Last night the President spoke of “the challenge of entitlements” and said that “Social Security and Medicare and Medicaid are commitments of conscience — and so it is our duty to keep them permanently sound.”

“With enough good sense and good will, you and I can fix Medicare and Medicaid — and save Social Security,” he averred. The ability of the federal government to negotiate drug prices has been an aspect of the recent debate over Medicare that was brought to the fore in the recent “100 hours” legislative agenda.

A number of conservative commentators have come out against this idea, including Acton’s own Rev. Jerry Zandstra and Benjamin Zycher of the Manhattan Institute (HT: The Reform Club). These are just two voices in a chorus of criticism rising against federal negotiation (I use them just because they are the ones with which I’m most familiar. I don’t mean to pick on anyone in particular).

Both of their arguments seem to me to boil down to this: the government is an effective negotiator and the result of negotiation will be that drug companies will have less money coming in and therefore spending on research and development will suffer.

Zandstra says of successful negotiation, “if, in doing so, you dry up research and development dollars so you aren’t developing drugs to treat cancer and Alzheimer’s and other diseases -- if you take the profit motivation away -- have you done good? No, you really haven’t.”

Zycher writes, “Federal price negotiations will cause sharp price reductions, but this will yield less research and development investment in new and improved medicines over time.”

These claims fail at a number of points in my opinion. Zycher and Zandstra are probably right on the mere claim that federal negotiation of drug prices will produce a drop in pharma income. But that isn’t the datum that is most relevant to the policy discussion.

Once government has decided to tax us and spend our money on a particular program, I think it is government’s responsibility to spend that money as well as it can, to be good stewards of efficient and productive use of those funds. This is true regardless of whether or not the program itself is one that government should be undertaking. The question of whether the government should be doing or pursuing a particular program or agenda is a different one than whether the government should pursue these programs efficiently and well.

So, given that Medicare is an entitlement to which our government has committed itself, it seems to me that the government is responsble for administering it as cost-effectively as possible. The government needs to make our tax dollars stretch as far as they can. This should include negotiating lower prices paid for prescription drugs, regardless of the effect it might have on drug company profits or research budgets.

It is a separate question whether drug companies need federal support to achieve the current or higher levels of funding for research and development. But let’s assume for the sake of argument that pharma companies do need federal support to find new drugs for “Alzheimer’s and other diseases.” If that’s the case, then the argument for subsidizing pharmaceutical research should be parsed out from the question of drug price negotiation.

Refusing to allow the feds to negotiate prescription drug prices effectively creates a subsidy for drug companies...something I would think that Zandstra and Zycher would be against, at least in principle. But maybe not.

Drug companies are in fact struggling, it seems. Pfizer, for instance, is shutting down operations at three Michigan sites and laying of 2400 workers, as part of a broader layoff of 10% of its workforce. And perhaps the estimated “loss of about five million life-years each year” is sufficient reason to support government subsidy of drug research.

But if conservatives are in favor of government subsidies for drug companies, they need to make that argument stand on its own and separate it from the question of price negotiation. Government subsidy of drug R&D should be a separate question, complete with its own line-item and its own policy analysis.

As noted at WorldMagBlog (among many other places), the incoming Democratic majority in Congress is suspending the process of earmarking, at least temporarily.

Rep. David Obey, D-Wis., and Sen. Robert Byrd, D-W.Va., the incoming chairmen of the House and Senate Appropriations committees, have pledged that “there will be no congressional earmarks” in the upcoming budget.

Earmarks will be available again in the 2008 budget cycle, after “reforms of the earmarking process are put in place.” There’s a lot of smoke right now around the talk of earmark reform. We’ll see next year whether there’s any fire.

Last month Tom Schatz, president of Citizens Against Government Waste, said that making lasting earmark reform will be difficult: “There are three parties in Washington: Democrats; Republicans; and appropriators,” CAGW President Tom Schatz said. “Democrats should expect any serious reform efforts to meet stiff opposition from appropriators who have no qualms about breaking party lines, or the bank, to keep their pork.”

According to CAGW, Rep. Obey has appropriated over $5.5 million in pork since 2005, and has a lifetime rating of 19% or “hostile.” Sen. Byrd, meanwhile, is crowned “The King of Pork” with a rating of 17% and a tally approaching $1 billion in pork since 2000. More on “the King” here.

It’s an open question, then, whether Byrd’s and Obey’s commitment to real reform is authentic.

In the meantime, I recommend checking out other resources at Citizens Against Government Waste.

NBC Nightly News has long had a special feature titled, “The Fleecing of America,” which investigates various instances wasteful spending by government officials.

To get a visual clue about the massive size and diversity of the federal budget, check out “Death and Taxes”, the 2007 edition, “a representational graph of the federal discretionary budget. The amount of money that is spent at the discretion of your elected representatives in Congress. Basically, your federal income taxes.”

The website also notes, “Don’t forget about the national debt! It’s the circle so big it doesn’t even fit in the box.”

I recommend printing out the graph in landscape orientation on ledger-sized paper and posting it somewhere near your desk. You’ll get plenty of questions from curious passers-by.

(HT: Mises Economics Blog)




Update: In response to the limitations of the graph noted by Tim in the comments section below, it should be noted that this graph does only refer to discretionary spending. This does not include either the mandatory spending that falls under the federal budget each year or the various entitlement programs, such as Social Security, which are “off budget.” With this in mind, of course, the pork in the graph above is the good news, relatively speaking.

With regard to speculation as to why the makers of the budget graph chose only to look at discretionary spending, I quote this Reason article: “Because discretionary spending can theoretically be zeroed out each year, it is generally regarded as the clearest indicator of whether a president and Congress are serious about reducing government spending.”

“The political left in America is emerging victorious,” writes Patrick Chisholm, and its true because “the era of big government is far from over. Trends are decidedly in favor of that quintessential leftist goal: massive redistribution of wealth.”

Over the past two decades, “Republicans’ capture of both Congress and the White House was, understandably, a demoralizing blow to the left. But the latter can take solace that ”Republican“ is no longer synonymous with spending restraint, free markets, and other ideals of the political right.”

Chisholm cites the fact that since 2000, “During the first five years of President Bush’s presidency, nondefense discretionary spending (i.e., spending decided on an annual basis) rose 27.9 percent, far more than the 1.9 percent growth during President Clinton’s first five years, according to the libertarian Reason Foundation. And according to Citizens Against Government Waste, the number of congressional ‘pork barrel’ projects under Republican leadership during fiscal 2005 was 13,997, more than 10 times that of 1994.”

And that’s just the tip of the iceberg, since “discretionary spending is dwarfed by mandatory spending - spending that cannot be changed without changing the laws.”

Read the whole thing: “Triumph of the redistributionist left.”