Cash flow of rejecting free money

Andrew Sprung at XPostfactoid is doing a great series on the individual states and their performance on  His post on Florida generated an interesting insight and one hell of a comment that I want to expand on.

In Florida, 856,092 private plan enrollees — more than half (53.6%) of the total — had incomes between 100% and 150% of the Federal Poverty Level (FPL). That compares with 47% in all states using that refused to expand Medicaid, and just 22% in expansion states.

Those with incomes in 100-138% FPL range would be Medicaid-eligible if the state had expanded. We don’t know exactly how many there are, but my prior analysis of national enrollment numbers suggests that at least two thirds of the 856k in the 100-150% FPL range are Medicaid-eligible — a bit more than a third of all private plan enrollees in the state (and maybe a good deal more).

In Miami-Dade, the proportion of low-income enrollees is even more eye-popping. Fully two thirds of enrollees — 259,000 out of 392,000 — had incomes in the 100-150% FPL range….

and the very interesting comment:

I am curious about whether an appreciable fraction of the cash influx a state loses by rejecting Medicaid expansion is recovered for the rejecting state in premium subsidies for the 100-138%-ers.

Liberal technocrats have been assuming that the states which refuse to expand are giving up massive amounts of money and thus economic growth by refusing to expand Medicaid will eventually expand.  However, are we accounting for the additional cash flow coming in as premium and cost sharing subsidies for people making between 100% and 138% Federal Poverty Line.  Brad Delong on Kansas from last fall:

 there is one number that I cannot find on either graph or in either version of the policy brief:

$8 billion.

That $8 billion is the amount of federal dollars the U.S. government will commit to match 100% of extra costs for the first three years and 90% for the next seven if Kansas expands the Medicaid program as ObamaCare envisions. And that is money that will not flow to Kansas if Medicaid is not expanded by Kansas.

And a more mathed-up Delong post:

The rejectors have 1/3 of the wealth of the nation–call it $5 trillion/year. They are throwing 0.7% of that away to make a political point….In the short-run of our currently-depressed economy we want to apply the within-monetary-union Keynesian multiplier to these flows: Medicaid-rejcting red states are thus making themselves 2% poorer in the short-run. For medical-care hubs like Dallas, Omaha, Atlanta, and Kansas City, the effects are likely to be larger: 3% less in terms of economic activity relative to the baseline, while the Bostons, the Denvers, and the Albuquerques will be on baseline. In the long-run–should they continue this insane and self-destructive policy–we want to apply Enrico Moretti’s long-run regional economic distribution multipliers–which means that we are talking a fall relative to baseline growth of 6% of regional GDP as far as medical-hub cities are concerned.

Does this analysis hold true for all the moving parts of the ACA as a whole?

The cash outflow to the federal government part is a constant whether or not a state expands Medicaid, it is a constant whether or not a state goes on or sets up their own exchange.  So the cash outflow component is a constant and not worth analyzing.  However cash in-flow is dependent in a post-King world only on whether or not they expanded Medicaid.

Now how do the cash flows balance?

Read more

Come On and Get the Minimum

Seattle’s new minimum wage is $15/hour. While we wait for the assured destruction of that city by businesses fleeing for places without a confiscatory wage policy, this piece by Jared Bernstein made a good point:

One reason is that labor power is so diminished, what with private sector unions at seven percent of the workforce (public sector unions, historically less vulnerable to outside pressure, are at 35 percent but under attack). But that just begs the question: why isn’t labor more powerful, with “labor” in this context referring to not only unions but to the much larger group that depends on paychecks for their economic well-being.

I don’t know the answer to these questions, but my experience as a policy wonk and economist in government has led me to believe that economics, as currently practiced, is part of the problem. Not the discipline itself, which historically has been flexible enough to offer wide ranging and useful tools for analyzing and solving economic problems. I’m talking instead about the way it interacts with wealth and power today to support capital and hamstring labor.

For example, it’s widely argued that government actions that set wages or regulate commerce create “inefficiencies.” Regulate an industry and capital will flee; raise the national wage floor and employers will leave the market (or, in Piketty’s world, handily substitute machines for workers). Increase a marginal tax rate and workers will supply less labor; investors, less capital. Form a union and the unionized firm will face competitive disadvantages that will put it out of business. Provide a safety net benefit to someone and they’ll work less. Tax a polluter and you’ll crash GDP. Tax a financial “innovator” and credit markets will dry up.

Conversely, cut back on a tax rate, a safety net program, the minimum wage, the unionization rate, financial oversight, and growth, jobs, and liquidity will flourish.

I’ve been arguing against these positions for decades, backed by considerable empirical evidence showing that moderate changes to tax rates, minimum wages, union density, the safety net, regulatory oversight and so on trigger nothing like the disasters their opponents claim and can yield important benefits (which is not to say there are no “negative impacts” at all). Yet the bar to win the anti-interventionist argument is set remarkably low. You don’t need evidence; you can just cite “basic economics.”

A Sympathetic Critic

This In These Times piece on the UAW vote in Tennessee by Mike Elk is getting a lot of attention.

Here’s the short story:

Workers and organizers cite outside interference, management collusion, union missteps, two-tier agreements and Neil Young

It’s very good work. Elk was there and he’s a labor writer who understands the issues, but the part of the piece that is getting the most attention is where he analyzes the union’s role- what they could have done differently. The piece is quite tough on the UAW:

Criticisms of the UAW
The No 2 UAW campaign used the very neutrality agreement that the UAW signed to argue that the union was making corrupt deals with management without worker input.
“We got people to realize they had already negotiated a deal behind their backs—[workers] didn’t get to have a say-so,” hourly plant worker Mike Jarvis of No 2 UAW told reporters outside of the plant last night.
“What the UAW is offering, we can already do without them,” says hourly worker Mike Burton, who created the website for the No 2 UAW campaign. “We were only given one choice [of a union]. When you are only given one choice, it’s BS. It would be nice if we had a union that came in here and forthright said, “Here is what we can offer.”
“I am not anti-union, I am anti-UAW,” Burton continues. “There are great unions out there, and we just weren’t offered any of them.”
Some labor observers have questioned whether provisions in the neutrality agreement may have also hampered the UAW’s ability to make its case. “Though neutrality agreements often help avoid vociferous employer opposition, unions also have to give up powerful organizing or negotiating tools,” says Moshe Marvit, a labor lawyer and fellow at the Century Foundation.
Also, pro-union community activists, who spoke with In These Times on condition of anonymity out of fear of hurting their relationships with the UAW, spoke about difficulties in getting the UAW to help them engage the broader Chattanooga community. Many activists I spoke with during my two trips to Chattanooga said that when they saw the UAW being continually blasted on local talk radio, newspapers and billboards, they wanted to get involved to help build community support.
However, they say that the UAW was lukewarm in partnering with them.
“There’s no way to win in the South without everyone that supports you fighting with you,” said one Chattanooga community organizer, who preferred to remain anonymous. “Because the South is one giant anti-union campaign.”

It’s probably really worthwhile to look at the UAW’s role in the loss if for no other reason than because the union’s actions are the only part of this that labor and labor supporters have any control over.

Elk concludes with this:

Still, at the end of the day, unions make missteps in union elections all the time and often face opposition from management, and the workers still sometimes win. Indeed, the NLRB reports that unions won 60 percent of elections conducted in fiscal year 2013.

To find out what the “Neil Young Factor” is all about, you’ll have to go over and read the piece.

His “sense” is this is very much like subprime lending

Since this scam has been going on for a long, long time, I don’t think he would be my first-choice investment adviser:

Hedge fund titan and education reform activist Whitney Tilson turned his Value Investing Congress speech Tuesday into an all-out attack against technology-based education company K12, calling it “a catastrophe for education” in spite of solid financials.
But even more damning for K12, which runs online schools at various levels, was Tilson’s decision to publicly short the company’s stock—a move that can be risky for high profile investors, attracting regulators and legal action from disgruntled CEOs. If K12’s stock indeed plummets in the coming months, Tilson and other short sellers stand to make a lot of money.
Tilson outlined his exhaustive research on K12’s academic practices, including poorly paid instructors with 300-1 student-teacher ratios, the targeting of at-risk children whose parents won’t complain to administrators about poor performance, and online classes for which students merely have to switch on their phones and login to be counted as active.
But Tilson also noted K12’s financials, which up to this point have been strong: the company has experienced revenue growth of 32% annually for the past decade. What’s more, the company estimates a $15 billion market for K12 students, and average revenue per student has risen over the last four quarters.

Well, a degenerate gambler and a finance-industry felon created K12, which was a bit of a red flag for this “investor” but apparently not for the hedge fund managers who make up “Democrats for Education Reform.”

It’s strange to watch this slowly spread upward to the highest levels of reform industry leadership, because here in Ohio where ed reform is a huge business we’ve had a failing cybercharter industry sector for many years. I first became aware of this particular ed reform portfolio investment several years ago, when some of the most vulnerable kids we encountered in the court system stopped attending local public high schools and decided to leverage the free market power of “choice” by signing up for cyberschool.

That many of them are completely unsupervised at home for a variety of reasons and chose this option to avoid intrusive questions from the “educrats” at our government school on their GPA, progress toward graduation, mental health issues and chaotic and often tragic home lives didn’t seem to concern national ed reform industry leaders like Jeb Bush and John Kasich but we wondered at the time if cutting them loose like that was a very bad idea. It had come to our attention that many of them do poorly in school not because their teachers belong to a union but because their home lives are an absolute horror show. It reached the point a couple of years ago where even the most conservative juvenile judge I’m in front of took to bellowing at us that these kids should all be “IN SCHOOL!” Incredibly, ed reform industry lobbyists in Ohio just expanded cybercharters. Again.

As anyone who has watched Milton Friedman’s crackpot theories go from roundtable to reality already knows, it is really, really difficult to regulate a publicly-funded private entity once deregulation and then industry capture of politicians takes hold. We know it in Ohio, and they’re finding it out in Pennsylvania, where a cybercharter profiteer inexplicably escaped state oversight and regulation for years, until he was finally indicted by the feds last month.

I hope this reform industry leader’s shorting strategy works, because K12 just captured another student sector, in New Jersey, despite the fact that the giant ed corp has failed so miserably everywhere else. Whether the following is related to that decision I do not know:

Christie’s acting education commissioner, Christopher Cerf, has experience in public-private school partnerships. He previously led Edison Schools, a for-profit company that became the largest private-sector manager of public schools. From 1999 to 2001, Christie was a registered lobbyist at a law firm that lobbied New Jersey government on behalf of Edison Schools, according to filings with the state Election Law Enforcement Commission. While the firm was representing the multinational education company, Chris Cerf was its general counsel. The firm, Dughi, Hewit and Palatucci, also represented Mosaica Education, a for-profit charter school operator, and the University of Phoenix, a for-profit online university.

Since we already know that for-profit colleges are a predatory rip-off and nearly impossible to regulate due to industry capture of politicians on both sides of the aisle, can anyone tell me why we decided to expand this bad idea? Are we really this fucking reckless and stupid, that we’d privatize our K thru 12 public education system? Tell me there’s a responsible adult somewhere in the state or federal government who has a handle on this, because I’m not seeing anyone step up here in The Heartland and Arne Duncan seems to me to have abandoned traditional public schools completely.

“I feel glad it’s come to everybody’s attention; people are supposed to get paid when they work.”

This is where it started, 2007:

The United States Supreme Court ruled yesterday against a home care aide from Queens and upheld federal regulations that exempt most home care workers from minimum-wage and overtime protections.
Senator Edward M. Kennedy, the Massachusetts Democrat who is chairman of the Senate Health, Education, Labor and Pensions Committee, said he would seek to amend the Fair Labor Standards Act to ensure that home aides were protected. He said the court decision highlighted “a significant gap in the protections of our laws,” and added that he would work with his colleagues “on a fair solution that treats these hardworking caregivers with the dignity and respect they deserve”.

We first looked at this fight in 2011.


The Obama administration announced on Tuesday that it was extending minimum wage and overtime protections to the nation’s nearly two million home care workers.
Advocates for low-wage workers have pushed for this change, asserting that home care workers, who care for elderly and disabled Americans, were wrongly classified into the same “companionship services” category as baby sitters — a group that is exempt from minimum wage and overtime coverage. Under the new rule, home care aides, unlike baby sitters, would be protected under the Fair Labor Standards Act, the nation’s main wage and hour law.
In an unusual move, the administration said the new regulation would not take effect until Jan. 1, 2015, even though regulations often take effect 60 days after being issued. The delay until 2015 is to give families that use these attendants, as well as state Medicaid programs, time to prepare for the new rule.
“We think the workers providing this critical work should be receiving the same basic protection and coverage as the vast majority of American workers,” said Laura Fortman, deputy administrator of the Labor Department’s Wage and Hour Division.

The White House said 92 percent of these workers were women

The Minimum

Last week, Washington, DC’s mayor supported Wal-Mart by vetoing a law that would raise the minimum wage in DC to $12.50/hour. The bill targeted big-box retail, so it wasn’t a straight wage increase. Still, Kathleen Geier wonders why Democrats (and she lists a lot of them) are so reluctant to make a stand against Wal-Mart:

As always, I completely understand why Republicans and conservatives love them some Walmart. But when liberals support pro-Walmart policies, there is a huge disconnect. They say they want one thing — a higher minimum wage! a guaranteed minimum income! good jobs! decreased economic inequality! And yet they are strongly supporting policies that will virtually ensure that they will get the exact opposite: jobs with miserable wages, no benefits, and no prospects for advancement; the further immiseration of working people in this country; and the tragic, slow-motion obliteration of one of the most powerful politically progressive institutions this country has ever known.

In other minimum wage news, California’s legislature voted to push the minimum wage into double digits: $10/hour by 2016. That’s still below what it would have been if the March on Washington had gotten its goal of a $2.00 wage, which would be $13.39 in 2013 dollars. It is more than the maximum minimum wage, which peaked at $1.60 in 1968, which is $9.44 in inflation-adjusted 2013 dollars.

One of the justifications given by wage supporters in California is that 3 of 5 minimum wage earners are over 25 years old. True, but so what? There are lots of 18 year-olds (and younger) supporting families, paying their way through college, and doing the same things older adults do. They all deserve a decent minimum wage.

Bury my heart at Blair Mountain

Why did Cory Booker come out against criticizing Bain? Because he’s a corporatist whore. Why did the Times go all in on taking Booker’s side? Because they’re errand boys, sent by grocery clerks, to collect a bill.

Once people took up arms for the right to live like humans, now we’re told that saying something mean about vulture capitalists is beyond the pale.