August 2010

2010 08 19
Kevin Drum Explains Social Security Trust Fund

Posted by in: Economics, U.S. politics

An admirable explanation that hits on the distributional ins and outs I referred to earlier this week.

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2010 08 19
Howard Dean on Park51

Howard Dean says of the community center proposed at Park51:

I think another site would be a better idea.

(Actually, he said it would be a “better i-deer,” but being from New England, I find this endearing.)

In response to criticism from Glenn Greenwald, Dean writes (in part):

My argument is simple. This Center may be intended as a bridge or a healing gesture but it will not be perceived that way unless a dialogue with a real attempt to understand each other happens. That means the builders have to be willing to go beyond what is their right and be willing to talk about feelings whether the feelings are “justified” or not. No doubt the Republic will survive if this center is built on its current site or not. But I think this is a missed opportunity to try to have an open discussion about why this is a big deal because it is a big deal to a lot of Americans who are not just right wing politicians pushing the hate button again. I think those people need to be heard respectfully whether they are right or whether they are wrong.

What I’d like to ask Dean, proud defender of civil unions for homosexual couples, is this: couldn’t this same argument be made in favor of asking those pesky lesbians to refrain exercising their right to attend their high school prom?

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2010 08 17
Right Wing Health Reform Alternatives (I)

Posted by in: Economics, Health Care

I have moved on today to taking a look at John Goodman’s “Characteristics of an Ideal Health Care System.” Goodman has an informative and always pointed Health Policy Blog. He is President of the National Center for Policy Analysis, and the last page of his paper notes that the Wall Street Journal once called him “the father of Medical Savings Accounts.”

I expect I’ll be writing more about Goodman’s Ideal Plan, but one thing leaped out at me straightaway as somewhat curious. Like most proponents of Medical Savings Accounts, Goodman appears to want insurance to come in the form of low-premium/high-deductible plans.

Not being utterly callous, Goodman is willing to subsidize the purchase of insurance, to some extent (although he’s willing to offer subsidies of identical amounts to rich and poor alike). In order to determine the level these subsidies should be set at, Goodman argues that we already a socially set number: it is “the amount we expect to spend (from public and private sources) on free care for that person when he or she is uninsured.” Goodman then cites Texas, which he says spends an average of about $1,000 per year per uninsured person on free care. He then notes, “Interestingly, $4,000 is a sum adequate to purchase private health insurance for a family in most Texas cities.”

Although writing in 2001, Goodman’s $4,000 Texas insurance policy must have been a high-deductible policy. According to this Health Affairs article, average job-based family coverage was $588 per month in 2001, or $7,056 per year.  Surely a $4,000 policy, in the non-group market no less, would involve a significant deductible. If so, then the following is what I find curious:

A common misconception is that health insurance reform costs money. For example, if health insurance for 40 million people costs $1,000 a person, some conclude that the government would need to spend an additional $40 billion a year to get the job done. What this conclusion overlooks is that we are already spending $40 billion or more on free care for the uninsured, and if all 40 million uninsured suddenly became insured they would – in that act – free up the $40 billion from the social safety net.

If those $4,000 policies (in 2001) were high-deductible policies, then at least some, and perhaps many, trips to the ER by those with such policies will incur expenses that would not be reimbursed by their insurance. But if so, then the $40 billion that would go toward subsidies to insure the currently uninsured would not necessarily offset the entire $40 billion in free care that we provided to them now.

I really feel scummy pointing out that this health reform proposal with which I wholly disagree is not the free lunch Goodman presents it as. Ick.

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2010 08 17
Health Reform and Marginal Tax Rates

Posted by in: Economics, Health Care

I’ll hopefully have more thoughts on this soon. This post is just to get the two money quotes down.

In designing my upcoming course on ethical issues in health reform, I’ve been reading a lot of health economics, despite not knowing very much at all about the subject. And not knowing much at all leaves me helpless to evaluate disputes between health economists. A rule of thumb in these cases is to find out which experts are considered level-headed and always worth listening to by most of their peers. Again, how else could I proceed.

Two such experts in health economics are Victor Fuchs and Joseph Newhouse. Fuchs is well-known in many circles for his book, Who Shall Live? Newhouse is well-known for leading the RAND Health Insurance Experiment in the 1970s-80s. This week I have been reading article from Fuchs’ book entitled “Economics, Values, and Health Care Reform,” and a recent article by Newhouse on the recent health care reform law and the residual issues we are left with. Each is worth reading, but the latter is really, really informative, especially because Newhouse both praises the law for (what I see as) its virtues and expresses deep skepticism and concern over other elements. (If you want the paper, let me know in the comments.)

Here are two quotations from the aforementioned papers that I hope to return to in the coming weeks. First, Fuchs:

There are only two ways to achieve systematic universal coverage: a broad-based general tax with implicit subsidies for the poor and the sick, or a system of mandates with explicit subsides based on income. I prefer the former because the latter are extremely expensive to administer and seriously distort incentives; they result in the near-poor facing marginal tax rates that would be regarded as confiscatory if levied on the affluent.

And here’s Newhouse:

Although necessary to achieve compliance, the subsidies will have the negative effect of increasing marginal tax rates. Consider a family of four whose income is $55,250, or 250 percent of the federal poverty level. Their current marginal tax rate is 22.65 percent plus any state or local income taxes. Assuming that, as of 2014, the family buys the most generous health insurance plan covered by the subsidy, the premium will be limited to 8.05 percent of the family’s income. This feature of the law will effectively add 8.05 percentage points to the family’s marginal tax rate, since any additional dollar of income will reduce the subsidy by eight cents. Thus, the family’s marginal tax rate will rise by roughly a third. Economic research suggests that this would be likely to reduce the labor supply of those who are not the principal income support of the household.

Being a liberal and being largely ignorant in the way of health economics, I’m often too tempted to dismiss the sorts of concerns expressed here by Newhouse. Sometimes I have good evidence for this, as when I dismiss claims that raising the minimum wage will eliminate jobs. Sometimes I have to admit that I’m just not sure what to think about claims that it would be easier to ignore.

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2010 08 14
Krugman, Laniel, and Baker on those Gov’t Trust Funds

Posted by in: Economics, U.S. politics

Paul Krugman explains how we should think about all those claims that this or that trust fund is going broke. But one of my favorite explanations comes from Explananda’s friend Steve Laniel from an October 2009 post:

In any case, Medicare is “headed for insolvency” because it works off a fixed budget. Well, Part A (hospital insurance) does. Parts B (reimbursing doctors), C (Medicare Advantage), and D (the drug benefit) are funded out of general revenues, so they can only go insolvent when the U.S. government goes insolvent. Medicare Part A is forced to be responsible in a way that the rest of the U.S. government is not. Why does no one ever talk about the Department of Defense being “headed for insolvency”? If Landrieu is so concerned about the public fisc, why doesn’t she push for the DoD to be funded out of a dedicated payroll tax? Then every few years, we could go through a public rending-of-garments ritual over the DoD’s impending bankruptcy. I would enjoy this very much. At least then we’d have parity: conservative Republicans shedding crocodile tears over how Medicare will have to be cut to keep it afloat, and my party doing the same for the military.

Finally, a point from Dean Baker that I’ve not seen made before:

[W]orkers, and only workers, pay Social Security tax. It is a payroll tax that is capped at just $106,000, so the chairman of Goldman Sachs pays no more in Social Security tax than a senior teacher or firefighter who may also hit the wage cap. By contrast, most of the general budget is financed through personal and corporate income taxes, which disproportionately come from higher income taxpayers. So it matters hugely that the bonds held by the trust fund are repaid from general revenue, as opposed to coming from additional Social Security taxes.

I need to think more about the full distributional implications of this point. But I think the takeaway is that while a regressive payroll tax raised general funds for years under the guise of a medicare or social security “trust fund,” the accounting vehicle of the Trust Fund ensures that the inevitable “fix” when outlays outstrip revenues will not add insult to injury by also being regressive. Instead of increasing the regressive payroll tax, the revenues used to fix program deficits are those supplied by more progressive taxation on upper income individuals and corporations.

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2010 08 12
MLK on Drugs?

Posted by in: U.S. politics

So everyone knows about Robert Gibbs’ remarks quoted in The Hill:

“I hear these people saying he’s like George Bush. Those people ought to be drug tested,” Gibbs said. “I mean, it’s crazy.

The press secretary dismissed the “professional left” in terms very similar to those used by their opponents on the ideological right, saying, “They will be satisfied when we have Canadian healthcare and we’ve eliminated the Pentagon. That’s not reality.”

Today Think Progress has a post documenting many occasions on which Obama himself has insisted that the American people hold him accountable. But they forgot one:

It is also worth noting that in this clip Obama praises the grassroots “agitating” that ultimately “forced elected politicians to be accountable.” This marks an interesting contrast with his Nation magazine interview with David Sirota, in which Obama

gently but dismissively labeled Wellstone as merely a “gadfly,” in a tone laced with contempt for the senator who, for instance, almost single-handedly prevented passage of the bankruptcy bill for years over the objections of both parties.

I’ll admit that I have always wondered whether Obama took the tone and stance that Sirota ascribes to him.

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2010 08 10
Food and Inflation

Matt Yglesias recently had a post on the proposed cuts in the SNAP program (a.k.a. foodstamps program) intended to offset proposed increases in child nutrition programs (e.g. school lunch programs). Yglesias cites this Monica Potts post that gives some background:

It’s worth noting that the increases in the food-stamp program were designed in the stimulus bill to be phased out once food-price inflation caught up to the expanded benefits, but because inflation was lower than expected, the benefits were going to last longer than anyone originally expected. It’s hard to imagine a situation in which politicians wouldn’t view those bigger-than-expected increases as free money. And it’s a small comfort to know the pot was raided for good rather than for ill.

This got me thinking of Mollie Orshansky, the brains behind the U.S. official poverty measure. That measure took the cheapest of four “economy food plans” and multiplied it by three, since at the time, in 1963, food constituted roughly one-third of the average family budget. Longtime critics of this measure have pointed out that the cost of food has increased much more slowly than the price of nonfood staples in the average family’s budget. Since the amount allocated for nonfood items is determined by the amount “needed” for foodstuffs, the official poverty measure fails to take differential rates of price growth into account.

This historical lag in food prices doesn’t necessarily entail a similar expected lag after the passage of the stimulus bill; but it is somewhat ironic that the issue of slow food price inflation has come up again in the context of policies ostensibly designed to aid the poor and near-poor but which end up adding insult to injury. After all, perhaps one way to make amends for screwing over the poor with an inadequate measure of non-food related resource deprivation might be to allow them a bit more in the way of food-related resources.

For more on recent and salutary developments in how the U.S. measures poverty, see this Yglesias post from March.

Howls of outrage (2)

2010 08 07
Recently read

Posted by in: Books

Arthur Conan Doyle. The Hound of the Baskervilles

A family haunted by a legendary curse, a wily villain, and Sherlock Holmes on the case. This novel, perhaps the most famous of the Sherlock Holmes mysteries, is a ripping good yarn. It also happens to be the first one I’ve read. I hope the others are as good.

Charles Petzold. Code: The Hidden Language of Computer Hardware and Software

This book is a superb introduction to the subject of how computers work. It starts in the most basic way talking about counting and binary and electricity, then moves from telegraph relays to the simplest circuits, builds all the way up through ever more complex computing machines, and ends with a brief explanation of high-level programming languages. Each step along on the way is set out by the author with impressive clarity and patience. Indeed, there is nothing in the first half of the book that would be over the head of an intelligent 12 year old. The second half of the book is a bit more challenging, but a motivated reader should be able to get through it without any background at all in the subject. Highly recommended for ages 12 and up.

Lenore Skenazy. Free-Range Kids: Giving Children the Freedom We Had Without Going Nuts Without Worry

Skenazy, a newspaper columnist, made headlines a few years ago when she let her nine year old ride the subway home alone and then wrote a column about it. In response to being branded “America’s Worst Mom” (which epithet she has borrowed for her book cover) she started a blog about worry free parenting and then wrote this book on the subject. Skenazy’s line is pretty simple: Too many parents these days drive themselves nuts with worry trying to avoid the most statistically improbable outcomes; that this has an unfortunate and unnecessary stunting effect on our children; and that the social norms that have coalesced around this worry make it really hard to stay sane yourself, e.g., you can be branded America’s Worst Mom if you let your nine year old take the subway home alone (along a route the child knows, with change for a phone call, and when both child and parent feel the child is ready for the adventure). (If my memory is not mistaken, my unusually precocious cousin was allowed to wander around Hong Kong when not much older than this when his family was passing through.)

I agree for the most part with Skenazy, and I’ve encouraged Yoon to read the book in the hope that we can agree to try to be as sane as possible when raising our son. The book did become a bit monotonous, though, since there’s only so much cheerleading for a mostly reasonable proposition that I can handle.

Robert Graves. Good-Bye To All That

Graves, the poet and novelist, was a British schoolboy in the period just before WWI and then fought in the trenches for much of that war. After the war, he studied for a time at Oxford. These three periods of his life brought him into contact, sometimes glancing, sometimes intimate, with just about every literary and cultural figure in Britain from Siegried Sassoon to Bertrand Russell to Thomas Hardy to T.E. Lawrence.

In his early thirties Graves left Britain for the island of Majorica and rarely returned. Good-Bye To All That was his bitter parting shot. I have always been fascinated by the disillusionment generated by WWI, and was especially interested by this aspect of the book. In this respect, it makes a nice companion to Vera Brittain’s Testament of Youth, which I wrote about briefly last year.

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2010 08 05

Posted by in: Odds and ends

I will be away from the blog until late August/early September. Apologies for the inconvenience.

(Seriously though: I’m teaching a course this semester on ethical issues in the recent health care reform debate. I expect, therefore, to be posting a lot of posts soon that should have 2009 in their date, but don’t.)

Howls of outrage (4)