About Peter Radford

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Healthcare Abyss

What are we to make of a major political party that is prepared to cast tens of millions of voters into the abyss? Really?

What are we to make of a major political party that had no response to its own signature battle cry? “Repeal Obamacare!” Then what?

Nothing, that’s what.

What are we to make of a major political party that imagined a topic like healthcare was simple? Or that it could get rid of a hated law without consequences? Or that it need not spend much time or effort in thinking through what to do next?

The bankruptcy of the Republican leadership is stark. Everything it now says is hollow. There is no meaning to its various initiatives because they totally lack substance. They lack thought. They lack cohesion. They lack connection to reality. They even lack conservatism. Above all else they lack morality.

Think about this: the final vote, aborted in any case due to deep divisions in Republican ranks, was postponed while we all waited for Senator John McCain to recover from surgery. His vote was viewed as pivotal. His surgery would have cost $76,000 to someone without insurance, and yet he was going to return to vote to end insurance coverage for about twenty million of his fellow Americans. His moral depravation is exposed for all to see.

And it is depraved to slash at the lives of so many people whilst snuggled in the comfort of your own well-being.

I have a great deal of respect for the long conservative tradition in politics. It is a point of view laden with rich history and intellectual substance. It demands of us that we think carefully and deeply about how to react. Those of us steeped in the more progressive tradition are foolish is we dismiss true conservatism lightly: it has enduring appeal and deserves the devotion of its admirers.

But this modern Republican party does not. It has shed all semblance of and relation to that conservative tradition. It has had no conversation with itself about how true conservatism relates to the modern economy or the modern society emerging as we enter the digital age. It is in persistent and massive denial of contemporary trends and their disruption of the very institutions that conservatives seek to preserve. We need modern conservatives to offer us thoughtful responses to these trends, not simply a spiteful or willful desire to retreat to some supposedly preferable past.

Because that past is exactly that. Past.

We need to engage now. We need to engage with what we face today. And one of the issues most demanding of such engagement is our national healthcare crisis.

American healthcare is plainly failing systemically. It is delivering poor results at great cost. It is shameful. And it is a deplorable waste of both financial and human resources. It is absorbing vast swathes of our economy that could be more usefully channelled into productive and wealth creating endeavor.

Ah. But that simply raises a parallel issue:

A more productive and wealth creating economy would be a happy home ground for traditional conservatism. It would be a challenge to traditional liberalism. How, for instance would we distribute that productivity-created wealth? How, my progressive friends, would the left describe its own response to the healthcare crisis? And how would the left respond, within its own longstanding and respected tradition, to the likely inequity of a thriving economy?

I fear that the healthcare abyss has swallowed both our major parties. Short term political gain has replaced long term social or economic vision.

No wonder the voting public turned to Trump. Our corrupt and bankrupt politics, so evident in this healthcare crisis, deserves to be trumped.

But the country doesn’t.

And that’s the shame of where we are now.

Yet there’s hope.

Lurking behind the collapse of the latest Republican effort is a simple truth that ought enthuse progressive voters. That collapse is the logical consequence of the contradiction at the heart of the republican’s own effort.

Here’s another thing to think about: ever since Obamacare passed into law the Republicans have been determined to get rid of it. This began as a “repeal” movement and an attempt to return our healthcare system to its pre-2009 state. However, as the years passed by and as people signed up for the dreaded Obamacare in droves it became increasingly difficult to envisage simple repeal. It is a cast iron law of politics that a massive social program, once embedded, is extraordinarily difficult to get rid of. The Republicans have railed and screamed about Social Security and Medicare for decades, but it is suicidal for a politician to run on a platform of their repeal. So now it is getting impossible to get rid of Obamacare. The status quo ante of 2009 is no longer a viable political goal.

This means that the Republicans have to offer an alternative that keeps the much expanded coverage but that matches their pseudo-conservative ideals. They want to lower taxes yet they need to finance the expansion of insurance. How? They simply don’t know. They want to roll back the expansion of Medicaid. How? They have no answer.

The deeper problem for the Republicans is that there is no answer to these questions. Not within their contemporary armory. Repeal looks so simple precisely because these questions would never arise or need answering. But once they did and “repeal” became “repeal and replace” they were forced onto the agenda and thus exposed the contradiction between contemporary Republican belief and political necessity.

The next logical step in Republican efforts to deal with this conundrum is to drop the “repeal” and focus, instead, on “replace”. And this is a triumph for the left because that implies what the Democrats have been arguing for all along: fix Obamacare. Don’t repeal it.

The fight is not over, but we are on the right road.

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Healthcare Update

The Congressional Budget Office released its analysis of the Senate’s healthcare bill. It is as damning as expected. All you need to know is encapsulated in this one chart from the report:

Here’s a clue to the real objective: near the bottom of the chart is a bar indicating the cost to the Federal government of removing the various taxes that helped finance Obamacare [the ACA mentioned in the chart]. That cost is $541 billion over the next ten years. This, obviously, knocks a vast hole in the budget and is not allowed under the arcane Senate rules covering budgeting. Those rules require any law affecting the budget passed by simple majority vote, that is a law that the equally arcane filibuster cannot slow down or prevent, cannot add to the deficit. It has to be what is known as “revenue neutral”.

So, having decided to cut taxes on the rich and the health insurance providers to the tune of $541 billion, what is a good Republican supposed to do?

Why: hammer the poor of course. Make them pay for the tax cut.

And, as the chart shows the Republicans propose doing just that and then some. Their bill, if it passes into law, would slash Medicaid spending by $772 billion over those same ten years.

In fact, if you look at the bottom of the chart the entire healthcare bill will save the government about $321 billion.

Why the discrepancy? Why cut healthcare for the poor by way more than the cost of the tax cut?

I am glad you asked:

You see, this is just the first step. Not content with this tax cut, the republicans want to follow this bill up with something they call “tax reform”. By this they mean yet another round of tax cuts for the rich. And they want to use the same arcane Senate rules to push that through because they know the Democrats won’t cooperate. So tax reform has to be “scored” by the CBO to appear neutral also. And here’s the neat trick: this neutrality is averaged, in effect, over up to three bills during a single year. The black ink of the healthcare bill can be used to offset the flood of red ink in the so-called tax reform process.

Now you get it!

The poor, through their loss of healthcare coverage via the reduction of Medicaid, are not paying for one round of tax cuts for the rich. They are paying for two tax cuts for the rich.

And the Republicans aren’t even embarrassed by the venality of what they are proposing. Instead most are applauding. The few holdouts, there are a handful, are all that stands between the poor and a plutocratic onslaught the like of which we have never seen.

Let’s see whether the rich get there way again. Want to bet?

 

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Economics 10Whatever

I have been less vexed about economics recently precisely because I have been focused on other, and more urgent, topics. The politics of our age are wondrously absorbing, if not a little disturbing. In any case I do try to keep an eye on what economists are up to. In that endeavor I came across a short article by Diane Coyle on the website “Project Syndicate”. If you want to know what is occupying the establishment it’s a good place to visit periodically.

And Professor Coyle is decidedly establishment.

Her article is couched as a book review/discussion of what ails economics. In it she attempts to refute the notion that economics is lost in a desert of its own making, as I and many others would suggest, but rather, she argues, it is vibrant and rapidly modernizing. She tries to persuade us that critics, like me, just don’t get what’s going own at the frontier of the discipline. There are, apparently, a load of breakthrough ideas some of which might make it into the textbooks sometime in the future.

Great.

But not great enough.

Two paragraphs towards the end of her article illustrate the issues:

“Behavioral psychology, complexity theory, agent based modeling and the like, along with historical narratives, and emphasis on institutions, methods such as randomized control trials and now big data and AI, are by no means a coherent new mainstream. It takes time to change curricula, and institutional inertia makes new approaches too risky and difficult for young economists seeking academic jobs and promotions”

What do we make of this?

On its face Coyle seems to be telling us that lots of exciting things are going on. After all throughout the article she is hinting at the new work people such as Andrew Lo are doing. Lo is the author of one of the books she reviews and she clearly is an advocate of his work. But, she tells us, he has been striving away at his non-mainstream efforts since 1986. Presumably that is most, if not all, his academic life. He is one of the people, Coyle lets us know, trying to incorporate advances in the human sciences into economics. He has, presumably, failed so far. After all not much of the modern economics curriculum is built on the kind of psychology and evolutionary theory Lo specializes in. By not much I mean really little. As in if you squint really really hard you might see a vague trace of it.

This is, of course, not Lo’s fault, but for Coyle to swat aside the critics by reference to a body of work that still sits resolutely outside the mainstream doesn’t bolster her argument. It weakens it.

Yes behavioral psychology is being taken on board in economics. Its about time. It is decades late. But the textbooks don’t yet reflect the change. They are firmly stuck in the past. Nor, in Coyle’s own words, is the profession apparently keen on updating itself. In her own words: it is difficult, if not impossible, for new ideas to form the basis of activity for young economists bent on climbing the professional ladder. Inertia seems to get in the way.

Doesn’t it always?

Perhaps in a generation or two we might finally purge the extraordinarily simple and naive version of psychology that still dominates economics. It was included not as an effort to understand human activity and its motivations, but to make analysis tractable. It was a prop for other ideas that needed to be given a footing. It wasn’t a result of serious study beyond that of the mid to late 1800’s when a description of utility and so on was deemed useful during the so-called “marginal revolution”. It was an afterthought, in other words, to a need to make economics appear more scientific. As psychology is has always been absurd, but economists aren’t psychologists, so they adopted absurdity with brio and dash in the service of their broader agenda.

Coyle goes on …

“Practicing economists outside universities do not keep up with the research frontier — although even here, useful tools such as behavioral economics, complexity theory, market design, and network theory are making significant inroads. Still, the economics taught in university departments, practiced in financial firms, and applied by policymakers remains heavily reliant on old-fashioned reductionist rational-choice models.”

Exactly, Professor Coyle. Exactly.

But what do you mean?

The first sentence implies that those of us out here in the real world are behind the times. This is something I would contest strongly. My experience is that the ideas mentioned in that first sentence are more likely to be thought about and tested outside a university than inside. At least in terms of a broad definition of economics. The business strategy world is steeped in them. It has been for a while now. I realize that economists still see business theory as a stepchild of economics not worth spending time on, but there’s some real action out there. And that action is having a direct impact on the economy. After all it is practical.

Then the second sentence appears as a non-sequitor. Having, fairly directly, disparaged non-university economics as being distant from the cutting edge, Professor Coyle then goes on to suggest that university departments too remain heavily reliant on old fashioned models. Worse still, policymakers are way behind too.

So where is the cutting edge?

Somewhere other than most universities. And certainly not in places like the Federal reserve Board, the World Bank, of the International Monetary Fund all of which are staffed to the gunnels with economists. Out of date very one of them.

Now, I don’t want to be unfair: Coyle has a point. There is lots of good stuff going on. It’s just that, as Lo’s career illustrates, it takes ages, if not generations, for it to appear in the mainstream.

So: if you are a student wanting to be on the cutting edge and you want to understand the economy — the real one and not the oddity that economists study — get out and about. Go study somewhere where the new ideas are being absorbed more rapidly. Or, alternatively, go locate other disciplines where those ideas are already old hat. You can then study the economy through the lens of contemporary thought without having to wait for the stodgy world of economics to catch up.

The odds are that it won’t.

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Healthcare Hypocrisy Revisited

I have been away for a while. Nothing has changed. Last I wrote was about healthcare, and to welcome me back the Republicans have released their Senate healthcare plan. It is an astonishing piece of class warfare. It is mind-blowingly hypocritical. Its entire purpose is to act as cover for a monstrous tax cut for rich families whilst eliminating swathes of coverage for our poorest families. It is positively grotesque in its moral and social inequity.

I am not going to waste too much breath on it. If it passes into law — still not a certainty — it will go down as one of this country’s darkest acts. It is that vile.

But, I am certain there are still voters who support it. Those folks, like most Americans, are shielded from the full cost of healthcare by a whole battery of tax breaks that allow them to live under the illusion that they “pay their way”. This illusion then allows them, in turn, to look with anger on the cost of providing healthcare to those less fortunate than they are. Given the oppression of low wages, ridiculous cost increases in education and healthcare, and endemic job insecurity, I cannot blame voters for feeling less than generous when asked to kick in taxes to pay for healthcare for their fellow citizens.

Still, in the interests of fair play I think voters ought to be made aware of the true cost of their own healthcare coverage.

At the heart of the Republican tax cut/healthcare plan is an offset. In order to make the tax cut neutral with respect to the overall Federal budget — which is a requirement of Senate rules if the Republicans  want to avoid a risk of filibuster — that tax cut must be matched by equal or greater cuts in expenses. That way the tax cut won’t add to the deficit. The only target large enough to provide sufficient cost savings is the program we call Medicaid. So that’s where the Republicans want to swing their ax.

Medicaid is the largest government healthcare program. It is the plan through which aid flows to the poorest. Before Obamacare ramped up spending on Medicaid, it cost the Federal government about $275 – $300 billion a year. This is not all though. Medicaid is a shared program between the Federal and State governments who kick in a further $150-$200 billion a year. So the total cost, pre-Obamacare, was around $500 billion. I am using pre-Obamacare numbers because the Republicans want to get rid of it, so its is the best comparison to other costs. Medicaid, which covers about 20% of the population, thus costs about $630 per person covered per month. That compares favorably with most private healthcare plans.

But about 50% of the population gets its healthcare through a plan provided by an employer. Guess what? The employer gets a nice tax break from the government to help defray that cost of those plans. And that tax break costs taxpayers a whole lot in terms of the forgone tax revenue. In tax parlance the revenue lost because of the tax break is called a “tax expenditure”.

Tax expenditures are sneaky things. They mask the cost of government policies because they only exist as “shadows” in the accounting. They are costs to the taxpayer that are hard to see because the revenue is never collected and then disbursed — that makes the cost of a policy easy to discern. Instead the revenue is simply never collected. The government’s books then don’t reflect the cost. That makes it difficult to identify the true cost to taxpayers of certain policies, which provides politicians with cover when they implement a program involving a tax expenditure.

Medicaid is not so lucky. Its costs are fully accounted for and thus leap off the page making it an easy target for so-called fiscally responsible critics. Oddly those critics hardly ever turn their ire onto tax expenditures.

So: my purpose in all this is to give you the true cost of the tax expenditure that the Federal government provides to support employer based healthcare plans. The estimate for fiscal year 2018 is $236 billion. That’s $1,430 a year per person covered, or $120 per month. Remember: that’s the cost of the subsidy, not the full cost of the healthcare plan. Obviously the employer and the employee pay the majority of the full cost.

Yes, that’s right. The federal government spends just about as much, in total, on subsidizing employer healthcare plans as it spends on Medicaid. Admittedly this subsidy covers more people than Medicaid does, but, still, why isn’t the Republican right wing up in arms over it?

More to the point: cutting the subsidy would cost the average taxpayer covered under an employer plan about $120 a month. Yes that’s a lot, but they would still have coverage. And they could choose a different plan to manage down that cost. The typical Medicaid customer has no alternative. Gutting Medicaid the way in which the Republicans propose is simply to abolish care for the poor. They cannot change to a different and cheaper plan. There aren’t any such things.

So why won’t the Republicans get rid of the employer subsidy? Politics. It’s always easier to hammer the poor and young than it is to hammer the middle class.

And, let me return to my opening comments: this so-called healthcare plan is in actuality a tax cut masquerading as a healthcare plan. It is an act of war against the poor. It is a throwback to the distant past when it was socially acceptable to abandon the poor. After all if they are poor they must be lazy, drunk, or something. Right? No one in the Land of Opportunity can possibly be poor if they work hard. Right?

Wrong.

One last thing: the largest tax expenditures, those pesky taxpayer giveaways lurking in the shadows of the government’s books, almost always benefit those with property or those higher up the pay scale. After all we don’t want to sully their self-image of being free from welfare do we?

No we don’t. Poor things might get upset that the government was helping them through life. Plus if they realized just how dependent on the taxpayer they were they might feel more at ease helping the poor.

And we can’t have that.

 

Addendum:

Here is a list of the top tax expenditures [Courtesy of the Tax Policy Center]:

 

 

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Healthcare – A Senate Nightmare?

Well, the Congressional Budget Office has spoken. It issued its report on the House healthcare plan that passed a few weeks ago. The picture it paints isn’t pretty, and it creates a nightmare for the Senate.

First, let’s all remember that the Senate was going to construct its own healthcare reform plan. This is the American way. Everyone involved gets to write a plan, and then they all sit around and ‘reconcile’ their differences in order to end up with one that can then be voted and signed into law by all involved.

In this case the House passed its plan without waiting for the CBO ‘score’ to arrive, and before many legislators had time to read and absorb its impact. The reason for this was obvious: Paul Ryan needed to create the illusion of progress, waiting for the CBO would have risked losing the support of the more moderate wing of his party and thus failing, for a second time, to carry through on an eight year Republican pledge. It was highly unusual to go to a vote before hearing from the CBO on such a large and complex subject, but the political risks necessitated haste.

The problem is, of course, that all Ryan accomplished was to punt the big issues and dump them into the Senate’s lap.

Here are the key points that will bog the Senate down:

  1. The CBO lambastes the fix put in place to deal with pre-existing conditions. This was the very ‘fix’ that Ryan used to woo the moderates in the House. Had the CBO report been available before the House vote it is clear those moderates would have voted against. So Ryan was right to rush. The Senate, however, does not have that luxury. It will have to plug the hole the CBO has identified — there are Republican moderates in the Senate who have said they cannot support reform unless the ‘fix’ is fixed! This, naturally, then raises the ;prospect that a Senate plan which includes a patch for the pre-existing condition hole in the House plan would fail to get right wing support in the House when they vote on it after reconciliation. At which point Ryan’s entire project is revealed to be a flop.
  2. The original Ryan plan that failed to get out of the House was scored by the CBO as cutting off coverage for 24 million people. All the patchwork on the second plan has reduced that only to 23 million. The Senate is now on the hook: does it really want to eliminate healthcare coverage for that many voters?
  3. The House plan includes a massive $800+ billion reduction in Medicaid, which is the program through which poor people access healthcare. The reason for this is to pay for the elimination of the Obamacare tax on wealthy people. The Senate is thus facing the political conundrum of clearly taking away healthcare for the poor in order to cut taxes for the rich. That’s poor optics under any circumstance. It is particularly poor in view of the contentious elections in 2018. This is complicated further by the fact that some states with Republican Senators took up the expansion of Medicaid under Obamacare — anyone receiving care under the expansion would lose it. This is hardly a vote winner.
  4. The House plan hammers the elderly and the poor. The CBO estimate is that a typical elderly person could face an increase in premium costs of 800%. The Senate will want to avoid the ire of older voters. That has to be fixed.
  5. Lastly: although premiums might well come down for healthy people two countervailing problems are noted by the CBO. One is that the lower cost plans will be ‘barebones’ and may not be adequate, which was a recurring problem that Obamacare tried to fix; second, lower premiums are not assured across the entire country. Because of local market conditions some parts of the country may well see premium increases despite the House plan. Since these areas are largely rural and Republican supporting, the political risk is very high.

So the Senate is not in a happy place. That’s putting it mildly. Such is the division within the Republican ranks over some of these key issues that Mitch McConnell, the Republican leader, was already doubtful of getting sufficient votes to pass reform under any circumstance. The CBO just made his task more difficult.

So it could be that Obamacare survives, and that the Republicans move on defeated on one of their cast iron pledges.

Tax reform is no easy task either. So the question is emerging: can the republicans actually govern? Or was all that anti-Obama rhetoric just vapor?

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