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Cato Daily Dispatch for November 13, 2003

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This Close to a Drug Benefit Deal
Senate Approves Expanded Employee Verification Program
U.S. Trade Deficit Widens to $41.3 Billion

This Close to a Drug Benefit Deal

"House and Senate leaders said on Wednesday that they had reached a tentative agreement on a bill to provide prescription drug benefits to the elderly, but many Democrats spurned it, saying parts of the deal would weaken the traditional government-run Medicare program," The New York Times reports.

"Details of the proposed agreement were disclosed bit by bit, in a series of events that left the ultimate prospects for enactment of Medicare drug benefits uncertain."

In "The Medicare Drug Benefit War," Tom Miller, former director of health policy studies, writes: "Simply adding another layer of underfunded, irresponsible promises to Medicare will stimulate beneficiary demand for 'cheap' drugs and over-use of those benefits. It is sure to be followed by exploding budgetary costs and increases in the 'unsubsidized' price of Medicare's prescription drugs. Up next will be later waves of drug coverage rollbacks, regulatory restrictions, tighter drug formularies, and price controls that chill future innovative research and snuff out the next round of life-saving drugs."

Senate Approves Expanded Employee Verification Program

"Legislation to extend and expand a pilot program that allows employers to search federal data bases to verify the work eligibility of job applicants was passed by the Senate by voice vote Wednesday," CQ reports.

"The measure would continue the Basic Pilot Employment Verification program for five more years, which is currently used by employers in six states to screen potential employees. The program was created by a 1996 law (PL 104-208) to help companies comply with U.S. laws that bar them from knowingly hiring illegal immigrants."

In "Willing Workers: Fixing the Problem of Illegal Mexican Migration to the United States," Dan Griswold, associate director of Cato's Center for Trade Policy Studies, argues that it is time to recognize the contribution that Mexican immigrants make to America's economic prosperity by legally recognizing those who wish to work in the United States. Says Griswold: "Contrary to common objections, evidence does not suggest that a properly designed system of legal Mexican migration will unleash a flood of new immigrants to the United States, hurt low-skilled Americans, burden taxpayers, create an unassimilated underclass, encourage lawbreaking, or compromise border security."

U.S. Trade Deficit Widens to $41.3 Billion

"The U.S. trade deficit widened to $41.3 billion in September as imports climbed to an all-time monthly high, a fresh sign of Americans' hearty appetite for foreign-made goods," The Associated Press reports. "Exports, however, also posted a solid gain.

"The latest snapshot of the country's trade activity showed that the trade gap grew by 4.4 percent in September from August's $39.5 billion imbalance, the Commerce Department reported Thursday. September's trade deficit was slightly larger than the $40.2 billion shortfall that economists were forecasting."

In "America's Record Trade Deficit: A Symbol of Economic Strength," Daniel Griswold, associate director of Cato's Center for Trade Policy Studies, writes: "Economic theory and experience demonstrate that trade deficits are driven primarily by macroeconomic factors, in particular investment flows, and not by allegedly unfair trade barriers or declining industrial competitiveness.

"Because of the link between trade deficits and rising investment, larger trade deficits are typically accompanied by improving economic conditions. A survey of the U.S. economy since 1973 confirms that, by almost any measure--economic growth, employment, industrial production, poverty reduction--the economy has performed better in years in which the trade deficit rose than in years in which it shrank."

Jonathan Block, editor, jblock@cato.org