’t this generally good news? Apparently not to the folks at KFF and HRET. In a subsequent post, I’ll explore the negative spin they put on what their survey found.

My Econ​o​mist​.com debate on whether governments should “do far more to protect online privacy” has now concluded. The vote on the motion went to my opponent, supporting government involvement by a margin of 52 to 48 percent.

I won a moral victory, perhaps, moving the vote from 70 percent in favor of government intervention to the very close ending tally. My commentary highlighting the substantial role of government in undermining privacy seems to have begun moving the dial in my direction.

A pleasant side-effect of the debate was to open lines of communication with a number of my privacy-advocate colleagues, many of whom do not share my libertarian outlook. One called me naïve to think consumers can successfully demand privacy given the imposing wall of corporate practices that rely on intensive and comprehensive data collection.

Full health privacy, for example, would require a marketplace in which consumers can pay cash for services or demand that information about their treatments not be shared. It is illegal for a pharmacy to fill a prescription without identifying the patient apparently, a requirement that sets up the conditions for nationwide tracking of patients’ medicines and, inferentially, their health conditions.

This prescription tracking is facilitated and reinforced by government regulation, of course. Consumers cannot exercise privacy self-help when the law requires pharmacies to collect information about them. Freedom to pay cash for medicines, and to do so unidentified, is at best a long way off, to be sure.

But I had suggested the naïveté of the pro-government view as well:

The arguments for government control certainly seem to rest on good-hearted premises: if we just elect the right people, and if they just do the right thing, then we can have a cadre of public-spirited civil servants dispassionately carrying out a neutral, effective privacy-protection regime.

But this romantic vision of government seems never to come true. Crass political dealmaking inhabits every step, from the financing of elections, to logrolling in the legislative process, to implementation that favours agencies’ interests and the preferences of the politically powerful.

For government to protect privacy, the ideal of “clean government” would have to be realized. But proposals to move policy in that direction, such as regulations on how elections are financed, happen to conflict with fundamental American rights like freedom of speech and petition. Public financing would make the government itself politicians’ most important constituent, ripping it loose from the moorings that protect individual rights and liberties.

A host of legislative process reforms might only begin to drive a wedge between politicians and what they do best. And the ideal of a neutral, scientific regulatory process has not materialized. Regulation is a different, more obscure forum for expressions of political power. For this reason and others, regulation is poorly suited to balancing all the interests of consumers compared to market processes, which are the best method we have for discovering consumers’ true interests and apportioning resources accordingly.

I’ll take my naïveté over the alternative. Reducing the power of government and thereby setting the conditions for consumer-centered privacy protection seems a more likely prospect than taking the politics out of politics, which is an even bigger, even more forbidding project.

Across the country, state legislatures have objected to, and outright rejected, the national ID and surveillance mandate imposed on them by the REAL ID Act. Passed in May 2005 with a compliance deadline three years later, the law has never been implemented. The Department of Homeland Security has repeatedly threatened to deny air travel to people from the states refusing compliance, then backed down when states have not caved to its demands.

But state legislatures are one thing. State-level bureaucrats are quite another. And they are hedgehogging along, positioning their states to implement the national ID law.

Writes Alan Greenblatt in State Legislatures magazine:

In a number of states, motor vehicle departments are doing the behind-the-scenes work necessary to move closer to compliance, including updating computer systems, installing face-recognition software and setting up more secure card production rooms.… [E]very state is moving toward compliance. Even in the 14 states where legislatures have explicitly rejected REAL ID through laws or resolutions, some moves have been made in the direction of compliance.

Politicians come and go, but the bureaucrats are in it for life. And they can grow their portfolio be building a national ID.

A week ago today, I questioned both the premises and purpose of an upcoming National Journal forum on ObamaCare and job creation. The forum’s promotional materials touted the new health care jobs that the law will create as a Good Thing, even though we already have too many health care jobs. All in all, it looked to be a very dignified pro-Obama(Care) rally, funded by one of ObamaCare’s biggest beneficiaries, the drugmaker Eli Lilly. The Washington Examiner’s Tim Carney picked up on the story. Then Instapundit added his own pithy interpretation: “Hey, the Atlantic media empire needs money. Eli Lilly has it. Plus, it boosts Obama. Win-win!” (Actually, I believe that would be win-win-win.)

To its credit, National Journal has since added balance to the forum and its panel. I received a promotional email today that reframes the event by asking, “are the right jobs being created?” (Emphasis mine.) They’ve also added AEI’s Tom Miller to the panel, who I’m guessing will cast a skeptical eye on the value added by these new health care jobs. Now the event looks to be a dignified and balanced discussion of ObamaCare.

National Journal still describes ObamaCare as “reform,” which I submit compromises objectivity. But this is progress. Kudos to them.

I once went to another Washington think tank to hear an advertised lecture by David Friedman, “author and professor of law and economics at Santa Clara University.” The great libertarian author of The Machinery of Freedom, speaking at a liberal-establishment Washington think tank? Cool. So I showed up early, took a seat by the wall, and was crushingly disappointed to discover that the speaker was in fact some other David Friedman, who was decidedly no libertarian, and I was pinned in and couldn’t leave. They told me later that an intern got the wrong bio off the web. Always blame the intern.

So anyway, I just wanted Cato-at-Liberty readers to notice that our new paper “Reforming Indigent Defense: How Free Market Principles Can Help to Fix a Broken System,” which Tim Lynch wrote about here, is in fact co-written by “the real David Friedman,” the son of Milton Friedman, the professor of law and economics with a Ph.D. in physics, the author of the early libertarian classic The Machinery of Freedom as well as such other books as Hidden Order, Law’s Order, and Future Imperfect — yes, that David Friedman.

So even if you didn’t think you were interested in the topic of voucherizing legal aid for indigent defendants, just consider that David Friedman is always interesting.

Matt Yglesias thinks my assertion that we would be better off economically if education money stayed with taxpayers rather than going to public schools and universities is “totally insane.” Ouch!

Now, I can actually understand this, because many people have difficulty envisioning things other than what they’ve always known. But have I really gone all Crazy Eddie? If government didn’t spend taxpayer dough on education, would the poor be much worse off than they are today? Can we never over-invest in schooling because education is just so important? Does the college wage premium mean we should never ratchet down subsidies for college education? And is it at least possible that spending more and more public dough doesn’t lead to more or better education — by which I mean actual, valuable learning — as much as more waste?

Unfortunately, it seems Ygelsias didn’t follow any of the links I provided in the post containing the line he objected to, which furnished some valuable data answering these important questions. And, by the way, it really was just one line he seemed to dislike — the point of the post was to argue against spending yet more taxpayer dough on an education-centered stimulus, not for complete separation of school and state. And, of course, tax-credit-based school choice leaves taxpayers in control of their money without eliminating support for education.

But let’s start answering our questions in more depth so that Mr. Yglesias and others can start to think outside of the “how we’ve always done it” box.

First, let’s hit one critical point: Spending taxpayer money on government schooling does not actually mean you get better education. Let’s look at that graphically:

Here you can see nearly four decades of precipitously increasing expenditures on K‑12 education plotted against student performance. And what does it reveal? No correlation between the Death Valley of academic achievement and the Everest of spending. Ever-more taxpayer dollars have gone into the government education system, but the system hasn’t improved at all. Why? Because the educators receiving the money have no need to get better — they’ve gotten ever-more dough no matter what, in large part because many people simply assume that increased government spending on education equals better education. But if you spend hugely greater amounts and get no better results, that seems like it would be an economic drain, no? Which was exactly what I was arguing.

How about higher education?

On a per-pupil basis, over the last quarter-century spending on public colleges and universities has been steady overall, while aid per student at all schools has gone way up. And what do we have to show for that?

The first thing is incredible tuition inflation — the bane of American higher education. On a per-pupil basis, since 1988 real aid per student has risen 144 percent, while prices have inflated 81 percent at four-year-private schools and 145 percent at four-year publics. It seems, at least in part, that colleges and universities raise their prices because, well, the aid makes sure they can.

Surely, though, the schools use that money to provide more people with ever-better educations? Maybe, but much of the new money seems to have gone just to hiring more administrators, freeing professors from teaching so they can conduct research, and erecting ever more fabulous amenities. Which brings us back to the economic point: Maybe taking money from taxpayers to subsidize all this empire-building and waste might be an economic loss because taxpayers would otherwise spend the money more wisely. Maybe they’d invest in companies that provide better, cheaper products; give money to charities; buy education from stripped-down — but more educationally effective — schools; or use it for countless other things they need or want.

But what if all this subsidizing — even with its attendant waste — resulted in impressive educational outcomes? Then maybe, just maybe, it would be an economic net gain. But things look pretty bad: The six-year graduation rate for bachelor’s degree seekers is just 57 percent; roughly one-third of first-year students need to take remedial courses; and literacy dropped (see p. 38) roughly ten percentage points for Americans with at least a bachelor’s degree between 1992 and 2003. Oh, and that wage premium? It could very well include massive credentialism: It might be that you now need a bachelor’s degree for jobs that require only skills or abilities you could have attained on the job or in relatively brief specialized training. But at this point even half-way decent prospective employees would be expected to have gone to a four-year college.

Enough conjecture, though. Let’s go to the videotape — an actual effort to isolate the effect of government higher-ed spending on economic growth. Economist Richard Vedder has done this, and what he has found is that the more a state spends on higher education, the lower its rate of economic growth. Why? Among other possible things, it seems that when education is largely funded by third parties — especially third parties who have no choice in the matter — it decreases schools’ and students’ motivation to act efficiently. So sure, build that on-campus water park — I ain’t really paying for it!

Looking at things this way — contemplating the myriad costs, not just the assumed benefits, of taxpayer funding of education — it seems maybe my ideas shouldn’t be assigned a cell between the Joker and the Riddler quite so quickly.

But what about the equalitarian argument? Forget about economic efficiency — what about justice for the poor?

First off, I’d note that freer, more efficient economic systems tend to be better for everyone, rich and poor alike. You can read all about that here. But we need look no further than American history to see that people — including the poor — will get educated without government help. Before there was widespread government schooling there was widespread education. Indeed, by 1840 — when Mann’s common-school movement was still in diapers — it is estimated that 90 percent of adult whites in America were literate, a very high level relative to Europe. And the nation was hardly the Monopoly Man at the time. In other words, poor people got educated on their own.

But how could this be? Certainly part of the answer was that many poor people emphasized education, and much education occurred in the home. It was also provided by religious institutions, as well as philanthropists. And, of course, poor communities sometimes got together to establish their own schools.

But that was then and this is now, right? Education is much more complex because the world is much more complex. How could poor people get an education today if government didn’t provide it?

Well, for one thing, education need not be nearly as complex and expensive as it is. All those computers and other bells and whistles? There is hardly overwhelming evidence that they do any good — they may just be a huge waste of money. Meanwhile, many relatively barebones private schools seem to do just as good a job or better at educating students. Oh, and there’s that charity thing again: Religious schools provide low-cost education to millions of kids, and it could be lower if they didn’t have to compete with “free” public schools. And despite massive government subsidies to higher ed, private philanthropists give tens-of-billions of dollars to colleges and universities every year — imagine how much they might give if government didn’t say it would do the job! In other words, there is absolutely no overwhelming argument — to say the least — that just because the world is more complicated government must run schools and pay for education. Indeed, huge, bureaucratic, plodding government is about the least well-equipped entity to handle complication and fast change.

And guess what? There is a profit-motive to furnish education to poor students with demonstrated academic aptitude: If someone lends money to a poor student to go to college so she can get an education that enables her to increase her future earnings, both parties will end up profiting. And let’s not overlook India and numerous other developing countries, where many of the poorest people in the world, using their own money, attend for-profit schools that outperform the free public schools. And why is that? Because the parents whose valuable money is being spent have huge incentives to hold schools accountable, and schools have to respond to parents to stay in business.

But maybe all that’s not enough for Mr. Yglesias. Maybe he needs to also be reminded of what he himself noted:

The current state of schooling in America is already bad enough in terms of ill-serving poor people.

That’s for sure! Currently, wealthy people can choose schools: they do it by buying a house in a good district or paying for private schools. Meanwhile, poor parents are often trapped in awful schools because they can’t afford to buy a McMansion for tuition. In higher education, flagship public colleges and universities have disproportionately middle- and high-income student bodies. And student aid? With creation of tax credit programs you have to have sufficient taxable income to use, as well as loans like PLUS that have no income maximums, aid has been targeted higher and higher up income scales. Meanwhile, the tuition inflation that all that fuels appears likely to scare low-income people away from higher education more than any other group.

Finally, let’s not forget that it was government that for centuries prohibited millions of people — especially African-Americans — from receiving either an equal education, or any education at all. Without question during those times many private Americans would have discriminated in the provision of education, but government required discrimination by both bigot and good man alike.

So the current education system — which tends to be bent toward the will of the large, voting, middle- and upper-income blocs — already massively underserves the poor, and quite possibly makes it much harder for low-income Americans to compete with rich people than if everyone paid for schooling themselves. The system also injects huge distortions and inefficiencies into education, hurting overall economic progress. Of course, this is not an open-and-shut case — few things are in public policy — but you sure need to do more than just call removing government from education “insane” to counter it. Unfortunately, that’s not something it seems too many people — including Mr. Yglesias — are prepared to do.

Here’s a Reuters story about the Australian Tax Office harassing Paul Hogan, better known to Americans as Crocodile Dundee, because of a tax dispute. The grinches at the tax office took advantage of Hogan’s return for his mother’s funeral to hold him hostage, refusing to let him leave the country until he coughs up some cash. It appears that the tax police in Australia are just as politicized and above the law as the IRS. Hogan has never been charged with tax evasion and there are plenty of signs that the bureaucrats want to make him a high-profile victim to justify the amount of money that has been squandered in a probe of supposed offshore evasion.

Actor Paul Hogan, star of the “Crocodile Dundee” movies, has vowed to continue fighting the Australian tax office which has barred him from leaving Australia until he pays a massive bill, saying he’s victim of a witch hunt. Hogan, 70, was served with a departure prohibition order 10 days ago while in Australia to attend his 101-year-old mother’s funeral which has prevented him from leaving to return to Los Angeles where he lives with his wife and son. The Australian Tax Office refused to comment on reports of seeking tax on A$38 million ($34 million) of allegedly undeclared income from Hogan, saying it cannot give details of individual taxpayers. But the actor went public in the Australian media this week to put forward his side in his five-year row with the tax office, saying he had done nothing wrong and the tax office was on a witch hunt for a high-profile case. …“If I was a tax evader, which I’m not, I must be the dumbest one in the world to keep coming back here instead of fleeing to a tax haven … I know they’re absolutely desperate to nail some high-profile character with money to justify the expense to the taxpayer.” Hogan, who was once a painter on the Sydney Harbour Bridge, is under investigation as part of Australia’s biggest probe into offshore tax evasion, Operation Wickenby. The operation is budgeted to cost at least $300 million. The tax office has claimed he put tens of millions of dollars in film royalties in offshore tax havens, a claim that he has denied. He has never been charged with tax evasion.

This story is symbolic of a bigger issue, which is the the unfortunate tendency of governments to create ever-more oppressive and misguided laws in response to failures of existing policy. We see this in the failed War on Drugs, which leads to trampling of civil liberties and erosion of privacy. We see it in the failed War on Poverty, which leads to more redistribution that further traps people in dependency. We see it in the failed government-run education system, which wastes more money every year as outcomes remain stagnant and children from poor and minority communities suffer.

In the case of tax policy, politicians impose high tax rates and punitive forms of double taxation. As anybody with a modicum of common sense could predict, this bad tax policy undermines economic performance and drives economic activity to jurisdictions with better tax law. The politicians then have two ways to respond. They can lower tax rates and reform tax systems, an approach that simultaneously would boost growth and improve compliance (as happened during the Reagan years). Or they can tighten the thumbscrews on taxpayers, trample their rights, and conspire with other high-tax nations to punish the jurisdictions that do have good policy.

Not surprisingly, most politicians choose the latter approach. And the attack on low-tax jurisdictions is a particularly loathsome part of their response. As this video explains, tax competition is a liberalizing force in the world economy and the effort by high-tax nations to penalize so-called tax havens is driven by a statist impulse to prop up decrepit and inefficient welfare states: