Today, the nation’s top health economists released a study that throws a huge “STOP” sign in front of ObamaCare’s Medicaid expansion.

The Oregon Health Insurance Experiment, or OHIE, may be the most important study ever conducted on health insurance. Oregon officials randomly assigned thousands of low-income Medicaid applicants — basically, the most vulnerable portion of the group that would receive coverage under ObamaCare’s Medicaid expansion — either to receive Medicaid coverage, or nothing. Health economists then compared the people who got Medicaid to the people who didn’t. The OHIE is the only randomized, controlled study ever conducted on the effects of having health insurance versus no health insurance. Randomized, controlled studies are the gold standard of such research.

Consistent with lackluster results from the first year, the OHIE’s second-year results found no evidence that Medicaid improves the physical health of enrollees. There were some modest improvements in depression and financial strain–but it is likely those gains could be achieved at a much lower cost than through an extremely expensive program like Medicaid. Here are the study’s results and conclusions:

We found no significant effect of Medicaid coverage on the prevalence or diagnosis of hypertension or high cholesterol levels or on the use of medication for these conditions. Medicaid coverage significantly increased the probability of a diagnosis of diabetes and the use of diabetes medication, but we observed no significant effect on average glycated hemoglobin levels or on the percentage of participants with levels of 6.5% or higher. Medicaid coverage decreased the probability of a positive screening for depression [by 30 percent], increased the use of many preventive services, and nearly eliminated catastrophic out-of-pocket medical expenditures…

This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.

As one of the study’s authors explained to me, it did not find any effect on mortality because the sample size is too small. Mortality rates among the targeted population – able-bodied adults 19–64 below 100 percent of poverty who aren’t already eligible for government health insurance programs – are already very low. So even if expanding Medicaid reduces mortality among this group, and there is ample room for doubt, the effect would be so small that this study would be unable to detect it. That too is reason not to implement the Medicaid expansion. This is not a population that is going to start dying in droves if states decline to participate.

There is no way to spin these results as anything but a rebuke to those who are pushing states to expand Medicaid. The Obama administration has been trying to convince states to throw more than a trillion additional taxpayer dollars at Medicaid by participating in the expansion, when the best-designed research available cannot find any evidence that it improves the physical health of enrollees. The OHIE even studied the most vulnerable part of the Medicaid-expansion population — those below 100 percent of the federal poverty level — yet still found no improvements in physical health.

If Medicaid partisans are still determined to do something, the only responsible route is to launch similar experiments in other states, with an even larger sample size, to determine if there is anything the OHIE might have missed. Or they could design smaller, lower-cost, more targeted efforts to reduce depression and financial strain among the poor. (I propose deregulating health care.) This study shows there is absolutely no warrant to expand Medicaid at all.

It is challenging to calculate the industrial output for post-socialist transition economies. However, through meticulous work based on internationally recognized statistical standards over two decades, two Russian economists currently associated with the Higher School of Economics in Moscow, Eduard Baranov and Vladimir Bessonov, were able to produce a statistical time-series for the main branches of Russian industry and for the industrial sector as a whole.

The table below summarizes their findings on the physical volume of industrial output in Russia from January 1990 until March 2013. January 1990 marked the end of economic growth in the territory of contemporary Russia (when Russia was still part of the former USSR) as well as the beginning of the late Soviet Union’s economic crisis. March 2013 is the most recent month for which data is available.

Source: Eduard Baranov and Vladimir Bessonov, 2013

No word describes these numbers better than “catastrophe”. As the data shows, the current level of Russian industrial output is still almost a quarter lower than it was in the time of the Soviet Union.

The only major sector that was able to increase its output over the last 23 years is the gas industry (by 17.1%). The output in every other major industrial sector has decreased. The size of the machine-building sector was reduced by 16.4%. The output in the chemical industry fell roughly by half. And light industry essentially ceased to exist.

Nor has this poor performance been only a recent phenomenon. As the graph below shows, with the exception of gas, industrial output in all major sectors has been dismal since the fall of the Soviet Union.

Possible explanations for the Russian industrial catastrophe might be grounded in a number of entirely reasonable arguments – such as the necessity to reduce the production of unnecessary, uncompetitive products manufactured en masse in the former USSR; to the inevitable changes in the structure of domestic and international demand since the opening of the Russian economy to the world market; or the tough competition from fast-growing emerging economies like China.

But those conditions were also faced by other post-Soviet countries, some of which managed to grow and increase industrial output over the past two decades. The main cause of Russia’s “Great Depression” has been its extensive interventionist and often arbitrary policies. Successive Russian administrations pursued policies that both destroyed substantial portions of the Soviet economic heritage and were unable to fully unlock the entrepreneurial resources and energy of the market economy, introduced in the late 1980s and early 1990s.

Too much privacy advocacy is done by a self-appointed expert class who, believing their own preferences to be universal, beseech legislators and regulators to mold or even remake the information economy. I have nothing against self-appointed experts—I am one, and some of you have been falling for my schtick for a decade. But the hubris of claiming to know how things should come out? That’s too much.

So the Electronic Frontier Foundation’s “Who Has Your Back?” report is real stand-out. Using a clear, six-star grid, they assess how well major Internet companies and ISPs do when it comes to key dimensions of privacy protection.

This puts you, the consumer, in a position to choose with whom you want to do business. As importantly, it puts business decision-makers on notice: If they don’t satisfy actual consumer demand for privacy, they are more likely than before to lose money.

If consumers care about privacy, they will act on what’s in this report—and specifically on the dimensions of privacy protection that matter to them. If they don’t, they won’t, because they prioritize other things, and businesses can do the same. It’s an elegant system—a market-based system—for discovering and delivering what consumers want.

The alternative is a foggy war (politics being war by other means) in which the “consumer advocate” and “industry” use every artifice to persuade various authorities whether or not, and how, to intervene. The actual desire of the consumer is an afterthought in this regulatory battle.

So, Who Has Your Back?

The report is worth checking out. You might learn that a provider you trust is not so trustworthy. You might learn of services that you should try because they are good actors. You might disagree with the methodology, and that’s fine, too. The responses of businesses and consumers to this report will be far more finely tuned to actual consumer demand for privacy than the gaudy privacy show that runs ’round the clock these days in Washington, D.C., state capitols, and Brussels.

Congratulations and thanks to the Electronic Frontier Foundation for some good, market-based privacy advocacy!

It drives a lot of us at Cato nuts to read news stories almost every day which simply assume that government spending is good for the economy. Any defense or nondefense spending restraint will hurt economic growth, it is assumed. Even a recent AEI study seemed to accept this Keynesian concept.

Government spending certainly helps the government-dependent parts of the U.S. economy. But most Americans live in the private economy, and so they might like to know how government budget actions affect the economy that they live in.

So let’s explore the spending-to-growth relationship with national income accounts data. I ran a simple regression with 60 years of data, 1953 to 2012. The variable I was trying to explain was real private GDP growth. Private GDP is total GDP less the government portion of GDP from Table 1.1.5. The explanatory variable was total (federal/​state/​local) government spending from Table 3.1. Both variables were converted to constant dollars using the GDP deflator.

The chart below shows the Excel plot of the results. The downward slope of Excel’s fitted trend line means that higher government spending growth in a year corresponds to reduced private GDP growth that year. For example, if real government spending growth was zero, private GDP would be expected to grow at 4.2 percent. If real government spending growth was 5 percent, private GDP growth would be expected to fall to 2.8 percent.

The F‑statistic for the regression was 4.1 indicating overall significance at the 95 percent level, which is the usual level economists look for to be confident of a solid relationship. The T‑statistic on the government spending variable was 2.0, which indicates significance at over 95 percent. (Note that the statistical results were even stronger when I included data back to 1946 because post-war government cuts coincided with robust economic growth.)

The R‑square of the regression was low, indicating that changes in government spending only explained a small portion of current-year GDP growth. That makes sense because a myriad of other factors affect GDP growth, including economic growth in other countries, regulatory factors, oil industry shocks, technology shocks, etc.

Note that my explanatory variable was total government spending, which includes government production and government transfers. I think that both types of government spending harm the private economy. If the government increases UI payments or food stamps, for example, it induces fewer people to work.

Personally, I’m suspicious of statistical “proofs” of economic relationships. But I do think that even broad-brush results such as this should give pause to the reporters and policy wonks who often write articles with hidden Keynesian assumptions. I think that the harm from increasing government spending affects the economy over a longer period of time. But even these single-year regression results suggest that people should be skeptical of the widely held notion that the economy is like a car and the government can speed things up by simply stepping down on the spending gas peddle.

P.S. I’m happy to share my data upon request if people want to check for any Reinhart-Rogoff problems.

One of the realizations that helped me to dispense of the neoconish foreign policy views of my youth is that for federal policymakers, the Pentagon is like a giant jobs program. Regardless of need, a military installation or armament factory can generally count on the unwavering support of the member of Congress who represents the district or state where the facility is located. 

On Monday, the Associated Press’s Richard Lardner provided a textbook example: over the past two years Congress has spent almost a half billion taxpayer dollars—and wants to spend another $436 million—upgrading Abrams tanks that experts and the Army itself say aren’t needed.

Who are some of the biggest congressional backers of the tank upgrading? Why, Republican “deficit hawks”! 

Keeping the Abrams production line rolling protects businesses and good paying jobs in congressional districts where the tank’s many suppliers are located. 

If there’s a home of the Abrams, it’s politically important Ohio. The nation’s only tank plant is in Lima. So it’s no coincidence that the champions for more tanks are Rep. Jim Jordan and Sen. Rob Portman, two of Capitol’s Hill most prominent deficit hawks, as well as Democratic Sen. Sherrod Brown. They said their support is rooted in protecting national security, not in pork-barrel politics. 

“The one area where we are supposed to spend taxpayer money is in defense of the country,” said Jordan, whose district in the northwest part of the state includes the tank plant.

Ah, yes, the “national security” excuse—probably the most cited justification by politicians to spend other people’s money since the ink dried on the Constitution.  

Remove the flag that politicians like to wrap themselves in and it becomes pretty obvious that crass pork-barreling is the big motivator. Defense contractors know the score, which is why work is farmed out to subcontractors in numerous states and districts: 

The Lima plant is a study in how federal dollars affect local communities, which in turn hold tight to the federal dollars. The facility is owned by the federal government but operated by the land systems division of General Dynamics, a major defense contractor that spent close to $11 million last year on lobbying, according to the nonpartisan Center for Responsive Politics… 

The first editions of the Abrams tank were fielded in the early 1980s. Over the decades, the Abrams supply chain has become embedded in communities across the country. 

General Dynamics estimated in 2011 that there were more than 560 subcontractors throughout the country involved in the Abrams program and that they employed as many as 18,000 people. More than 40 of the companies are in Pennsylvania, according to Sen. Robert Casey, D‑Pa., also a staunch backer of continued tank production. 

A letter signed by 173 Democratic and Republican members of the House last year and sent to then-Defense Secretary Leon Panetta demonstrated the depth of bipartisan support for the Abrams program on Capitol Hill. They chided the Obama administration for neglecting the industrial base and proposing to terminate tank production in the United States for the first time since World War II. 

This is why U.S. taxpayers are subsidizing the security of wealthy allies. 

In case you haven’t been following what the Cato Institute has been doing lately on social media, here’s an accessible list of all of Cato’s current projects across different social media platforms:

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P.S.: Today is my last day leading social media and digital outreach efforts at Cato. Congratulations to my successor, Kat Murti, who will be taking Cato into the future and helping grow Cato’s social media following to new heights.

America’s transportation system will continue to grind to a halt under President Obama’s pick for transportation secretary, Anthony Foxx. Currently mayor of Charlotte, N.C., Foxx strongly supports streetcars and other obsolete forms of transit.

It is a measure of the glacial pace of America’s political system that Obama had nearly 16 months’ notice that current Secretary Ray LaHood planned to step down at the end of Obama’s first term, yet the president required another three months before finding a replacement. If the administration has anything to say about it, American travelers will move at the same glacial pace: the streetcars that Obama, LaHood, and Foxx want to fund are slower than most people can walk.

Transit advocates often point to Charlotte as an example of a successful lightrail line (more accurately described as a “low-capacity-rail line”). With success like this, I’d hate to see failure: the line cost more than twice the original projection; generates just $3 million in annual fares against more than $20 million in annual operations and maintenance costs; and collects of an average of just 77 cents per ride compared with nearly a dollar for other light-rail lines. Now Charlotte wants to extend the line even though a traffic analysis report predicts that the extension will dramatically increase traffic congestion in the corridor (see pp. 54–56).

Foxx believes rail transit “drives economic development,” says George Washington University Professor Christopher Leinberger approvingly. “The goal of any transportation system, especially rail transit, is not to move people,” Leinberger argues. “The goal is economic development at the stations.”

Anthony Foxx certainly believes that. “If we didn’t do streetcar,” he asked the Charlotte city council during a debate, “does anybody have an idea how we’re going to revitalize” downtown Charlotte?

Rail advocates claim that Charlotte’s low-capacity-rail line helped revitalize neighborhoods along the line. However, a study by transportation expert David Hartgen concluded that most of the billions of dollars of development that was planned along the line was never built. Of the developments that were built, most would have taken place without the line, Hartgen found, though not necessarily in exactly the same locations.

I’ve said this before and I’ll say it again: transportation spending generates true economic growth only if it results in lower-cost, faster, and/​or more convenient movement of people and goods. Streetcars and low-capacity rail are more expensive, slower, and for all but a tiny number of people less convenient than the alternatives, whether buses or cars. Even if you reduce transit rider costs by subsidizing them to the hilt, someone has to pay the subsidies and that slows economic growth.

Foxx is blissfully unaware of this and we can expect him to continue LaHood’s policy of giving away as much money as possible for transit projects that are as expensive as possible and move few people while creating more congestion for everyone else.