Targeting Medicaid Access

Robert Pear writes in today's New York Times that "Citizens Who Lack Papers Lose Medicaid." His opening paragraph:

A new federal rule intended to keep illegal immigrants from receiving Medicaid has instead shut out tens of thousands of United States citizens who have had difficulty complying with requirements to show birth certificates and other documents proving their citizenship, state officials say.

I'm going to comment first on the policy and then on the reporting. I think it is crazy that the rule was implemented without a provision that presumed that all children were citizens until a fairly long window elapsed during which their parents or guardians could formally establish their status. Pre-natal care should always be included, for the same reasons. There's no reason why the rule has to have the sort of impact during its phase-in period that Pear's subsequent report documents. Say what you like about illegal immigration, Medicaid, or poverty--none of them are the fault of these kids.

Now go back to how Pear wrote that sentence. I don't think his reporting justifies the use of the word "instead" in that sentence. To do so requires him to show that the policy is not making illegal immigrants ineligible for Medicaid. He has not done that. Here are three excerpts from the article that come closest:

“The largest adverse effect of this policy has been on people who are American citizens,” said Kevin W. Concannon, director of the Department of Human Services in Iowa, where the number of Medicaid recipients dropped by 5,700 in the second half of 2006, to 92,880, after rising for five years. “We have not turned up many undocumented immigrants receiving Medicaid in Waterloo, Dubuque or anywhere else in Iowa,” Mr. Concannon said.

[...]

“We’ve seen an increase in the number of people who don’t qualify for Medicaid because they cannot produce proof of citizenship,” said Albert A. Zimmerman, a spokesman for the Florida Department of Children and Families. “Nearly all of these people are American citizens.”

[...]

Wisconsin keeps detailed records listing reasons for the denial or termination of benefits. “From August 2006 to February of this year, we terminated benefits for an average of 868 people a month for failure to document citizenship or identity,” said James D. Jones, the eligibility director of the Medicaid program in Wisconsin. “More than 600 of those actions were for failure to prove identity.” In the same period, Mr. Jones said, the state denied an average of 1,758 applications a month for failure to document citizenship or identity. In 1,100 of those cases, applicants did not provide acceptable proof of identity.

The last one simply shows the policy is having an effect. It does not identify whether the effect is the intended or (presumably) unintended effect. In the first two, claims are made that the effect is largest among the largest population of Medicaid recipients. The effect may even be disproportionately large among the citizen group. But there is no evidence that it is confined to that group. There is no information in the article about California or Texas or even the paper's home state of New York, where we would expect the largest populations of illegal immigrants to be applying.

The fact that a rule is having unintended consequences does not by itself mean that it is not also having its intended consequences.

The God Delusion by Richard Dawkins

An atheist giving a public lecture on his book, The God Delusion, at Randolph-Macon Woman's College must contend with some audience members from nearby Liberty University. He does so admirably well. Spend 100 minutes or so with an extremely thoughtful public intellectual.

More Laffer Curve Laughers

Via Greg Mankiw, we find this National Review interview of Senator McCain by Ramesh Ponnuru. Greg refers us to this part of the Q&A (by far the worst on economic issues):

Ponnuru: If you could get the Democrats to agree, or at least to come to the table on entitlements or on tax simplification, are those circumstances under which you’d be willing to accept a tax increase?

Sen. McCain: No; no.

PONNURU: No circumstances?

Sen. McCain: No. None. None. Tax cuts, starting with Kennedy, as we all know, increase revenues. So what’s the argument for increasing taxes? If you get the opposite effect out of tax cuts?

Greg suggests two appropriate follow-up questions for McCain:

1. If you think the 2001 and 2003 tax cuts increased revenue, why did you vote against them?

2. If you think tax cuts increase revenue, why advocate spending restraint? Can't we pay for new spending programs with more tax cuts?

As Greg has announced that he's an economic advisor to Governor Romney, I'll be very curious to hear Romney's response to a direct question about the circumstances under which he would be willing to increase taxes if he's elected President.

The question that I would like to have answered by any policy maker who voted for the tax cuts and believes that they have increased revenues is:

Why did you make them so small?

Dick Armey on Executive Compensation

Writing in the Washington Times today, Dick Armey cautions his former colleagues against more legislation about executive compensation. Best paragraph:

There is a healthy dose of arrogance in the idea that another law could beat an entrepreneurial marketplace for determining how to evaluate compensation. Poor executive performance shows up quickly on the bottom line. Heaped on top is the misplaced notion that since Congress is engaged in politics and government all organizations should have the same objectives and structures. Governments exercise force and create rules. By contrast, firms create wealth and create the opportunity for people to exercise their freedom to choose, to contract, to buy and to sell.

Compensation of top-level executives is a matter to be resolved between the executives and the board of directors. Boards may not do a good job in some cases, but I don't see how greater government involvement will improve outcomes systematically.

Investment Advice for Presidential Candidates

The latest New York Times headline about Barack Obama's financial investments has the candidate claiming that they did not present a conflict of interest. From what I can tell, there is no ethical problem here. The problem is that Senator Obama should have a better stockbroker. Or, better yet, he should have no stockbroker.

If I were seeking or holding political office, I would not put my financial assets in a blind trust. I would never want to put myself in a position of having to claim, as Obama is now doing, "At no point did I know what stocks were held. And at no point did I direct how those stocks were invested." This is terrible language for a candidate to have to say. It combines the phrasing of a legal technicality with the shifting of blame to an employee. The speculative investments also present the candidate as taking advantage of opportunities that are not available to ordinary folks. This is not the image that a candidate wants to present.

Compare that with a candidate who does not establish a blind trust--no abdication of responsibility, no suggestion that someone else is working in secrecy on his or her behalf. With no blind trust, the candidate shouldn't hold individual stocks, to avoid any suggestion of favoritism. Instead, the candidate can put all stock investments in a low-cost, broadly based index fund, like this one. Now, the candidate is setting an example that all American savers can follow. The candidate is also not playing favorites among companies. He or she does well when every company listed on a major exchange does well.

That's a much better strategy, particularly since the get-rich-quick element of politics can always come later, on the lecture circuit or the book tour.

Senator Clinton's Letter and Speech

In the wake of last week's market volatility, Senator Clinton made a speech on the floor of the Senate and sent a letter to Chairman Bernanke and Secretary Paulson. Greg Mankiw characterized one part, appropriately in my view, as xenophobic. PGL at AngryBear responded with other parts that were, in his view (and to a lesser extent, mine) appropriately critical of our current macroeconomic policies.

The main problem with Clinton's argument is that there is no particular connection between the amount of U.S. debt that China and Japan hold and what happened last week. Is she really saying that the U.S. market wouldn't have dropped after the Chinese market dropped if we ran a trade surplus with China? Or if we still ran a deficit but China's resulting portfolio holdings were in some other country's federal liabilities rather than ours? Our economy is connected to the Chinese economy via both current account and capital account transactions. We might want to be more mindful of the latter than we have been. But that doesn't mean that the high ownership of U.S. debt by China caused the transmission of price movements from China to the United States.

Read this excerpt and see if she actually justifies the leap she makes in going from the red to the blue sentences below:

I have long argued that a great source of vulnerability is the fact that other countries, including China, own so much of our debt. Today, foreign nations according to the most recent Treasury statistics hold over $2.2 trillion or 44% of all publicly held United States (U.S.) debt with Japan and China alone holding nearly $1 trillion. In essence, 16% of our entire economy is being loaned to us by the Central Banks of other nations. Having so much debt owned by other countries can be economically unsound. Yesterday it was the sell off of foreign stocks that had reverberations in U.S. markets. But if China or Japan made a decision to decrease their massive holdings of U.S. dollars, there could be a currency crisis and the U.S. would have to raise interest rates and invite conditions for a recession. While it can and will be debated whether yesterday's market disruption was just a blip or a larger indicator of our economy's vulnerabilities, it is clear that interdependence between our economy and that of other nations can pose a risk if we do not pursue smart policies. Precipitous decisions by any country with our debt could create much graver economic problems than what we saw yesterday. The writing may not be on the wall, but yesterday, the writing was on the Big Board.

Her "in essence" sentence is not a sensible comparison. It does not make sense to compare a stock of money--the total holdings of U.S. federal debt by foreign investors--with the flow of money that is U.S. GDP. A sensible comparison might be the flow of interest that we pay to these foreign investors, a much smaller number as a share of GDP. (For example, I don't get too worried about the fact that a bank has lent me more than 100% of my income in the form of a mortgage. The reason is that the interest on that mortgage is a very reasonable fraction of my income.)

The statement in green above is a true statement. Not only would the problems be more grave--they might actually be problems and be related to what the creditor nations did. But even this scenario that she discusses is, in Mankiw's word, alarmist. There would have to be a reason why China or Japan would intentionally precipitate a selloff of their holdings of U.S. debt, particularly since the Chinese and Japanese holders of the debt would be the first ones to suffer the capital loss due to this action. It couldn't simply be that their own economies faltered--the U.S. debt they hold is an asset to them. When my income falters, I am typically quite grateful for the assets I have in the bank (somebody else's liabilities). Their economies would have to falter so badly that they needed to liquidate their holdings of U.S. debt to pay off some of their own debts. Not too likely, unless, perhaps, we close our markets to them.

Clinton's rhetoric, particularly these statements about being "held hostage" or "losing our economic sovereignty," suggest that she's thinking about a scenario in which a policy maker in Beijing or Tokyo decides that the U.S. debt is overvalued and wants to unload it en masse. About the only thing that could really convince me to do this, were I the policy maker in Beijing, is a credible belief that my counterpart in Tokyo was about to do the same thing.

While that is something over which Washington has very little control, even in that case, all that would happen--unless you think the U.S. government wouldn't pay the interest or principal on its obligations--is that the U.S. dollar would depreciate and domestic interest rates would rise. Exports would pick up a bit, and the government would find deficits more costly to finance. I'd prefer if that didn't happen, but in the grand scheme of things, it's neither very likely to happen nor very severe in its real consequences if it does.

The Social Security Coloring Book

It appears that I've been replaced by a coloring book, courtesy of The Stand-Up Economist. It's actually quite a good discussion of the policy issues. [h/t The Big Picture].