Obama

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CBO: Obamacare Costs Jobs – Not!

Read all about it!

Fox News: “ObamaCare could lead to loss of nearly 2.5 million US jobs report says.”

Washington Times: “Obamacare will push 2 million workers out of labor market …”

The Hill: “O-Care will cost 2.5 million workers by 2024”

And these are just a sampling.

This hyperventilation by our right wing media, picked up and amplified by Republican leadership, was triggered by a report issued by the Congressional Budget Office, our official impartial score keeper of all things policy related. I pity the poor CBO sometimes, wading as they do into our political quagmire. Still someone has to give us the bad news and rather them than me.

How bad was the news?

Well. It was good.

Yes, that’s right. The bad news was actually good. You see the review of the impact of Obamacare on the economy was an ancillary aspect of a much larger review of the economy and Federal budget outlook. In two appendices – Appendices B and C to be exact – the CBO gives us an insight into how they treat the impact of health care reform within the many moving parts of the economy over the next ten years. Here’s the paragraph that has everyone so exercised:

“The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024. Although CBO projects that total employment (and compensation) will increase over the coming decade, that increase will be smaller than it would have been in the absence of the ACA. The decline in full- time-equivalent employment stemming from the ACA will consist of some people not being employed at all and other people working fewer hours; however, CBO has not tried to quantify those two components of the overall effect. The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week). “

Read that closely and you see something somewhat different from what you read in the media. I highlighted the relevant sentence.

First, the drop in jobs is actually a drop in total work hours translated into an equivalent number of full time jobs to make it easier to comprehend. Second, that drop is seen as entirely voluntary.

This is not a loss of jobs due to employers firing or refusing to hire. It is a loss of work due to people deciding not to work  or to work less.

Why would they do that? Simple: our labor market is distorted by it being the primary location for people to find health insurance. So there are a fair number of workers who would prefer not to work, or would like to work part time, but who work full time because they need to find health insurance. Often these are older workers who would like to retire but keep working because they have a health condition that prevents them getting health care insurance other than through an employer sponsored program. Once they can locate and pay for insurance outside of the workplace they stop working. So this is not a job killer, but a lifestyle enhancer. People will be better off.

Yes, there will be instances of people being forced to work less hours as unscrupulous employers evade the law, but the CBO is clear in its estimate. The preponderance of the lost work hours will come as people opt to stop working. It isn’t because they are being forced out.

Not that you would understand this from reading those headlines.

Better yet. As those workers leave the workforce, and because employers will still be looking to hire, the net effect will be a tighter labor market and, most likely, higher wages for those who stay employed. It will also have a net positive impact on the unemployment rate.

One more thing: already the Republicans have targeted a reform they want to make to the law. They want to get rid of the subsidy Obamacare gives to insurance companies to offset, temporarily, the possible skewed risk pool that might increase insurance losses above the premiums charged. This skew is given the rather arcane name of ‘risk corridors’ and was identified as a potential reason insurers would stay out of the insurance exchanges on which the law depends. Here’s the key sentence where the CBO talks about that subsidy:

“CBO now projects that, over the 2015–2024 period, risk corridor payments from the federal government to health insurers will total $8 bil- lion and the corresponding collections from insurers will amount to $16 billion, yielding net savings for the federal government of $8 billion.“

Yes, that’s right. According to the CBO, the government is making a profit of about $8 billion on the deal. It isn’t a subsidy at all. It is a source of revenue. Nonetheless the Republicans want to get rid of it. Presumably they want to make the deficit larger.

When you cut through all the nonsense and actually read the CBO report, it offers pretty good news for health care reform supporters. It’s costing us less than everyone thought; it will free some workers from the drudgery of having to work just to get health care; and it will provide lots of people with coverage that they would otherwise not have. The only downside is that all the negative press from the Republicans, and the deliberate stalling of its implementation in some ‘red’ states has cause fewer people to sign up than planned or hoped for.

Ultimately the law is a success, and is already beyond repeal. It is an example of how our toxic politics has mucked up the average person’s likely perceptions of reality, and, given those headlines, it is a shining example of how shallow and biased the media can be.

We aren’t being given the facts properly. How can we possibly vote sensibly?

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Distribution and All That

Rumor has it that Obama’s next State of The Union address will focus heavily on inequality which has become quite a vogue issue in some Washington DC circles. I doubt anything will come of his speech, these obligatory speeches get swamped by politics the moment they end, but it will be interesting to hear what he has to say, because it is, as you all now, an issue that I have been prattling on about for some time now.

Let’s take a look at some background.

All economies, ours included, ration stuff. That’s what they do. In more polite circles this rationing is called allocation or distribution. We don’t use the rationing word because it makes people uneasy and conjures up Soviet era images of bureaucrats mucking around in the minutiae of our lives in ways we resent.

But rationing is rationing by any other name.

By this I mean that the economy and its institutions, and particularly its rules, set the context within which we all buy and sell things, and acquire what we can from the very long list of the things that we want. This recognizes the basic fact that resources are not infinite, nor is ability evenly distributed, and we all have varying degrees of opportunity to get what we want. Merit is never sufficient. The only time merit comes into play is when the opportunity exists to express that merit. Nor does hard work guarantee anything. It too needs a heavy dollop of good fortune to make a difference in our lives.

At its root the world is a very lumpy place. Opportunities, resources, skills, and all else we need are unevenly distributed about the place. This unevenness naturally leads to scarcity. And scarcity leads to the need to ration who gets what.

In our economy prices do the rationing. Or at least they do superficially. This means that if you are wealthy you get more stuff. If you are poor, not so much. Getting to be wealthy is very difficult nowadays, especially, as it turns out, in modern America. Who knew we were so class riddled and hidebound? If you’re unlucky enough to be born poor the chances very very high you will stay that way. The land of opportunity is more myth than reality. And is certainly more myth now than it used to be.  A level of inequality is always around and is actually a good thing because the plausible prospect of wealth motivates people to innovate and work hard. Our current problem is that the prospect of advancement is a whole lot less plausible than it was.

So our way of rationing things has created a few very wealthy folk and a whole mass of very poor folk. The kind-of-ok middle is less ok than before, but isn’t destitute.

This all matters for a variety of reasons.

In terms of economics the collapse anything resembling equality as it was a fews decades back has done a great deal of damage. It has reduced the level of demand in the economy by syphoning off more and more income to people who already have most things they want and so are not inclined to spend their increasing income. At the same time a large number of people who want more are unable to spend because they aren’t being paid enough. So, overall, the economy is sputtering along with less spending than it could have. And since spending by some people implies earnings by others, the missing demand causes us to have lower profits and fewer jobs than we might expect given the total income the economy generates.

We are stuck in a sub-optimal zone we can’t break free from.

Why did our price system produce this distorted rationing outcome?

Because the rules that set the context within which prices do the rationing, and the institutions that condition that context and operate those rules, are rigged. We are not playing a fair game. Our economy has been constructed – or rather reconstructed since the early 1980’s – so that people who earn income from capital or land, people we can generally call rentiers, are privileged. Whereas people who earn their income from work are not. On top of this we have turned our economy into a financially dominated one, rather than one based on making or providing real goods and services. This has allowed financiers to get their hands on a greater share of the pie, to the detriment of us all.

An easy way of showing this is simply to look at tax rates. A hedge fund manager, some of whom make billions of dollars a year, can pay as little as 15% on that income, whilst the rest of us face tax rates that escalate up to around 35%. Likewise, if you sit at home and earn your income from a stock portfolio the gains on that portfolio are taxed not as income, but as capital gains, and thus at a lower rate. Since about 80% of all stocks are held by the very wealthy this distorts their share of after tax income and helps perpetuate their stranglehold on our national wealth.

None of this is a revelation. It’s an old problem made much worse by our policies of the last few decades. Here’s a good summation:

“The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.”

That’s a quote from Keynes near the end of his General Theory published in 1936. No wonder our rentier class hates him.

So: it is the rules we set via policy and legislation that lay the groundwork for the market to ration outcomes. And the market rations via setting prices. Right now rentiers rule and thus get a disproportionate share of the national spoils. Hence our extreme inequality.

Back to Obama.

Absent his health care reform he has done precious little, other than talk, about inequality since he arrived in office. His fancy speeches rarely translate into policy.

I would like to think this is because of the adamant opposition of the Republicans who are, after all, steadfastly opposed to most efforts to redistribute our national income. Indeed they have been the main force changing the rules to increase the privilege of the rentiers. But they were abetted along the way by the Democrats who have acquiesced to the long decline in the share of national income going to the Federal government by way of taxes, and have supported a variety of the deregulatory efforts that opened the door for the financial sector to syphon off our wealth. So our erstwhile left-leaning major party does not have clean hands. It is also culpable, although less so.

How did this happen?

Because inequality matters politically. Especially when money is equated with free speech as the Supreme Court decided in the Citizens United case. This opened pandora’s box and led to wholesale corruption in our politics. If a few very wealth people can spend their fortunes on elections they can buy influence and protect their interests. They can ensure the game is rigged. So it was a Democrat who scotched an effort to change the tax rate on hedge fund managers. He was bought off by big election campaign donations.

This flood of money has successfully shifted the center of gravity of our political discourse. Issues that had general bi-partisan support a few decades ago are now highly contentious. One is the level, if any, of redistribution the government undertakes to undo the effects of our market based rationing.

Recent statistics show that bottom 20% of wage earners get about 2.3% or all our national income. The top 20% get about 57.9%. This was the raw income each segment earned in 2010. But government programs and taxation shifted things about. After that adjustment the bottom 20% was better off, with 9.3%, and the top 20% was worse off with 47.2%. So the government acts to re-ration and ameliorate some of the damage done by the rigged rules. Of course it could do more: it could un-rig the rules. But the odds of that are low given the grip the rentiers have on power.

And the rentiers are getting support from Republican voters who have shifted they support for redistribution dramatically in recent decades. It was only a few years ago that Republican voters supported government programs by a 60% to 40% margin. That has now flipped. Only 40% of Republicans support helping the poor or unemployed. This turn about is mirrored in other statistics that show Republican voters lack of sympathy for the less fortunate. When asked they seem to think that the rich got that way by dint of hard work, and that the poor are destitute because they don’t work hard enough. Neither Democratic or independent voters think this way. Indeed those groups identify the lack of opportunity as the big problem, not the lack of hard work.

Here we are then. On the eve of a major speech about a vital topic that affects us all, and with both parties aligned against any truly constructive response because they are in the pocket of the very people who benefit most from the current level of inequality. That most voters – those Democrats and independents – think we have a problem and want action is neither here nor there. We will get a speech and then the rentiers will pull the strings.

Chin up though. The tide is shifting. There is sufficient pain out there, sufficient inequality, and sufficient anger about it, that even our corrupt system cannot avoid forever. And the rentiers are suffering. After all we have a surplus of capital our economy, which gives rise to a delicious irony: the basis of rentier power is the scarcity of capital, which thus commands a high price in our world of market based rationing. If it is now comparatively more abundant, it is worth less. A whole lot less. Especially with interest rates so low – which is why rentiers are clamoring for higher rates.

Keynes talked boldly, and wrongly, about the demise of rentier power. He called it ‘the euthanasia of the rentier’. He argued, perhaps more tongue in cheek than real, that the rentier phase of capitalism is a transitional one.

We can all hope, can’t we?

Let’s hear what Obama has to say about distribution and all that.

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US Health Care Sucks

But we all know that already.

Yet another report has been produced documenting just how dysfunctional the American health care system is. It makes for dismal reading. That the report has been issued during the great Obamacare launch fiasco means, most likely, that its conclusions will be glossed over by both our political parties. They will be too busy trying to score clever political points rather than actually fixing anything. Such is the way in Washington nowadays.

The report’s key findings are shocking:

  • In 2013, more than one-third (37%) of U.S. adults went without recommended care, did not see a doctor when they were sick, or failed to fill prescriptions because of costs, compared with as few as 4 percent to 6 percent in the United Kingdom and Sweden.
  • Roughly 40 percent of both insured and uninsured U.S. respondents spent $1,000 or more out-of-pocket during the year on medical care, not counting premiums. High deductibles and cost-sharing, along with no limits on out-of-pocket costs, may explain why even insured people in the U.S. struggled to afford needed health care, the researchers said.
  • Nearly one-quarter (23%) of U.S. adults either had serious problems paying medical bills or were unable to pay them, compared with fewer than 13 percent of adults in the next-highest country, France, and 6 percent or fewer in the U.K., Sweden, and Norway.
  • About one of three (32%) U.S. adults spent a lot of time dealing with insurance paperwork and disputes or were either denied payment for a claim or paid less than expected. Only 25 percent of adults in Switzerland, 19 percent in the Netherlands, and 17 percent in Germany—all countries with competitive health insurance markets—reported these problems. U.S. insurers spent $606 per person on administrative costs, more than twice the amount in the next-highest country. Such high costs result from a complex, fragmented insurance system, the researchers write.
  • The vast majority (75%) of U.S. adults said their health system needs to undergo fundamental changes or be rebuilt completely.
  • The U.S. spends $8,508 per person on health care. That is nearly $3,000 more per person than Norway, the second-highest spender.

The good news for Americans is that they can get to a specialist much more quickly than people elsewhere. I think this is a double edged advantage. Most people can get what they need from a generalist rather than a specialist. Generalists tend to cost less. And, I suspect, America has many more specialists than it needs precisely because they can charge more for their services.

This is the time of year when employees right across America have to go through the annual health care “election” process. This is when they choose the plan they will use – from amongst the list provided by their employer – during the upcoming year. More often than not the choices are exemplars of bureaucratic obfuscation. They are too complicated. They arbitrarily limit people to lists of doctors that the plan “covers”, so if the doctor down the road is not on the plan you might have to go across town to find one that is. Or, if you live in a less urban area, there may be no doctor in the plan at all.

Employer plans change at the whim of the employer. Driving down health benefit costs has become an annual rite for human resource departments everywhere, which means that an ever more Orwellian language is deployed to make the reductions look like benefits.

And, for those who staunchly defend the American system, given that employers look at “benefits” such as a health care plan as part of employee compensation, and given that the cost of said plans has soared over the past decade or more, the system is just one more reason that wages have languished. More and more compensation is being diverted into paying for health care plans and the administration thereof.

Indeed, I rather imagine that the ghastly cost of the US system, which the report puts at $8,508 peer person, is an understatement. I doubt it includes the administrative costs buried in every business large enough to offer a plan to its employees.

Setting all that aside though, the report is a stark reminder that the system sucks. There is no way to defend it other than via stubborn ideology. It fails over a third of Americans each and every year.

More to the point, well over two thirds of all Americans think it needs serious overhaul or perhaps total scrapping.

I was never a fan of Obamacare, it is a fudge designed to preserve part if not all the insurance industry’s profit base in health care. It is a kluge rather than a reform. It attacks some basic issues, but is not a thorough, nor a long term answer. Medicare for everyone would have been.

Obamacare’s appalling administrative foul-up is masking a real problem. A problem that the Republicans have no plan to solve, but who are now able to ignore as they gleefully attack Obama and his horrible plan.

Anyway, read the plan in full here.

Then start organizing to support the real fix: single payer insurance. Just like the civilized world.

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A Proper Agenda

I read Obama’s speech in which he urged Congress to move on from last weeks’ farce with a little concern. It seemed that he misses the point about what a proper economic agenda ought to be.

Well from my point of view, naturally.

You see he listed there priorities:

  1. Get a deal done on the budget
  2. Pass immigration reform
  3. Pass a farm bill

Now, none of these strikes me as the most urgent issue we face. Yes I can see all being important, but no they don’t take priority over setting the economy back in balance.

That would be a balance between the rewards form work, and the rewards from wealth.

We have achieved a lamentable imbalance. The steady multi-decade decline in rewards to work, relatively and in some cases absolutely, have undermined our fabled middle class. Worse it has undone that all-American myth of opportunity. Worker productivity has soared, but worker rewards have not. The supposed link between the two has been severed. It is even becoming clear that the much discussed link between education and wages is weakening if not also severed. People are working hard but not benefitting. Somebody obviously is, and they are the very top income earners. Worse, since those at the top of incomes tend to hold most of the capital, they are benefitting twice over: disproportionately in terms of incomes, and disproportionately in terms of income from wealth – that capital.

So the ballyhooed inequality we heard so much about last election time is compounding. It is getting worse.

One outcome of this is the nastiness of our politics. Anger, resentment, and bitterness provide fertile ground for extremists. The Tea Party grew from such ground. Political extremism is also proving useful for those who have long hoped to undo our social programs. They can construct alluring arguments about the cost of such programs that play well with those whose hard work is not rewarded and who see themselves as being milked dry to pay for said programs.

A vibrant economy is a much less extreme one.

None of this is new. I imagine Obama hears as much constantly.

So why not put curing inequality on the agenda? Why not focus on it?

I think it’s because he has no answers. His advisory team is embedded in the accepted wisdom of our times – that there is a long term issue with sustaining productivity; that the link between wages and productivity has been broken by market forces out of our control; that there is a disconnect between the labor requirements of our economy and the skills of our workforce; and that, in any case, the spoils ought to go to those who “risk” to create jobs. In other words he lives firmly in what I refer to as a Reaganite world.

Oddly I think the Tea Party is far ahead of him on this issue. They do reject Reaganism. Or at least that part of Reaganism driven by big business, which is to say a fair bit of it. We saw this in the Tea Party’s willingness to defy big business during the debt default debacle. The rhetoric back and forth subsequently has confirmed that big business sees the Tea Party as too extreme and a threat to its hegemony over policy.

In any case, I would like to see rebalancing the economy high on the agenda. As in on top of it. This is not only for the economic fairness it would bring, but also because I see it as our most potent method for defanging political extremism.

If it turns out that our economy has changed in some fundamental way, and that wages are thus going to be under pressure permanently, then far from being a reason to make government smaller, it is a motivation to expand it further. A small government world can only co-exist with a stable political framework if it produces the missing balance between wages and wealth. Otherwise the clamor from those who do not share in those gains from productivity will force an expansion of government to offset the imbalance. Redistribution will grow, not shrink. Political tensions will grow likewise. And both democracy and capitalism will suffer.

The balance we both need and ought seek is between the requirements of democracy and capitalism. They live better together than apart. Obama ought, by now, to have realized that. It’s a shame he didn’t put rebalancing on his priority list. I would have thought it’s an election winner.

Then again he’s not running again. So why would he?

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Republican Sanity? Perhaps

Just a quick reminder: before we all get carried away with this new post-crisis dawn stuff, we should remember that two-thirds of the House Republicans – including Paul Ryan – voted to continue the government shutdown and to force the US into default. That thought ought to pour cold water on anyone who imagines we are out of the woods.

We are not.

A great deal now depends on the fear of electoral backlash that might – but only might – discipline enough Republicans into acting sensibly in the upcoming budget discussions.

Perhaps more importantly: there is an additional cause for concern. The Ultras have already begun to mobilize their considerable financial resources in order to make strong primary challenges against many of the Senate Republicans up for reelection in 2014. This may have one of two outcomes. Either the Ultras oust the more moderate incumbent in a primary and then lose the general election. This would strengthen the Democrats. Alternatively, the Ultra primary winner then goes on to win the general election – some of these seats are in hard right states – which would then make the Senate more volatile.

In any case I think we all ought to take care and not assume that the Republicans have suddenly seen the light and will act inside the normal channels of governance.

Seeing is believing should be our mantra. Until then careful skepticism is on order.

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