Come for the politics, stay for the snark.
Here’s my first contribution from this side of things. Let’s see if it works.
So far today, two billionaires have become very upset.
I took a screenshot of the Blankfein tweet because I figured that someone would tell him about the racism and he would take it down, but it’s been up for four hours now.
Larry Kudlow is the pure distilled essence of a Trump appointment, the type specimen of the breed, and the perfect expression of the state of Republican “thinking” on not just economics, but any matter in which actual knowledge and a respect for empiricism might help.
Via Wikipedia, we find he is barely educated, at best, in the fields in which he now works:
Kudlow graduated from University of Rochester in Rochester, New York with a degree in history in 1969. Known as “Kuddles” to friends, he was a star on the tennis team and a member of the left-wing Students for a Democratic Society at Rochester.
In 1971, Kudlow attended Princeton University’s Woodrow Wilson School of Public and International Affairs, where he studied politics and economics. He left before completing his master’s degree.
I’ll admit that Kuddles is kinda cute, but an unfinished masters degree in a policy school is not one you’d usually associate with economics acumen.
He went on to a stellar business career, managing to get fired repeatedly for substance abuse on the job, including a claimed $10,000/month cocaine habit that got him canned from Bear Stearns in 1994. (It’s interesting to note that a frantic effort is underway today to diminish such inconvenient truths on Kudlow’s Wikipedia page.)
Fortunately for Kuddles, he cleans up well, dresses nicely, and can tok gud. So he was able to revive his career as a TV gasbag, with a series of appearances and then shows on CNBC, the network that figured out the markets could be covered like sports teams.
Unfortunately — for the rest of us, if not for the ever-failing-up Kudlow — he’s been wrong about almost every key economic call since Methuselah was in diapers. He is a Laffer disciple, a supply-sider whose faith that there is no tax that is too low, no plutocrat whose needs must not be served, is impervious to any test of reality.
In 1993, when Bill Clinton proposed an increase in the top tax rate from 31 percent to 39.6 percent, Kudlow wrote, “There is no question that President Clinton’s across-the-board tax increases … will throw a wet blanket over the recovery and depress the economy’s long-run potential to grow.” This was wrong. Instead, a boom ensued. Rather than question his analysis, Kudlow switched to crediting the results to the great tax-cutter, Ronald Reagan. “The politician most responsible for laying the groundwork for this prosperous era is not Bill Clinton, but Ronald Reagan,” he argued in February, 2000.
Kudlow firmly denied that the United States would enter a recession in 2007, or that it was in the midst of a recession in early to mid-2008. In December 2007, he wrote: “The recession debate is over. It’s not gonna happen. Time to move on. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come”. In May 2008 he wrote: “President George W. Bush may turn out to be the top economic forecaster in the country” in his “‘R’ is for ‘Right'”.
And this:
When Obama took office, Kudlow was detecting an “inflationary bubble.” That was wrong. He warned in 2009 that the administration “is waging war on investors. He’s waging war against businesses. He’s waging war against bondholders. These are very bad things.” That was also wrong, and when the recovery proceeded, by 2011, he credited the Bush tax cuts for the recovery. (Kudlow, April 2011: “March unemployment rate drop proof lower taxes work.”) By 2012, Kudlow found new grounds to test out his theories: Kansas, where he advisedRepublican governor Sam Brownback to implement a sweeping tax-cut plan that would produce faster growth. This was wrong. Alas, Brownback’s program has proven a comprehensive failure, falling short of all its promises and leaving the state in fiscal turmoil.
The reviews are coming in. Via the BBC:
David Stockman, Mr Kudlow’s former boss during the Reagan administration, told the Washington Post in 2016 that Mr Kudlow’s prediction that tax cuts would lead to growth was “dead wrong”. Instead, he said the cuts led to budget deficits.
More recently, he has warned that Mr Kudlow would not be able to rein in the president.
“As much as I love him … Larry’s voice is exactly the wrong voice that Donald Trump ought to be hearing as we go forward,” he told CNBC.
Liberal economist and New York Times columnist Paul Krugman has been sharply critical, noting that Mr Kudlow missed signs of the housing bubble and recession.
“At least he’s reliable — that is, he’s reliably wrong about everything,” Mr Krugman tweeted.
Indeed in December 2007 – just as the recession was beginning – Mr Kudlow wrote in the National Review: “There’s no recession coming. The pessimistas were wrong. It’s not going to happen.”
It is interesting that Kudlow himself doesn’t seem to disagree with his predecessor on the issue that got Cohn out. From a quick take bylined by him, Laffer and Stephen Moore (another stellar, always-wrong econ public intellectual) here he is on Trump’s tariff announcement:
Tariffs are really tax hikes. Since so many of the things American consumers buy today are made of steel or aluminum, a 25 percent tariff on these commodities may get passed on to consumers at the cash register. This is a regressive tax on low-income families.
I wonder how that squares with the new job. ETA: I know how it squares. It’s already been forgotten. We’ve always been at war with Eastasia.
But that’s just SOP in the circles in which Kudlow travels: intellectual rigor doesn’t actually matter. He’s under no obligation to be consistent in any of his pronouncements, and he certainly doesn’t have to be right about anything as long as he provides cover for the true Republican (n.b.: not just Trumpian) policy goal: the transfer of more and more of our society’s wealth to those who are already wealthy — and hence, in the GOP/Rand/Sociopath view of the world, those who are virtuous enough to deserve such riches.
For all of you who’ve wondered why the US can’t be more like Kansas — we may now we get to find out.
Image: Thomas Shields Clarke, A Fool’s Fool, c. 1887.
We Can Always Use Some Bitter, Cynical, Gallows Humor, So Here’s A Kudlow PostPost + Comments
Here’s another part of the Trump interview that Joy Ann Reid highlights. Betty has covered part of this, but I think Trump’s attitude on this is important for Democratic strategy.
He literally adopted a "Godfather" phraseology to all but say Democrats could have avoided blue state tax hikes via SALT if they had "come to him" to plead for his largesse. It's a combination of the impulses of 1. and 3.
— Joy Reid (@JoyAnnReid) December 29, 2017
Let’s see his words.
SCHMIDT: Do you think Holder was more loyal to. …
TRUMP: I don’t want to get into loyalty, but I will tell you that, I will say this: Holder protected President Obama. Totally protected him. When you look at the I.R.S. scandal, when you look at the guns for whatever, when you look at all of the tremendous, ah, real problems they had, not made-up problems like Russian collusion, these were real problems. When you look at the things that they did, and Holder protected the president. And I have great respect for that, I’ll be honest, I have great respect for that.
He rambles about Joe Manchin, Luther Strange, and Roy Moore for a while, and then
O.K., let’s get onto your final question, your other question. Had the Democrats come through. …
SCHMIDT: Tell me about that, yeah.
TRUMP: Had they asked, “Let’s do a bipartisan,” Michael, I would have done bipartisan. I would absolutely have done bipartisan.
SCHMIDT: But they didn’t. … They didn’t …
TRUMP: And if I did bipartisan, I would have done something with SALT [the state and local tax deduction]. With that being said, you look back, Ronald Reagan wanted to take deductibility away from states. Ronald Reagan, years ago, and he couldn’t do it. Because New York had a very powerful group of people. Which they don’t have today. Today, they don’t have the same representatives. You know, in those days they had Lew Rudin and me. … I fought like hell for that. They had a lot of very good guys. Lew Rudin was very effective. He worked hard for New York. And we had some very good senators. … You know, we had a lot of people who fought very hard against, let’s call it SALT. Had they come to me and said, look, we’ll do this, this, this, we’ll do [inaudible]. I could have done something with SALT. Or made it less severe. But they were very ineffective. They were very, very ineffective. You understand what I mean. Had they come to me for a bipartisan tax bill, I would have gone to Mitch, and I would have gone to the other Republicans, and we could have worked something out bipartisan. And that could’ve been either a change to SALT or knockout of SALT.
But, just so you understand, Ronald Reagan wanted to take deductibility away and he was unable to do it. Ronald Reagan wanted to have ANWR approved 40 years ago and he was unable to do it. Think of that. And the individual mandate is the most unpopular thing in Obamacare, and I got rid of it. You know, we gained with the individual. … You know the individual mandate, Michael, means you take money and you give it to the government for the privilege of not having to pay more money to have health insurance you don’t want. There are people who had very good health insurance that now are paying not to have health insurance. That’s what the individual mandate. … They’re not going to have to pay anymore. So when people think that will be unpopular. … It’s going to be very popular. It’s going to be very popular.
Now, in my opinion, they should come to me on infrastructure. They should come to me, which they have come to me, on DACA. We are working. … We’re trying to something about it. And they should definitely come to me on health care. Because we can do bipartisan health care. We can do bipartisan infrastructure. And we can do bipartisan DACA.
I’ve bolded the parts that are out of “The Godfather.” Trump evidently believes that “bipartisan” means that the Democrats come to him and kiss his ring. It’s not clear whether he would then, out of the generosity of his heart, grant anything that the Democrats might want or if he simply expects them to sign on to his and the Republicans’ agenda.
A fair bit of commentary observed that aspects of the tax bill, including the removal of state and local tax deduction, seemed punitive to blue states. Trump just confirmed that.
Had they come to me and said, look, we’ll do this, this, this, we’ll do [inaudible]. I could have done something with SALT. Or made it less severe.
All Democratic negotiations with Congress and the Administration have to take this into account. I don’t see a good answer. It appears that he’s willing to punish the country until the Democrats kiss the ring.
Following up on Betty’s post below…
Pursuing the Maine chance, Susan Collins is all over a small part of the map on the Senate tax-theft/heath-care-wrecking/federal-overreach/America-gutting bill.
She voted in favor of the motion to proceed, but she’s now signaling that she isn’t yet a solid “yes” on final passage:
Republican U.S. Senator Susan Collins said on Thursday she was not committed to voting for the Senate tax bill, citing concerns over healthcare and a deduction for state and local taxes.
Collins told reporters at a Christian Science Monitor breakfast it would be “very difficult for me to support the bill if I do not prevail on those two issues” but she was encouraged by her discussions with leadership.
Hedge, dodge, waver and waffle: the net is that she’s still susceptible to pressure. I think she’s beginning to feel the heat on at least two talking points: that the bill raises taxes on many, probably most of her constituents, which is a bad place for a New England Republican to be; and that the health care measures she’s been pursuing are fig leaves that will gut her loudly proclaimed commitment to preserving access for all those who have it now.
I called her DC office and left a message and then spoke to a weary staffer in one of her state offices. I encourage you all to do the same — especially when you can leave a recording that doesn’t necessarily mark you as a non-Mainer.
Contact info for all her offices here.
Image: Alexander Coosemans, Still life with fruit and lobster before 1689.
So I read the latest over at Talking Points Memo on the slow-rolling Republican “moderate” cave on the tax bill to Trump and the GOP’s I Got Mine/Tongue-Bath-A-Billionaire Caucus. That led me to a Twitter rant born of despair and rage.
The TL:DR is that dominant-power decline has happened before, will happen to whoever comes next, and is well underway now. None of this is new; none original. It just bubbled up, and as misery loves company, I give you a slightly edited version of the rant below.
As the GOP prepares to transfer wealth up and gut national finances in the process, it’s worth reflecting a little on national power. US predominance is no law of nature. It emerged in specific historical circumstances, & it will erode (is eroding) within its historical moment.
Trump and GOP actions are powering that decline, from gutting US diplomacy to abandoning soft power/trade alliances to an over reliance on the trappings of military power on the international security side to an attack on the US’s domestic capacity to solve problems, propel economic growth, and secure good lives for the great mass of its people.
The attack on universities that is both part of GOP rhetoric and built into the tax bill, for example is an attack both on civic life (in the form of engaged and critical-thinking citizens) and on the dollars and sense of economic life. Universities are where research happens, ideas turn into companies and all that. Whack them and we become not just dumber, but poorer too.
More decline follows as the basic sequence of life gets made harder for more people. CHIP follies are making pregnancy and childhood more wretched and even deadly. Ongoing assaults on the ACA, Medicaid and Medicare do the same for all of us and if/when the GOP passes its tax bill, most Americans will see taxes and deficits go up, threatening Social Security and everyone’s old age.
This kneecapping of American well-being and power extends across the policy spectrum. Crapping on the environment isn’t just a matter of not hugging trees. Just ask the citizens of Flint, MI if bad water is just an aesthetic loss. Recall the LA of my childhood and consider whether air pollution is just a matter of obscured views and great sunsets, etc.
All of these (and many more) domestic policy choices actually make us poorer, as individuals and as a nation. One more example: we already have crappier infrastructure than many of our national competitors. Among much else, that means it can take us longer to get to work — which is both an individual cost and and a net weakening of the US economy as a whole.
These are hidden taxes, charges we pay not in cash, but in our ability to choose how to spend our lives. That cuts US productivity as a matter of GDP, and our contentment as a matter of GHQ (Gross Happiness Quotient) (I made that up. I think.)
None of this means American will (necessarily) collapse entirely. It just means we will be less well off and, in the context of national power, less able to act in the world as a whole. We won’t be able to afford as much (see Britain, post 1918), and…we will — we already — find ourselves with less moral capital, less ability to persuade and encourage fidelity and emulation abroad. (Again, see Britain, post 1918).
There’s real danger ins such decline. See Putin’s post Soviet Russia for one approach to the loss of economic, military and ideological/moral power.
In that context, it wouldn’t surprise me in the least to see Trump, backed by the GOP, launch into a second war of choice in an as many decades, with similarly awful consequences.
But, that said, even though nations find it hard enough just to muddle through a relative decline in international stature, the world goes on, in somewhat different order. That’s happening now. We can’t really stop it.
We do have a choice though — we can accept a relative decline that still has the US eagerly pursuing a rich and just future…
Or we can dive further the implications of the current GOP program, and watch as our politics become yet more of a zero sum game in which those with the most grab all the crumbs they can, leaving the rest of us to our own devices, while US power dwindles.
And that, by way of the long road home, leads me here: Trump’s GOP* is a fundamentally anti-American party. It is working as hard as it can to deliver wealth and power to a small constituency to the detriment of our national interest. That’s how an organized crime ring acts, not a party of government.
And with that….this thread. It is open.
*And it is his party, or, if you prefer, he’s the predictable face of what that party has long been becoming.
Images: J. W. M. Turner, The Fighting Temeraire tugged to her last Berth to be broken up, 1839.
after Hieronymous Bosch, The Hay Wain (central panel of a tryptich), between 1510-1520.
May want to pop some popcorn too!
On @maddow I'll break a big story about Trump and his taxes – 9PM eastern via @DCReportMedia Ill be on @lawrence, too.
— David Cay Johnston (@DavidCayJ) March 15, 2017
What we've got is from 2005… the President's 1040 form… details to come tonight 9PM ET, MSNBC.
— Rachel Maddow MSNBC (@maddow) March 15, 2017
14-Mar-2017 08:29:23 PM – WHITE HOUSE SAYS IN RESPONSE TO MSNBC THAT TRUMP PAID $38 MILLION IN TAXES ON INCOME OF $150 MILLION
— Jennifer Ablan (@jennablan) March 15, 2017
WH taking it seriously. https://t.co/j71K04FAcS
— Josh Marshall (@joshtpm) March 15, 2017
Hmmmm https://t.co/GE8wyvg04n
— Rick Wilson (@TheRickWilson) March 15, 2017
And we leave the last word to the drunk at the end of the bar er, um, noted, local crazy person er, um, official mouthpiece for state propaganda outlet er, um pundit and talk show host:
@NBCNews on Jihad against @POTUS From access Hollywood, to morning Lib Joe, to Deep State Leaks. Media Corporate Jihad. Details at 10 FNC
— Sean Hannity (@seanhannity) March 15, 2017
Open thread!
Set Your DVRs: News Is Supposedly Going To Be BrokenPost + Comments
The Republican Party has an ACA problem. The ACA is deficit reducing. Most of that was because it raised taxes on upper income families and cut back Medicare reimbursement rates for Medicare Advantage. The Republicans are ideologically indifferent to cutting back Medicare Advantage reimbursement rates especially as Medicare Advantage has continued to grow in popularity so it has not harmed core Republican votes or donors. But the Republican Party is ideologically committed to lower taxes on high income families.
The Republican Party has a policy problem. It needs to offer something that is close enough to coverage to minimize blowback of sympathetic figures crying on camera that the Republican health policy bill will kill them. So that means some type of coverage. And that means spending some money. That money has to be found from somewhere. It can either be found from raising a different set of taxes after the taxes that hit high income individuals are cut or borrowing.
So here is what the Republican Party’s wonks are proposing:
Republicans are considering capping the U.S.’s tax break on job-provided health insurance, a major change to the tax system that could be used to finance their efforts to repeal and replace Obamacare.
This is a big pool of money. The CBO believes the ESI tax exclusion is worth a quarter trillion dollars a year. It is regressive tax benefit where the benefits mostly accrue to upper income individuals. There is a good economic argument that the tax incentive favors one form of compensation (health insurance) over another (cash) when the efficient incentive structure is to be indifferent where both forms are treated the same by the tax code. Most liberal wonks (myself included) will agree that building a system from scratch, ESI tax exclusion would never be part of an ideal package.
BUT HERE IS THE PROBLEM. It pisses off voters who receive coverage through work. And we already sort of tried this route before:
A similar idea was proposed by Senator Ron Wyden, a Democrat, during debate over the Affordable Care Act, and went nowhere. Obamacare already includes a levy on high-cost health insurance plans, known as the Cadillac tax, that begins in 2020. Republicans didn’t say where they would set the cap.
The Cadilliac tax set a fairly high rate (40%) excise tax on a fairly high exclusion limit. It was supposed to have gone into play for 2018 but a large, bi-partisan coalition (including union friendly Democrats) pushed to force it back another two years. There is still a large blocking coalition in place to continue to push the Cadillac tax back. It will become the health care tax equivalent to the AMT re-indexing.
If the Republicans need to raise serious money from this exclusion being rolled back ($50 to $100 billion a year is serious), it means the tax hits most employer sponsored health plans to some degree. If they don’t raise serious money because they fear blowback, it is a high income earner only tax and it still leaves their plan with a massive hole.
The easiest solution for Republicans looking for money to paper over their plan is to do what they did for Medicare Part D. Just borrow it as that means no hard choices are needed.
But I can’t see how this proposal would get 150 votes in the House or 40 in the Senate.
Health Savings Accounts (HSA) are going to be a big component of whatever passes as Republican health policy over the next couple of years. An HSA is a tax advantaged savings account that can be used to pay for out of pocket expenses and premiums. They are initiated and contribution eligible when the owner is covered under a high deductible health plan (HDHP). One of the primary tax advantages for an HSA is that contributions are tax free. Growth (as long as it is used for qualified medical expenses) is also tax free. I want to focus on the first part though.
My wife was notified of her bonus yesterday. Her firm also gave her a cost of living and merit based pay bump. She’ll see her bonus in the first check in January. I was sitting in a meeting where I barely needed to pay attention so I started sketching out my family’s 2017 budget. 2017 is looking good for us. I figure that I’ll still do some soccer but the four year plan to trade quantity for quality will continue as I value my family time more than soccer time as I no longer need it to pay the mortgage. My son will be out of daycare this summer so we are seeing a major expense drop and our incomes are going up. As my son leaves daycare, we’ll lose the value of the tax free benefit of the flexible spending account and that thought made me angry. Not angry at losing a tax benefit but angry at getting a lot of help when my family really does not need a lot of help.
We are able to contribute tax free a significant chunk of his day care costs. In 2016, we are doing well for ourselves so our marginal income is taxed at a fairly high marginal rate. I’m okay with paying a high marginal rate as I like civilization and the public sphere. I thought back to 2009 and 2010. Those years were lean. I was either out of work or consulting and my wife was working but unable to find full time work. We were tight and paying the mortgage was an adventure some months. If we were able to afford to put money away, we would have seen a tax benefit that is significantly less than what we are getting now. And those were the years when we really needed help as we had an infant daughter and a fraction of total income in 2016 or projected for 2017.
I’m angry about this because the tax deduction racket shovels most of the benefits towards people who don’t need the additional help. Someone who is in the top bracket this year will see the federal government subsidize their $1,000 contribution with a $400 tax break. Someone who is making $10,000 a year will not be able to afford to make a $1,000 contribution and in the odd case that they could, the federal subsidy administered through the tax code is only worth $100. That is wrong on a moral basis. More help goes to people who really don’t need it as the marginal value of their last dollar is fairly low.
One of the policies I want to see advanced is a flipping of tax deductiblity towards an open ended credit so it is more of a sliding scale based on either income or contribution. Here is how I think it could work:
The first $200 of a contribution to an HSA or an FSA would have credit equal to the size of the contribution times the top income tax marginal rate.
The next $500 contributed would have a credit equal to the size of the contribution times the second highest income tax marginal rate
The next $500 would have a credit equal to the increment times the third highest marginal rate
This would continue until a threshold is reached where any contributions to a tax advantaged account receive a federal subsidy equal to the lowest marginal rate. It still encourages savings but it gives more help to people who need it and less help the the people who are in pretty good to really good shape.
HSAs, tax deductions and help for those who don’t need itPost + Comments
Right now, the current Republican plan is Repeal and Delay as the NY Times reports:
Republicans in Congress plan to move almost immediately next month to repeal the Affordable Care Act, as President-elect Donald J. Trump promised. But they also are likely to delay the effective date so that they have several years to phase out President Obama’s signature achievement.
This emerging “repeal and delay” strategy, which Speaker Paul D. Ryan discussed this week with Vice President-elect Mike Pence, underscores a growing recognition that replacing the health care law will be technically complicated and could be politically explosive.
The mechanics of the repeal bill are fairly straightforward. A reconciliation bill would be written to sunset subsidies and Medicaid Expansion money after two (or three) years while a Replace bill is cobbled together. The individual mandate tax would be dropped to zero even if it was not technically repealed and all of the taxes that fund the ACA would be dropped immediately. This blows up the insurance market fast. There are discussions and rumblings that some Republican wonks are trying to make this point to Republican leaders. Someway of shoveling a massive amount of cash to insurers would be needed that would perform the same function as risk corridors and reinsurance but called something else is the most likely response.
And then there would be some type of Replace bill that would offer skimpier subsidies and much higher cost sharing than current law.
That Replace bill will cost money. It won’t cost as much money as the ACA but it will cost money.
That is a major problem as the major funding streams from the ACA (Cadillac Tax and high income tax surcharges) are gone. Nicholas Bagley at the Incidental Economist flagged this very early on:
You’ve got to bear in mind that passing the reconciliation bill would represent an immediate $346 billion tax cut over ten years to the wealthy—$123 billion from the Medicare tax surcharge and $223 billion from the tax on investment income. All of that money—every dime—will go to people making more than $200,000 a year.
The other major source of funding for the ACA is the Cadillac tax in the out years and Medicare Advantage payment equalization. The Cadillac tax is popular with health economists who, when they concentrate for an annual convention, might have sufficient political power to elect a county commissioner in an NFL market and no one else. The Republican Replace plans use modified Cadillac plans that usually apply regular income tax rates to health insurance benefits at far lower thresholds than the Cadillac tax. But I digress.
The Replace plan will cost money. And here is where we run into the Norquist problem. It is Republican orthodoxy that once a tax cut is passed it can never be re-enacted. The Replace Bill would not be signed for at least six months (absurdly optimistic case scenario) after the Repeal bill that wiped out the high income taxes that fund the ACA. The Congressional Budget Office (CBO) would score Replace based on current law which means no high income surcharges as offsets. Republicans can’t vote for higher taxes per Norquist even if those are taxes that just got cut.
Assuming Norquist is still a major political enforcer of Republican orthodoxy, my best bet is that any Replace Bill will be like the 2003 Medicare Modernization Act (MMA) in that it is almost completely deficit financed.
I always like to look at the 12-DD box on my W-2.
friendly reminder: 100% of the employer sponsored market is subsidized, and has mostly higher premiums https://t.co/eQ4MgLdMFX
— Seth Trueger (@MDaware) September 6, 2016
This box tells me how much my employer sponsored insurance (ESI) actually costs between premiums and Health Savings Account (HSA) contributions. The 12-DD box was a requirement of PPACA and its goal is to make people slightly more aware that their health insurance at work really costs them more than $47.56 every two weeks.
My employer is starting the annual open enrollment education process. We’ll get weekly e-mails from Human Resources about all of the different options and how the networks interact. There are no major changes to network or plan design for employee insurance this year. There is a small diabetes disease management program and a reference pricing experiment but for most people there will be very few visible differences between the 2016 policies and the 2017 policies. For people at my pay grade, we are seeing a 4.2% increase in premiums explicitly taken out of our paychecks. The company is “covering” roughly 85% of the cost of 85% Actuarial Value coverage for my family. Economically, the company contribution is “just” cash income transformed into a tax advantaged compensation but I don’t see the money so it does not feel like I am paying the full price of my insurance coverage for my family.
I do get two explicit subsidies. The entire premium of the policy is tax deductible. That is worth 4% of my families income. We also put away some money into a tax advantaged savings account that is worth another .5% of my family’s income for the year. So we get a total of 4.5% of family income subsidy help to pay for a good insurance package.
This is important because most poeple who get ESI don’t think they are getting subsidized. Everyone is getting subsidized. People with higher incomes and ESI get a larger dollar figure subsidy than people at a lower income because tax deductions are valued at the marginal tax rate. People with higher incomes also tend to have richer benefits, higher actuarial value coverage and fewer gatekeepers so total premiums are higher.
Medicare is heavily subsidized. Part A and Part B premiums pay for roughly a quarter of the program. The rest of society subsidizes the rest of the cost of Medicare.
CHIP has subsidies ranging from 0% to 25% to 100%.
Medicaid is almost entirely subsidized.
The individual market is heavily subsidized for people earning under 200% FPL. For people who earn between 200% and 400% FPL it is modestly subsidized. For people who earn more than 400% FPL there are no explicit subsidies like the advanced premium tax credits available between 100% FPL and 400% FPL nor any implicit subsidies through the tax code.
Let’s keep that in mind when we talk about health insurance. Almost everyone is subsidized except for a narrow segment of the PPACA individual market. It is just that some of the subsidies are well hidden and non-obvious.
#Oklahoma #Medicaid agency announces 25% provider rate cuts https://t.co/HgISSTpHiC
— Jessica Kahn (@JessPKahn) April 1, 2016
And another story from Oklahoma:
Facing a $1.3 billion budget hole, the Oklahoma House has passed legislation that would cut 111,000 Oklahomans from Medicaid.
House members on Wednesday passed the bill 65-34 mostly along partisan lines and sent it to the state Senate for action.
The measure would instruct the Oklahoma Health Care Authority to seek a federal waiver allowing the state to exclude from Medicaid all able-bodied adults under 65 with dependents.
That bill failed in the Oklahoma Senate.
Oklahoma is heavily dependent on oil revenue to make their budget work. Oil prices have cratered so state revenues have crashed. At the same time as oil prices have collapsed, economic activity in the state is decreasing which means more people don’t have jobs, more people don’t have employer sponsored insurance, and more people have become Medicaid eligible. The Medicaid eligible pool is counter-cyclical. As the economy does well, the eligible pool shrinks, and as the economy does poorly, the pool grows. So the number of people who are eligible for Legacy Medicaid grows just as the state revenue needed to pay for Medicaid services drops. This is a problem.
Legacy Medicaid is financed by the state and the Feds splitting the bill. Oklahoma pays 41% of the cost of the medical services component of the program. The Feds pick up 59% of the medical side and a bit more on the administrative side. Oklahoma has a balanced budget constraint. the Federal government does not. That means the Feds are willing and able to spend money to meet increased Legacy Medicaid demand in a downturn but the state can not. Instead, the state needs to cut expenses to meet its balanced budget constraint and Medicaid is a very large line item in every state budget, so that means Medicaid is often one of the major areas of cut-backs in either eligibility, services allowed or provider payments.
So what is the solution?
The long term solution is that the Federal government should take on more and more of the cost of Legacy Medicaid. The Feds can spend in a downturn when the states have to be 50 mini-Hoovers who have to cut during a recession. This does three things. The first it makes sure that people can get the medical care that they need and that the continuity of care is maintained. Continuous care is usually better and cheaper than people getting dropped and then added back to insurance months or years later. Secondly, it transforms Medicaid financing from a pro-cyclical activity into a counter-cyclical macro-economic stability policy. One of the major components of the stimulus in 2009 was a Federal Match rate bump. This moved $87 billion in Medicaid expenses from the states’ books to the Federal books.
The Stimulus bump was a short term solution that required massive supermajorities from a party that believes that the federal government faces a different budget constraint than a typical household. The long term solution is to have the Feds continually increase their share of the costs until Legacy Medicaid is funded on the same bases as Medicaid Expansion. The Feds pick up 90% of the tab and the states pay 10%. This will still allow for state control which allows Massachusetts to cover different services than Mississippi but it allows for a much stronger counter-cyclical automatic stabilizer to be in place.
The attraction this should have to a significant number of Republican state level elites is that by taking Medicaid off of their books, it frees up a lot of money for easy to justify tax cuts.
Turns out Bernie overestimated revenue from his single-payer offsets, falling $3T+ short: https://t.co/RKsoIcFpoz pic.twitter.com/bAn2q9H58H
— Loren Adler (@LorenAdler) February 3, 2016
The Committee for a Responsible Federal Budget ran the numbers on the Sanders’ healthcare plan and its financing and depending on the assumptions, the Sanders plan is either $3 trillion dollars short over 10 years or $14 trillion dollars short over ten years compared to what the campaign is claiming.
That Sen. Sanders has shown a commitment to paying for his new initiatives and has proposed specific concrete changes to do so is quite encouraging. However, by our rough estimates, his proposed offsets would cover only three-quarters of his claimed cost, leaving a $3 trillion shortfall over ten years. Even that discrepancy, though, assumes that the campaign’s estimate of the cost of their single-payer plan is correct. An alternateanalysis by respected health economist Kenneth Thorpe of Emory University finds a substantially higher cost, which would leave Sanders’s plan $14 trillion short. The plan would also increase the top tax rate beyond the point where most economists believe it could continue generating more revenue and thus could result in even larger deficits as a result of slowed economic growth.
Sanders is not running in the Republican primary where the ability to propose programs with multi-trillion dollar piles of bullshit is an asset. His campaign should respond to CRFB and Thorpe’s cost estimates on a non-ad-hominem basis to explain why their estimate that single payer is a net neutral fiscal move instead of a massive budget buster.
At least that is the the public health take-away of a recent study analyzing the public health impacts of an increase in the alcohol tax in Maryland.
The Baltimore Sun:
Maryland recorded 7,400 cases of the bacterial infection in 2010, when alcohol, like other goods, was taxed at 6 percent. But two years later, with a 9 percent levy tacked on to booze sales, gonorrhea cases in the state dropped below 5,700, even as infection rates grew nationally.
Researchers at the University of Florida say they can only find one explanation: the alcohol tax.
“We know increasing alcohol taxes decreases alcohol consumption,” said Stephanie Staras, the lead author of the study, published in the American Journal of Preventive Medicine. “We also know that people who are using alcohol are more likely to have risky sexual behavior.”
Besides being a great opportunity to for an excellent post title, this is a good illustration of how insurance design is important but far less important to general health than general socio-enviromental factors. Maryland was looking to raise revenue and perhaps decrease drunk driving when they increased the tax. Tertiary impacts on sexually transmitted infection (STI) rates were most likely not part of the political debate.
However, if these results hold up, and logically they make sense as alcohol consumption leads to bad decision making, avoiding seventeen hundred STI cases avoids significant treatment cost and more importantly, it avoids significant pain and risk for individuals. Avoidance through changing the environmental and economic matrix is far more efficient treatment than post-infection treatment.
In 2014, the nominal economic growth rate in the US was 3.91%. Not a great number but not a bad number.
In 2014, healthcare spending grew by 5.3%. Given context that is a great number
Total spending for health care in the United States increased 5.3 percent and reached $3.0 trillion in 2014, or $9,523 per person (Exhibit 1). This was faster than the rate of growth in 2013 (2.9 percent), which was the lowest in the fifty-five-year history of the National Health Expenditure Accounts. The acceleration in health spending growth in 2014 followed five consecutive years of historically low growth, which averaged 3.7 percent. Health care spending grew 1.2 percentage points faster than the overall economy in 2014 (when the nominal gross domestic product [GDP] increased 4.1 percent), resulting in a 0.2-percentage-point increase in the health spending share of GDP—to 17.5 percent. By comparison, the health spending share of GDP remained between 17.3 percent and 17.4 percent from 2009 to 2013.
The past few years had seen healthcare spending at or below nominal growth in the economy. That led to a stabilization or decline in healthcare spending to GDP ratio for several years which is a massive deal for long term federal fiscal planning.
But 2014 saw the share of GDP going to healthcare go up. Did something strange happen in 2014?
Why yes, 15 million more people got coverage and they used that coverage.
If it costs .2% GDP net to cover 15 million or more people that is dirt cheap and a good value for the money.
And a final piece of intriguing potential for good news:
All-time record low growth of 3.6% in 2013 revised down to 2.9%. Some reason to expect similar revisions next year https://t.co/KUYJBHDwnQ
— Altarum_CSHS (@Altarum_CSHS) December 2, 2015
Self correcting mechanism. Cap of tax exclusion could also work this way & would be more progressive. We need one https://t.co/ROERP10yua
— Don Taylor (@donaldhtaylorjr) October 26, 2015
Duke prof making $125k & admin $25k pay same premium for health ins. Caddy tax will affect both same. Cap ESI exclusion >impact on Prof 1|2
— Don Taylor (@donaldhtaylorjr) October 26, 2015
There's an equivalent actuarial impact of caddy tax & cap ESI tax exclusion, but cap tax exclusion more progressive b/c of prog tax code 2|2
— Don Taylor (@donaldhtaylorjr) October 26, 2015
TLDR: Changing the Cadillac tax from a fixed rate surcharge to elimination of deductible benefits workers with lower incomes but very high health insurance compensation while keeping the incentives aligned for better cost control measures. This tweak could get some unions back on board while also simplifying the tax code. Should be a double win. It won’t be.