ObamaCare requires each state to open its Medicaid program to all legal residents earning up to 138 percent of the federal poverty level. Supporters estimate this mandate will cost state governments little: the Kaiser Family Foundation’s worst-case-scenario estimates suggest that state Medicaid spending would rise by just 1.2 percent in New York and 5.1 percent in Texas between 2014 and 2019.

In a new working paper titled, “Estimating ObamaCare’s Effect on State Medicaid Expenditure Growth,” Cato Institute Senior Fellow Jagadeesh Gokhale shows that those estimates are generally far too low. Gokhale finds that all of the five most-populous states — California, Florida, Illinois, New York, and Texas, which account for roughly 40 percent of U.S. population — will struggle to cope with rising Medicaid spending even without ObamaCare’s Medicaid mandate. But ObamaCare significantly increases that burden on four of them:

In its first year of full implementation (2014), ObamaCare will increase spending on Medicaid by 9.0 percent in Florida, 22.2 percent in Illinois, 6.4 percent in New York, and 13.5 percent in Texas. Spending in California is projected to be smaller by about 3 percent.

The cost grows over time. The following chart shows the burden that ObamaCare’s Medicaid mandate will impose on these states over the first 10 years of full implementation:

Compared to a world without ObamaCare, state Medicaid spending will decline by 3 percent in California, but increase by 17.1 percent in Florida, 28.1 percent in Illinois, 16.5 percent in New York, and 12.9 percent in Texas over the first 10 years of full implementation.

On a per-taxpayer basis, ObamaCare’s Medicaid mandate is also highly inequitable:

for every $1 in costs imposed on each working-age Texas adult, Floridians and New Yorkers will pay about $1.50, Illinoisans will pay $3.60, while Californians will save a small amount (about 3 pennies).

Gokhale explains that the Kaiser Family Foundation’s projections are lower because they assume that ObamaCare’s individual mandate will not significantly increase enrollment among people who were eligible for Medicaid but not enrolled under the pre-ObamaCare rules. Consistent with other research, Gokhale assumes the individual mandate will encourage people to enroll in Medicaid even if they would not face financial penalties for being uninsured.

Update (3/3/11): The chart and text were updated to reflect corrected numbers.

Max Boot is thinking about US military personnel training the Afghan security forces and feeling irritated:

What irritates me about the whole situation is that it is the U.S. that has to pick up the tab. Our troops are already doing the bulk of the fighting. Why don’t our rich allies — e.g., Japan, Saudi Arabia, the UAE, France, Italy, Germany, Britain — pay for more of the cost of training? Some of those countries have made sizable troop contributions; others haven’t. But the U.S. has done more than any of them in terms of fighting the Taliban directly. Why do we have to do so much more than the rest of them in financing the Afghan Security Forces too?

I should note that their failure to ante up should not be an excuse for us to walk away. This is not an act of altruism; it is very much in America’s national-security interest to have a functional and effective security force in Afghanistan to prevent a Taliban/al-Qaeda takeover. Our security perimeter runs right through the Hindu Kush.

A few points. First, is this the same guy who asserted in 2001 that “the most realistic response to terrorism is for America to embrace its imperial role” and that “Afghanistan and other troubled lands today cry out for the sort of enlightened foreign administration once provided by self-confident Englishmen in jodhpurs and pith helmets?” I mean, say what you will about the English or the Romans, at least they didn’t whine about others not doing their dirty work for them.

More importantly, it’s uninformed. As I have been incessantly howling at the moon pointing out in other contexts, when we state that we have a vital interest in something, as the US Government has and as Boot reiterates above, smaller, weaker allies have every reason to free ride on Uncle Sucker even if they believe they share that interest.

Finally, Boot asserted the other day that we are “locked in an existential struggle against Islamist extremists,” and here he expands on the theme by asserting that America’s “security perimeter runs right through the Hindu Kush.” This is extreme hyperbole. Existential? As in, our existence is at stake? I thought we were over this sort of thing, but I guess not at Commentary.

Moreover, depending on what Boot is trying to convey with the phrase “security perimeter,” it’s far from clear why it stops at the Hindu Kush. There are all sorts of things going on on the other side of the Hindu Kush that could bear much more heavily on our security than what’s going on just to the West.

I give up.

The thing that probably bothers me most about “consumer protection” in the financial area is the obsession with banning products, or characteristics, that sound bad, but that are actually beneficial to consumers. An example of such is the prepayment penalty.

Basically a prepayment penalty is a fee the borrower pays if they pay off their mortgage early. The usual reaction from “consumer advocates” is “that’s horrible” — why should someone have to pay in order to re-finance or get out of their mortgage. Or that the prepayment penalty would make it difficult for the borrower to take advantage of lower rates or an improvement in their credit. 

A new NBER working paper lays out the case of why prepayment penalties are actually good for the riskiest (worse credit) borrowers. The paper also explains why we are more likely to see prepayment penalties in the subprime market than in the prime. The logic of the paper is that prepayment penalties help to ensure that “pools of mortgages do not become disproportionately composed only with the riskiest borrowers over time.”

With any given pool of subprime borrowers, some of those borrowers will see their credit quality improve over time. Maybe they establish a good payment history. When the pool is initially priced, which will determine the interest rate charged, that pricing is based upon the average risk of the pool. If however, borrowers can leave the pool as their credit improves, then the average credit quality of the pool will decline. Investors know this. So, in the absence of prepayment penalties, the average interest charged will have to be substantially higher. Essentially the prepayment penalties results in a cross-subsidy from subprime borrowers whose credit improves to those borrowers whose credit does not improve. 

Recognizing this logic also explains why we don’t often see prepayments in prime mortgages: prime borrowers are already close to the best credit, so there’s less chance of their credit improving and less room overall for improvement. Of course, there’s nothing stopping the borrower from waiting for their credit to improve before getting a mortgage.

From a New York Times report on NBC’s interview:

Former Vice President Dick Cheney … said President Obama is likely to be a one-term president because his policies are unpopular with the public.

“His overall approach to expanding the size of government, expanding the deficit, and giving more and more authority and power to the government over the private sector,” Mr. Cheney said in an interview with Jamie Gangel for NBC News. “Those are all weaknesses, as I look at Barack Obama. And I think he’ll be a one term President.”

I recall the Bush-Cheney administration also came under criticism for “expanding the size of government, expanding the deficit, and giving more and more authority and power to the government,” and it didn’t prevent him from being reelected.

In today’s much talked-of Wall Street Journal op-ed, President Obama reaches for common ground with critics of excessive government regulation — not a constituency he’s had much time for in the past. He announced an executive order requiring agencies to review existing regulation for outdated or unwise rules deserving of being struck from the books. That drew measured praise from organized business groups, something the President has not had much of lately.

Many left partisans are aghast, just as they were when Bill Clinton dashed for the political center after his own mid-term electoral “shellacking.” Salon complains that Obama’s op-ed “reads like an apology to the business community,” while Rena Steinzor fears the move signals a decline in influence for the administration’s regulatory ultras, such as Margaret Hamburg (FDA), Lisa Jackson (EPA), and David Michaels (OSHA).

Environmental law expert Jonathan Adler thinks the new executive order might do some good:

The Executive Order is here. It reaffirms the basic principles outlined in President Clinton’s Executive Order 12866, issued in September 1993, and continues to require agencies to conduct cost-benefit analyses of proposed rules. As noted in the President’s op-ed, it also requires agencies to engage in “retrospective analysis” of existing rules so as to accelerate the pace at which outdated regulations are revoked. Specifically, it requires all agencies to develop a plan for such retrospective review within 120 days. If the White House Office of Information and Regulatory Affairs ensures such reviews are meaningful, this could be a significant and positive step.

That’s a big “if.” Over the past two years, OIRA has not restrained its administration colleagues from making 2010 by far the biggest year for new regulatory burdens in memory (Heritage helpfully assembles details.) The most burdensome new rules are not from the best-known areas of new legislation, such as ObamaCare and financial reform, but from the environmental area. That makes it especially disturbing that, as Ted Frank points out, the President’s op-ed “singles out the top-down and economically inefficient fuel-economy regulation as a good one.”

So what does Obama see as an example of an excessive regulation needing repeal? The example he offers is the inclusion of the sweetener saccharin in the category of hazardous waste. Really? Saccharin as hazardous waste? Amid dozens of high-stakes, much-studied regulatory controversies, the only one he could come up with is one that — with all due respect to the people who make the little pink packets — is of hardly any significance to the wider economy, and not much more as a matter of principle?

Even this administration could have made better deregulatory boasts than that. For example, in a fit of sense, the Obama Justice Department a while back adopted regulations specifying that the Americans with Disabilities Act should no longer (as of this March) be interpreted to require restaurants, theaters and other Main Street businesses to admit patrons’ non-canine “service animals” such as monkeys, goats, snakes and spiders.

But it was almost as if his point was to pick a regulation so minor that no one cared much about it one way or the other. Had the President’s speechwriters been looking for an example of a hazardous-substance rule that would actually get people talking about regulatory overreach, they might have picked EPA’s dairy-spill regulations, which (in the words of one report) “treat spilled milk like oil, requiring farmers to build extra storage tanks and form emergency spill plans….” That one does have big and widespread economic costs.

Whoops — not a good example. That one’s not being repealed — EPA at last report intended to go forward with it. Can we really assume anything much is changing here besides the atmospherics?

Chinese President Hu Jintao arrives in Washington today for a summit meeting with President Obama following spats over economic and military issues that have created a chill in bilateral relations. This follows Secretary Gates’s visit just last week to Beijing for discussions with Defense Ministry officials. On the Huffington Post, I have a piece that looks at the current state of U.S.-China relations in the context of these visits:

“The process of repairing [the U.S.-China relationship] appears to be off to a rocky start. A key objective of Secretary Gates was to get China’s military leadership to agree to a wide-ranging dialogue on strategic issues, including nuclear weapons, ballistic missile defenses, space weapons, and cyber warfare. His hosts rebuffed his initiative, agreeing only to a very limited dialogue on such second-tier issues as combating piracy and cooperating on international peacekeeping missions. Chinese officials indicated that Washington would need some policy changes — especially moderate its willingness to sell arms to Taiwan — before a dialogue on larger strategic issues could take place. The most the Defense Ministry would agree to do in the meantime was “study” Gates’ broader proposal.

“The lack of a meaningful military dialogue frustrates a persistent U.S. goal — to get Beijing to be more transparent regarding both the level of its military spending and the extent of its geopolitical ambitions — especially in East Asia and the Western Pacific. Recent reports of China’s possible breakthroughs in nuclear technology and stealth aircraft have intensified Washington’s concerns.”

The complex U.S.-China relationship has always had elements of both partnership and rivalry. The partnership component has tended to figure more prominently, especially in the economic arena where the benefits to both parties are substantial and widely appreciated. But the balance is now shifting toward the competitive end of the spectrum. There are many reasons for this, including the stress that arises whenever the dominant economic and military player in the international system encounters a rapidly rising great power. However, the current tensions between the United States and China also are the product of the sharply different political systems, histories, cultures, and agendas of the two countries.

The shift to a relationship in which rivalry may top cooperation poses serious challenges for leaders in both countries. Strategic and economic rivalry can easily escalate into viewing the competitor as an adversary, and even an outright enemy. Given the importance of the bilateral relationship, not only for the United States and China, but for the health of the international economic system and the future of global peace, it is imperative that both sides seek to manage and contain their disagreements. The Hu-Obama summit offers an opportunity to advance that process, and one hopes that the two leaders do not waste the opportunity.

The sudden collapse of the Tunisian government on Friday underscores the turmoil toward which the Muslim world seems inescapably drifting. As I wrote earlier today at The National Interest Online:

Today, as during the Cold War, policy makers in Washington seem to expect economic growth to act as a substitute for political liberty, thereby ignoring the instinctive desire for freedom. Despotic leaders love to adopt pseudo-economic “reforms” to mask their coercive measures and perpetuate the status quo, but in the end, the institutionalized oppression imposed by ruling elites cannot be appeased in that way. Time will tell whether Tunisia and its neighbors evolve toward a freer and more prosperous future. But either way, human history confirms that fundamental change is a gradual and often painful process, and that more often than not forces erected to suppress individual freedoms eventually break down or unravel…

Check it out!