Government – Page 152 – artdiamondblog.com

In China Too, Special Interest Groups Lobby Against Free Markets

Source of graphic: online version of WSJ article cited below.

(p. A1) BEIJING — When Chinese President Hu Jintao visits the U.S. in mid-April, he is sure to field tough questions about Beijing’s trade and economic policies amid a wave of rising protectionism. But he also is grappling with a similar backlash at home.

Amid one of the longest and fastest growth streaks of any modern economy, China is wrestling with concerns from a rising wealth gap to corruption to environmental damage. But the latest uproar has turned on foreigners, targeting the many outside investors that have piled into China and prospered — even while fueling much of the country’s growth.

. . .

(p. A8) In some ways, the 63-year-old Mr. Hu faces a more complex situation than his predecessors, as China becomes more like the U.S., with greater tolerance of dissenting views and organized interest groups. Resistance to some market-oriented changes is mostly driven by special interests such as disenfranchised farmers, private businessmen and ministries trying to hold on to their powers. At the national legislature’s March meeting, lobbying by interest groups picked up markedly.

For the full story, see:

KATHY CHEN. "Amid Tension With U.S., China Faces Protectionist Surge at Home." The Wall Street Journal (Fri., March 31, 2006): A1 & A8.

Precariousness: In France it is Sought and it is Feared

Coombs and VanderHam on the April 3, 2006 extreme ski run, in which they both died. Source of caption information, and of photo: online version of the first NYT article cited below.

Some seem to seek risk:

(p. A1) ”La Grave goes from tranquil to frightening and mad, and it’s so exhilarating to be in those moods,” Mrs. Coombs said in a telephone interview last week. Her husband, she said, ”never found anything more perfect.”

Last month, Mr. Coombs slipped off a cliff and fell 490 feet to his death. He was 48. He was trying to rescue Chad VanderHam, his 31-year-old protégé and skiing partner from the United States. Mr. VanderHam had gone over the same cliff moments earlier. He also died.

Their accident, during a recreational outing, has focused attention on extreme skiing and on this remote destination, high in the Alps about 50 miles east of Grenoble.

For the full story, see:

NATHANIEL VINTON. "Skiing Beyond Safety’s Edge Once Too Often." The New York Times (Wednesday, May 17, 2006): A1 & C23.

Others seem to fear risk:

PARIS, April 8 – Standing amid the chaos of the protests here this week, Omar Sylla, 22, tried to explain why the French are so angry about what seems to many people like such a small thing: the French government’s attempt to loosen labor laws a bit by allowing employers the right to fire young workers without cause during a trial period on the job.

Even after President Jacques Chirac promised to shorten the period to one year from two, the protests continued, and French students and unions have vowed to keep demonstrating until the law is repealed.

”We need less precariousness, not more,” said Mr. Sylla, the son of immigrants from Ivory Coast, who still lives with his parents in a government-subsidized apartment in a working-class suburb of Paris.

Mr. Sylla said he had searched for years for a job before finding work about a month ago as a baggage handler at Charles de Gaulle International Airport. Even then, he said, he only got the job because his sister works at the airport and pulled strings on his behalf.

For the full story, see:

CRAIG S. SMITH. "French Unrest Reflects Old Faith in Quasi-Socialist Ideals." The New York Times, Section 1 (Sunday, April 9, 2006): 8.

Economists have long puzzled at how the same person can both buy insurance and gamble in a casino. The first seems an act of risk-aversion, and the second of risk-seeking. (Milton Friedman, and others, have tried to explain the paradox.)

But I am puzzled by something else. When risks are taken, why are they so often taken in arenas such as rioting in the streets, or extreme skiing, where they achieve no noble purpose? Whatever risks one is going to take, why not take them in the arena of innovation and entrepreneurship, where the potential benefits to the innovator and to human progress, are huge?

Economic Efficiency Arguments Mattered in Clearing Whirlpool to Acquire Maytag

A few weeks ago, the Justice Department cleared Whirlpool’s $1.7 billion acquisition of Maytag even though the new entity would have a dominating share of the marketplace, controlling about three-quarters of the market for some home appliances.

The department justified its decision by a combination of evidence and law. That included confidential commercial information that the department says it cannot make public; a very broad definition of the marketplace to include foreign companies, some of which have yet to make a bigger push in the United States; and an expansive reading of the economic efficiency defense for permitting such deals.

The decision demoralized the career ranks of the antitrust division at the Justice Department, officials there have said. And it left private antitrust practitioners in Washington wondering whether, in light of the decision and the flurry of corporate dealers, there are could really be any mergers that this administration would challenge.

For the full commentary, see:

Stephen Labaton. "STREET SCENE: LEGAL BEAT; New View of Antitrust Law: See No Evil, Hear No Evil." The New York Times (Friday, May 5, 2006): C5.

Virginia Senator George Allen has “a libertarian sense”

Virginia Senator George F. Allen. Source of photo: http://en.wikipedia.org/wiki/Image:George_Allen_official_portrait.jpg

Mr. Allen says he has "a libertarian sense." He describes himself as more in sync with Thomas Jefferson and Ronald Reagan than with George Bush. "I’m one who dislikes limits. I don’t like restrictions. I like freedom. I like liberty. Unless you’re harming someone else, you leave people free."

For the full interview, see:

FRED BARNES. "THE WEEKEND INTERVIEW with George Allen; The Virginian." The Wall Street Journal (Sat., April 22, 2006): A8.

An Inconvenient Truth About “An Inconvenient Truth”

Al Gore. Source of photo: http://in.news.yahoo.com/051008/137/60gzj.html

(p. A25) If Al Gore’s new movie weren’t titled ”An Inconvenient Truth,” I wouldn’t have quite so many problems with it.

. . .

Gore shows the obligatory pictures of windmills and other alternative sources of energy. But he ignores nuclear power plants, which don’t spew carbon dioxide and currently produce far more electricity than all ecologically fashionable sources combined.

A few environmentalists, like Patrick Moore, a founder of Greenpeace, have recognized that their movement is making a mistake in continuing to demonize nuclear power. Balanced against the risks of global warming, nukes suddenly look good — or at least deserve to be considered rationally. Gore had a rare chance to reshape the debate, because a documentary about global warming attracts just the sort of person who marches in anti-nuke demonstrations.

Gore could have dared, once he enticed the faithful into the theater, to challenge them with an inconvenient truth or two. But that would have been a different movie.

For the full commentary, see:

JOHN TIERNEY. "Gore Pulls His Punches." The New York Times (Tuesday, May 23, 2006): A25.

Prices Can Be Lower When Few Firms in Industry

Alex Tabarrok. Source of image: http://www.gmu.edu/centers/publicchoice/faculty.html

Price gouging can work only if firms have monopoly power — so if gouging is the explanation for higher premiums, we would expect to see higher premiums in states with less competition. My student, Amanda Agan, and I tested this hypothesis in a study released two days ago by the Manhattan Institute. Contrary to the gouging hypothesis, we found that a 10% increase in industry concentration reduces premiums by $2,200. The result makes sense if we remember that, to increase market share, firms don’t raise prices but rather lower them. Wal-Mart has grown into the nation’s dominant retailer by lowering prices, not raising them.

For the full commentary, see:

ALEX TABARROK. "Rule of Law; Price Gouging Is Bad Medicine." The Wall Street Journal (Sat., May 20, 2006): A9.

We Should Reward Those Who Take Risks to Produce What We Need

On the Democratic and Republican-in-Name-Only side, we have the idea of "windfall profits taxes" on energy companies. These would presumably mandate a desirable level of corporate profits in one sector on which we depend. (And how long do you think it would apply to only one industry?) If profits exceeded that level, they would be taxed.

As far as I can tell, there is no plan to give a rebate to the companies if their profits have fallen below that desired level.

In other words, the plan is to send this message to energy-company investors, including retirees and pension funds: "Yes, we are in a situation of oil and gas shortage. Yes, we want you to risk billions of dollars exploring for and producing and refining oil and processing gas. But if you succeed for any reason, and even if no price-fixing is found, we will punish you for it."

This is what I would call confusion. You usually get more of something by rewarding people for doing it or producing it, not by punishing them for doing it or producing it.

Yes, the human instinct of envy demands that we get some licks in against people who are doing well, even if we are doing only slightly less well ourselves. But economies built on the politics of envy are rarely successful. Ask the Cambodians or the Chinese or the Russians before they went capitalist.

For the full commentary, see:

BEN STEIN. "Everybody’s Business; A Quick Course in the Economics of Confusion." The New York Times (Sun., May 28, 2006):

“My Merit Is My Caste; What Is Yours?”

NEW DELHI, May 22 — The problem of caste prejudice here is as ancient as the Hindu texts. The efforts to redress it date from the formation of modern India nearly 59 years ago. Today — as India enjoys awesome rates of economic progress and confronts the challenge of spreading the benefits to its needy majority — the nation faces a polarizing totem of public policy: a government plan to extend college admission quotas to certain "backward" castes.

Affirmative action is in some ways an even more emotional issue in India than in the United States. In recent weeks, a proposal to extend quotas for admission to some of the country’s flagship, federally financed universities has caused fresh turmoil.

Protests — particularly by medical students who say merit should be the only basis for admission to India’s intensely competitive medical schools — have spread across the country and, here in the capital, hobbled public health services. Advocates and opponents of the measure have exchanged often ugly rants.

. . .

Medical students have been particularly outraged because the plan would further restrict the limited number of seats. Medical education in India begins with a five-year undergraduate program, and the proposal could affect students’ chances of completing their training.

The central lawn of the All India Institute of Medical Sciences, the pre-eminent public hospital, was occupied Friday by medical students on the fifth day of a strike that began last week and continued on Monday. "My merit is my caste. What is yours?" read one T-shirt.

. . .

The opponents say set-asides would diminish the quality of India’s best universities and divide students along caste lines.

"Why after 55 years are we still thinking in terms of caste-based reservation?" demanded Poojan Aggarwal, a third-year student at Safdarjung Medical College here. "We should talk now of total meritocracy. We know on this issue none of the political parties will support us."

For the full story, see:

SOMINI SENGUPTA. "Quotas to Aid India’s Poor vs. Push for Meritocracy." The New York Times (Tues., May 23, 2006): A3.

(Note: ellipses added.)

Doha Tariff Cuts Would Save Global Economy About $100 Billion; France Objects

Source of graphic: online version of the WSJ article cited below.

(p. A1) The so-called Doha round of talks, which began in 2001, were designed to boost developing nations; among other things, they want lower barriers to their agricultural exports. France has vowed to veto any deal that doesn’t protect its farmers. A pivotal missed deadline April 30 has led to predictions the talks could die by summer if countries including France don’t change their stance.

The standoff shows how cultural and emotional factors can combine with politics to stifle free-trade goals that most economists believe would provide a net benefit to the world. The tariff cuts envisioned by Doha would not only help developing countries sell their minerals and food products, but would also lower barriers to the industrialized world’s exports of goods and services. The World Bank calculates that Doha would boost the global economy by around $100 billion.

Overall, France itself likely would be a major economic gainer from a global (p. A10) deal. Though it’s the world’s second-largest agriculture exporter after the U.S., farming accounts for just 2.5% of the French economy. World-class manufacturing and service companies, such as car maker Renault SA and insurer AXA SA, are larger engines of the French economy. France could gain more income than it would lose in opening its agricultural markets to budding farm superpowers like Brazil.

Even in agriculture, France can be a formidable competitor, notably in products such as wine and cheese. Its brand is well-known the world over. And its farms are increasingly home to capital-intensive agribusiness companies, not just small family producers. Most of the $11.5 billion in European Union subsidies that France receives each year goes to the largest, most commercially viable farms.

WTO chief Pascal Lamy, a Frenchman, says he doesn’t understand France’s position. "As an efficient farm producer, the strategy should be to reduce subsidies and prices, because others won’t be able to compete with you," he said in a recent interview.

. . .

The French rural tradition, however, is changing. Between 1993 and 2004, the number of arable farms fell by nearly a third. Wide swaths of neglected land are now home to unsightly scrub, and the farms people see as they drive down France’s immaculate highways are often parts of major business enterprises. Oxfam says as much as 60% of subsidies went to the richest 15% of French farmers in 2004, the latest figures available.

Oxfam believes the EU’s tariffs and farm subsidies, which total over €40 billion annually, are harmful to the world’s poorest countries. High customs duties keep products from poor nations out of the wealthy EU market. At the same time, EU farmers overproduction is dumped cheaply abroad, driving down global prices and harming farmers in the developing world.

For the full story, see:

SCOTT MILLER. "Food Fight; French Resistance To Trade Accord Has Cultural Roots; WTO Talks Promise Benefits But Farmers Retain Hold On the Nation’s Stomach; ‘Politicians Are Frightened’." The Wall Street Journal (Tues., May 16, 2006): A1 & A10.

Doctor Overhead Increased 15 – 20% Due to Insurance Delays in Paying Claims

Source of the graphic: the online version of the NYT article cited below.

What is noteworthy in the table above is not the differences in delays in paying. What is noteworthy is that the fastest payer still takes a month to pay.

(p. C1) Few things rankle a doctor more than an insurance company’s saying it cannot find a claim for medical services. Particularly when there is even a signed return receipt to document delivery of the bill.

"We actually had the little green card to show who signed for the dang thing," said Elizabeth Wertz, chief executive of the Pediatric Alliance, a large group of Pittsburgh doctors. "We sent it by certified mail. The insurance company said they didn’t have it."

The claim was for several thousand dollars, according to Ms. Wertz, who declined to identify the company, a large regional insurer, for fear of making it more difficult to wrangle payments. It is a problem known to many doctors as they struggle to balance the rising cost of providing patient care with what they see as a reluctance by some powerful insurers to pay promptly.

Pediatric Alliance’s 37 doctors are among the 7,000 physicians, nurse practitioners and other health care providers around the country who are clients of the claims-processing company Athenahealth, which plans today to present a rare warts-and-all look at how well — or not — the nation’s seven biggest health insurers pay their bills.

Not well enough, in many cases, according to the data and to experts who say the survey provides the most comprehensive look yet at the state of accounts payable vs. accounts receivable in the nation’s health care system.

Tardiness or refusal to pay what doctors consider legitimate medical claims may add as much as 15 to 20 percent in overhead costs for physicians, forcing them to pursue those claims or pass along the costs to other patients, according to Jack Lewin, a family doctor who is chief executive of the California Medical Association, a professional group of 35,000 physicians.

. . .

(p. C10) Athenahealth, which says it collected $1.8 billion on behalf of its physician clients last year, is among the biggest of several thousand companies that help doctors and hospitals get paid by editing their claims and helping them to deal with difficult cases. Health care providers who can afford such services say they have become a necessary part of doing business.

In the case of Pediatric Alliance, with 37 pediatricians in a dozen offices in and around Pittsburgh, the doctors’ group spends at least $250,000 a year on salaries for eight billing clerks who handle claims and pursue money owed by insurers and patients. That is on top of salaries in Pediatric Alliance’s offices for staff members to verify the patient’s coverage and collect co-payments, plus paying an outside company to check for errors before the bills go out.

Ms. Wertz, the alliance’s chief executive, says some insurers’ telephone call centers limit claims-related issues to 10 per call. "That’s incredibly inefficient," she said. "We see thousands of patients. Our people have to sit on phone 30 minutes to get a live person."

. . .

"I would much rather have my staff talking to patients than talking to insurance companies," Dr. Katz said.

For the full story, see:

MILT FREUDENHEIM. "The Check Is Not in the Mail." The New York Times (Thurs., May 25, 2006): C1 & C6.

(Note: The "Dr. Katz" mentioned is "Dr. Molly Katz, a Cincinnati gynecologist and former president of the Ohio Medical Association.")

U.S. Government “spending $3,500 to find out if we handled $1 correctly”

Indian records buried in a limestone cave near Lenexa, Kansas. The Omaha-World Herald identifies the unhappy gentleman as "Ross Swimmer, a special assistant with the Interieor Department" (see source cited for excerpt below). The Olympian Online of Olympia, Washington identifies him as "John Allshouse, assistant regional administrator for the National Archives" (see source cited for image). Source of image: http://159.54.227.3/apps/pbcs.dll/article?AID=/20060507/NEWS/60507029

LENEXA, Kan. (AP) – Seventy feet beneath the prairie, the government is filling limestone caverns – protected by guards and a bomb-sniffing dog – with truckloads of American Indians’ financial and cultural records.

What is ground zero for an accounting that will take seven years and cost $335 million owes its existence to a bitter class-action lawsuit brought against the Interior Department a decade ago. Still, it’s only a short version of the historical accounting that Indians demanded but no longer want, because they do not think it can be done properly.

The Indians say the government mismanaged a trust in their names for 120 years and now owes them tens of billions of dollars.

. . .

Concerns about the how the trust accounts are managed are almost as old as the trust itself.

In 1915, the Joint Commission of Congress on Indian Funds warned of "fraud, corruption and institutional incompetence almost beyond the possibility of comprehension." In 1928, the Interior Department found Indian trust data unreliable and almost useless. Dozens of other scathing reports followed.

Finally, in 1994, Congress demanded that the department fulfill an obligation to account for money received and disbursed. A year later when account statements still had not been reconciled, Elouise Cobell of the Blackfeet Indian tribe in Montana joined with the Boulder, Colo.-based Native American Rights Fund and others in suing.

"Fractionalization" of accounts is a major obstacle in managing the trust. As ownership of the 160-acre and smaller land parcels transferred from generation to generation, proceeds from the trust accounts had to be divided among more and more descendants. Department officials say 90 percent of the transactions are for less than $100.

"In every category it has cost us more to find the errors than the total amount of the errors we found," said departing Interior Secretary Gale Norton. "When you consider that we have millions of transactions under $1, you’re spending $3,500 to find out if we handled $1 correctly."

For the full story see:

"Paper Trail Fills Massive Cave." Omaha World-Herald (Sun., May 21, 2006): 10A.

(Note, the online version, has a different title and a day-earlier publication date:

"Counting Up What Indians Are Owed." Omaha World-Hearald (Sat., May 20, 2006).)