Category Archives: economy

All Posts, economy, environment, justice

IF WE VOTE WE WIN

“If we vote, we win.” I have heard that statement several times from earnest sounding first time candidates for public office. It is not as catchy, but I would modify their slogan to say, “If we are well informed and vote, we win.” We are fortunate to live in a republic where that is true, but it only matters if citizens accept the responsibility of selecting good candidates for public office.

Have you heard it said that, “We have the best government that money can buy.”? That is a cynical but too-often true statement. How did it happen? Perhaps we have become the best voters that money can buy – and if so, that is an even greater concern. Our national worship at the altar of profit and greed has led us to allow corporations and the extremely wealthy to influence us to an extent that threatens the existence of government by and for the people.

Our Supreme Court has ruled that corporations have all the same rights as individuals and that unlimited political spending is a “free speech” right, thereby allowing unlimited amounts of anonymous money to be used to influence our votes and our opinions on issues. There are even ways for big donors to claim charitable tax deductions for their contributions to organizations whose purpose is to convince us that we should vote the way the wealthy donors want us to vote. Their money hires marketing experts who seek ways to link their goals to our personal values and religious convictions – and it works. Special interests like petroleum companies, agribusiness, and the extremely wealthy fund immense advertising (propaganda) campaigns to convince us of their viewpoints without disclosing that they are behind the advertisements.

There are two things we can do to take control of our government. First, be as well informed as we can be. And second, ignore the advertising – all of it. An ad may say that it was sponsored by an organization with a high sounding name. Don’t trust it. It was probably paid for by someone with a lot of money who wants to influence you – someone who is working for their interest, not yours. To be well informed we should pay attention to our few legitimate, fact based news media and we should ask our questions directly of candidates in public forums. We should also trust our own instincts on issues. Most of the time, deep down, we know what is right. After we have done those things, then we will be ready to vote.

Will we trust ourselves or will we trust what the propaganda machines tell us? The propaganda machines of the Communist and Fascist powers of the 20th century demonstrated that if you say something often enough, many people will believe it despite any amount of evidence to the contrary. The propaganda machines operating in the USA today are run by special interest groups and corporations. They are very good at what they do and they often persuade both voters and government to ignore facts – the same facts that corporations take into account in their own planning. One example of this is the debate about climate change. Well documented scientific research tells us that human use of fossil fuels is contributing to climate change and that sea levels are rising as a result of that. Special interest groups, including fossil fuel companies, have run massive campaigns to convince us that it is not true. They have influenced our government so much that the State of North Carolina is removing information on the subject from their websites. The State also made it illegal for coastal planning agencies to project changes in sea level greater than the continuation of historical trends. That suits the needs of coastal real estate interests, supports re-building coastal roads that have been wiped out by storms and suits the needs of energy companies. But there is one business interest group that needs to evaluate the facts realistically. That is the flood insurance industry. Insurance companies are changing their risk zones and drastically raising insurance rates because they know that climate change and sea level rise are real.

How has government responded? Initially there was at least one intelligent response – to get the government out of the business of subsidizing flood insurance in high risk areas. But recently, after strong pressure from coastal real estate interests, the government has resumed heavily subsidizing insurance. The insurance companies and the real estate interests and the owners of coastal property will all do well and when the damage is done to their property, it will be repaired through insurance that was subsidized by taxpayers and by the national debt.

How can the same government that denies climate change and sea level rise also be the one that subsidizes higher insurance premiums made necessary by the projected rise of sea level? The answer is that the corporate propaganda machines have made it all seem very reasonable. That is just one example of big money influence on government policy. You can find many more if you look for them. We know it is wrong but we the voters elected the people who did it. There are other elections coming. If we are well informed and if we vote, we will win.

All Posts, budget, economy, medicaid, north carolina, poverty

MEDICAID AND MANAGEMENT INCOMPETENCE

“What are the most important decisions that you have made in your work?” Ask that question of executives who have been successful in leading complex organizations and a clear majority will give an answer that has to do with choosing the rest of the leadership team. That is a lesson which Governor Pat McCrory is learning in the school of hard knocks while North Carolina taxpayers fund his tuition bills.

Shortly after Dr. Aldona Wos was named Secretary of Health and Human Services for the state, I pointed out that her principal qualification appeared to be the success that she and her husband had in raising money for Governor McCrory’s and President George W. Bush’s election campaigns. In a column at the time, I described her as “…a physician who has not been involved full-time in health policy or medical practice for many years…President Bush rewarded Dr. Wos by appointing her as Ambassador to Estonia. Likewise, the Governor made her DHHS Secretary and she hired a young McCrory campaign staffer, Matthew McKillip, as the Chief Policy Officer of DHHS. At age 24, he has no previous health service education or experience but he has worked for a right wing think tank and now he is leading health policy development for the state.” She proceeded to select others for the DHHS team including Ricky Diaz, a McCrory campaign staffer hired as the top public information officer. He was forced to resign after lying to the press about violations of medical record confidentiality laws.

Wos picked Carol Steckel, another conservative ideologue but one with substantial experience in Louisiana, to re-organize the Medicaid program. Steckel resigned after only eight months. Dr. Laura Gerald resigned as the State Health Director as did Dr. Rebecca King, the state’s top dentist, citing differences with Wos and the administration. Wos and the Governor publicly misinterpreted the findings of the North Carolina Auditor to create the appearance of extraordinarily high administrative costs in the Medicaid program. They used that interpretation to support their goal of privatizing Medicaid. Protests by the auditor and health professionals later demonstrated that the state’s administrative costs are actually quite moderate.

Wos changed the application and enrollment procedures for Food Stamp assistance and her new process takes months for many low income families. It is so bad that the federal government has warned the state that funding for administrative costs will be withheld if improvement is not made promptly. She implemented a new computer system for making Medicaid payments to physicians and other health care providers despite credible warnings that it was not workable, resulting in payment slowdowns that have jeopardized the financial survival of health care providers (doctors, hospitals, therapists and others) who depend heavily on Medicaid.

She is promoting an idea for addressing our troubled state mental health system by merging several quasi-governmental regional agencies into a smaller number without addressing the underlying issues about how and by whom services are delivered to living, breathing patients. Thinking that this administrative re-shuffling will improve mental health services is a bit like preventing the sinking of the Titanic by rearranging its deck chairs. It may appear that something is being done but the ship is still headed for the bottom of the ocean.

The biggest problem in this case is not with Dr. Wos. The major problem is with a Governor who has “rewarded” (punished might be a more apt description) political allies by putting them in highly responsible leadership positions for which they are unprepared. In this case the Governor chose someone who ideologically agrees with him but lacks necessary experience then he offered encouragement as she put other unqualified people in key roles. More recently he has failed to take action as a series of high level staff resigned. The debilitation of DHHS began with the appointment of unqualified personnel and that has demoralized more capable members of the department’s team.

DHHS is by far the largest and most expensive department of state government – comparable in fact to the Titanic. A ship so large cannot turn on a dime and ours is clearly in peril. Unless the Governor acts soon, DHHS will take many thousands of mentally ill and low income North Carolinians down along with some of our health care providers. It remains unclear whether Governor McCrory and Secretary Wos will go down with the ship.

All Posts, economy, environment

ARE WE VICTIMS OF SUCCESS?

We human inhabitants of planet earth have a problem that we would rather not face or discuss. That problem is our astonishing rate of population growth. The human population of our world was estimated to be about 1,000 million in 1800. By 1900 our numbers had increased by 65% to 1,650 million. By 2000 it had increased to 5,973 million – roughly six times as many as in 1800. At expected rates of growth, we will be close to 9,000 million souls by 2050.

So far, we have been reasonably successful in adapting the way we live to accommodate more people. When there was conflict over rights to graze animals wherever we wanted, we invented the idea of private property rights so that we would know who had the right to use which land. When our cities reached a size which allowed vermin to transmit disease, we suffered the plague. Eventually we learned that by getting garbage and sewage out of the city, we could avoid the plague and many other health problems. Later on we learned how to share water with rules that regulate how much one person can take from a stream or well so that there will be water left for others to use. When rules were ineffective or inconvenient, warfare has sometimes been an alternative. Biblical history says that the tribes of Israel slaughtered the inhabitants of the land that they wanted and took it as a place to live. In a similar situation, Americans of European ancestry killed off the Native American population and forced the survivors to relocate to reservations. The competition for land and resources has sometimes been brutal but humans have thrived as a species through whatever means seemed necessary at the time.

Modern health care, agribusiness and industrial scale animal production have succeeded in extending our lives, feeding our burgeoning population and avoiding famine. They enabled the record-breaking population growth of the 20th and 21st centuries but added dangerous chemicals to our food and environment in the process. We ignore warnings about poor air quality and fish that are unsafe to eat. In some places (Beijing for example) the air is often unsafe to breathe and hard to see through. Global warming is creating sea level rise which will make some coastal population centers uninhabitable in the next century. New York, Miami, and New Orleans are endangered along with many coastal cities around the world. Mountain gorillas, tigers and elephants are among those who will not survive in the wild if we continue taking their land for human habitation. There are predictions that future wars are more likely to be fought over scarce clean water than oil.

While US states sue each other for allowing their businesses to create pollution which crosses into other states, advocates of economic development and job growth are winning legislative debates to allow hydraulic fracturing for natural gas and expanded use of coal without holding the energy companies responsible for correcting environmental damage that they cause. 21st century children born around the world will want modern, high tech lives requiring more jobs and more energy.

There is no one with the power or authority to restrict population growth. That is up to individuals. By all appearances, decisions about consumption of energy and other resources will be much the same. I don’t know who first said that, “When everyone is responsible, no one is responsible.” but that sentence sums up the situation in which we find ourselves. Individuals will decide to create more children and the population will continue to grow.

The idea of collective action to control population may seem as repugnant today as restrictions on water use seemed when they were first suggested. China’s “one child per family” law has been withdrawn. Ideas, such as higher taxes on anyone with more than two children or life-long tax reduction to anyone who undergoes voluntary sterilization are generally dismissed as “extremist” and no “moderate” alternatives are offered. Some of our religions (fundamentalist Islam and traditional Mormonism) teach procreation as a responsibility. The largest Christian denomination (Catholicism) teaches that artificial birth control is morally wrong. They fight against including birth control in foreign aid to poor nations with high birth rates and against including it in health care plans. They are so effective that one of our major political parties (Republican) backs those positions. The prospects for meaningful collective action seem dim.

With improving technology, we can probably continue growing our population for a few more generations before some science-fiction sounding combination of disease, famine and war imposes population control on a hotter planet with less land and bigger oceans. In the meantime we might do well to explore this lesson in humility. Modern humans as a species have existed for about 200,000 years. Dinosaurs lasted over 160,000,000 years. Now all of them are gone. There is little question that the Earth and life will survive. There is less certainty about humanity. No individual needs population control but humanity does. When everyone is responsible, no one is responsible. That leaves considerable doubt as to whether we can last as long as the dinosaurs did. Will humans be victims of our own success or will we evolve enough and care enough to leave a healthy planet for our descendants? We are all responsible.

All Posts, budget, economy, justice, north carolina, poverty, public education

PUBLIC POLICIES AFFECT OUR INCOMES

Nine of the ten US States with the highest median household incomes voted for a liberal in the last presidential election. The only outlier among the high income states was Alaska. At the other end of the income scale, nine of the ten US States with the lowest median household incomes voted for a conservative. The only outlier was New Mexico. The same tendency is apparent when all states are considered. 80% of the states with household incomes above the US median voted for President Obama. 67% of states with incomes below the US median voted for Mr. Romney. For convenience I’ll go with the conventional names and call the more liberal states “blue” and the more conservative states “red”.

Reading down the list of states by income, it is clear that the leaders are blue states with moderate to liberal policies at the state level. In general they are the states which spend more on social safety net programs and public education. They also tend toward the moderate or liberal part of the spectrum on social issues like same sex marriage, abortion, and immigration reform.

Reading up from the bottom of the list of states by income, you will find red states that spend less on social safety net programs and public education. And they tend toward the conservative end of the spectrum on same sex marriage, abortion and immigration reform.

How can these patterns be explained and what can be learned from them? Here are some ideas. By focusing their resources on assuring good public education and access to health care for everyone, including those with low incomes, the blue states develop strong work forces that attract good paying jobs. Some will argue that many jobs have moved to the low-tax environments in the red states and there may be some truth in that. It should be noted that many businesses that talk about such relocations are not only seeking low taxes. They are seeking low wages. If there has been movement of jobs to red states, it appears to have perpetuated their low wage environment rather than improving it.

The relatively liberal social policies of the blue states seem open to more people regardless of sexual orientation or immigration status; and some people looking for such openness also have the economic and intellectual means to start businesses that create economic growth. They gravitate to places where their lifestyles and freedom are respected – bringing economic growth that benefits everyone. If my thinking is wrong, then how would one explain that blue state residents clearly have higher incomes?

It is our tradition to be a nation with regional cultural differences and that will certainly continue. And it has also been our tradition to learn from each other’s successes and failures. In 1789 North Carolina created the first State operated university. Other states saw how well the idea worked and copied it. Cincinnati created the first paid fire department in the US in 1853. The idea succeeded and was copied across the nation. Today hardly anyone thinks of public universities or fire departments as liberal or conservative ideas.   They are simply accepted as ideas that work well and that contribute to the success of everyone in the community.

It is time once again to look across state lines and see which public policies are producing the best results. Blue states are leading the nation in median income, educational attainment, and life expectancy. Red states are leading in poverty-related problems including divorce, adolescent pregnancy, and shorter life expectancy. Low funding of education and safety net programs are not producing good results. Restrictions on the personal freedoms to control one’s own body and to marry the person of one’s own choice do not contribute to the success of a state or its citizens.

It’s time to look carefully at what works and what doesn’t and then move ahead with public policies that enhance personal freedom and encourage success. With that attitude and all of our other advantages, North Carolina can become the economic envy of the nation. Two things are required if we are to achieve that. First, we must pay attention to the management and effectiveness of our public policies – stop tearing down public institutions and government and begin making them more creative and efficient. Second, we must study what works (whether a “liberal” or “conservative” idea) and adopt the public policies that lead to success.

There is no question about our ability or our resources. We can be as great as we choose to be. The important questions are about our willingness to abandon hard line ideologies in favor of doing the things that produce the results that we want. Those choices will be made by voters. Without the willingness to adopt successful public policies we can be thankful for our friends in Mississippi. They will assure that we don’t finish last.

All Posts, budget, deficit, economy, justice, poverty

INCOME INEQUALITY AND A POLITICAL DIVIDE

It is said that those who do not learn from history are doomed to repeat it. We can learn a great deal from the strong historic correlation between political polarization and income inequality.

Income inequality peaked in the early 20th century when the top 1% of the population claimed about 20% of total income. Political polarization peaked around the same time as fiscally conservative Republicans and their presidential candidate, Herbert Hoover, carried the 1928 Presidential election. This was before the stock market crash but already there was rising dissatisfaction with income inequality. White southern farmers (Most blacks were barred from voting.) were pushing for increased federal regulation of banks, financial institutions and railroads that were thought to be profiting unfairly from the work of others. Organized labor gained traction among industrial workers who felt abused by their employers.

Conflict was widespread as workers banded together for higher wages and better working conditions while their employers arranged for police or private armed forces to attack strikers and organizers. In 1929, National Guard and local police intervened to end a textile mill strike in Gastonia NC, resulting in the shooting deaths of several strikers and a law enforcement officer. Bloodshed was more common in northern industrial centers.

Workers formed unions because their work was dangerous, provided no job security and they could not decently support families on what they earned. In 1912, a Socialist third party candidate garnered 6% of the popular vote for President. The “Farmer-Labor Party” gained fringe popularity along with socialist and communist movements. By 1930, the Depression was severe and FDR was elected President, subsequently passing his New Deal programs including federal economic stimulus, massive public works projects, Social Security, and strong regulation of banks. Thus began a painfully slow recovery which was not complete until the WWII effort brought full employment.

Today the share of national income enjoyed by the top 1% is again around 20% and political polarization is at its highest level since 1900. Conservatives have blamed unions for economic woes and more recently have succeeded in changing laws to make it harder for workers to organize; but labor activity is on the rise among low wage workers. Like their predecessors a century ago, they find it impossible to participate in modern society on their wages. Even among those who have jobs, hunger and homelessness are rising. Politicians respond that they would like to do something to help but they don’t have enough money. That response comes resoundingly from Republicans but also from Democrats.

Explanations of why there is not enough money ring hollow when the incomes of the top 1% continue to rise while the wages for labor stagnate or shrink. Teachers and many white collar workers are similarly affected. One factor contributing to the rapid growth of income among the wealthy while others see no increase is the more than 50% reduction in tax rates for the wealthy since their 20th century peak. Our budgets were balanced and our middle class grew to its largest size when taxes were higher. Poverty was shrinking; unemployment was low; and public education was a source of national pride.

Today, candidates from both major parties depend on the very wealthy for campaign contributions which they use to sell themselves to the general public. In 1982, the top .01% (one ten thousandth of the population) made 10% of all campaign contributions for federal elections. By 2012, they provided 40% of the contributions. Major corporations make sure that they have very wealthy people from both parties on their boards in hopes of sustaining strong influence on public policy no matter who wins an election. That is the same kind of influence which encouraged the Governor of North Carolina to send troops to break up the Gastonia strike.

Most Americans do not want a radical swing to the right or the left but they do desperately want an economy where hard work is rewarded with wages sufficient to support a family; including realistic opportunities for good education and upward mobility. We want to believe that any job worth doing is worthy of a living wage but our middle class is disappearing. We see employers back out of promised retirement plans and other benefits while using temporary employment arrangements to cut wages. People don’t join labor unions because they enjoy paying dues. They join because they believe they need protection from untrustworthy employers and because they perceive strength in unity.

We are again in a time when many adult workers cannot support a family and see little hope of upward mobility. In the early 1900s, desperate people tried desperate things. From their despair they built strong unions, New Deal jobs programs, and tax policies of the 1930s – 1950s. Their actions decreased unemployment and poverty and built our middle class. Once again, we are in a time when desperation will bring change. I wonder, this time will we read the writing on the wall before our backs are up against it?

Most data for this column is from the article “Why hasn’t democracy slowed rising inequality?” Journal of Economic Perspectives—Volume 27, Number 3—Summer 2013. It is available free on line or I will email it to readers on request.

All Posts, budget, economy, justice, medicaid, north carolina, poverty

ESSE QUAM VIDERI

The Latin phrase that heads this column is the North Carolina state motto, adopted from the Roman philosopher and political theorist Cicero. It means “To be rather than to seem”. It is a fine motto; inspiring integrity and openness in government. In The Prince, Niccolo Machiavelli taught the reverse saying, “It is not essential, then, that a Prince should have all the good qualities which I have enumerated above, but it is most essential that he should seem to have them.” Machiavelli was coaching a prince who would soon become a ruler and he wanted his pupil to understand that it is not necessary or even advisable to always behave with integrity. All that is necessary is to SEEM trustworthy.

Proponents of North Carolina’s voter ID law understood Machiavelli’s lesson well. They would have us believe that the purpose of the law is to protect the value of every citizen’s vote by eliminating voter fraud; but they never produced evidence that fraud has affected the outcome of a North Carolina election (or that fraud exits). If they had proof, they would publish it. The leaders of the Voter ID movement only need for fraud to SEEM real so they can SEEM to be protecting the rights of voters while they selectively reduce the rights of targeted groups.

Their decisions regarding which IDs are acceptable for voting discriminate against minorities, the poor and the young. A state issued driver’s license was accepted but a state issued college ID was not. A federal military ID is ok but a Food Stamp ID is not – selectively targeting the poor and the young. The photo ID requirement, which sounds nondiscriminatory, will be discriminatory in practice. The proportion of black voters in the last election who lacked a driver’s license is more than double the proportion for white voters. Those problems demonstrate that the bill is not what it seems to be. Supporters of the new law argue that the state will provide a free ID to anyone who doesn’t have one, conveniently failing to notice that poor folks generally don’t have the certified original birth certificate, passport, or alternatives needed to get the free ID. Nor do they have time and transportation for trips to license offices to complete the application process. As Machiavelli pointed out, the sponsors don’t need to BE non-discriminatory as long as they can SEEM non-discriminatory.

During the legislative session, the Supreme Court terminated one of the protections of the 1965 voting rights act. Afterward Republicans moved quickly to supplement the Voter ID Bill with schemes that target the poor, the young, minorities, and college students. Believing that the Federal Government could no longer interfere with discriminatory laws and practices, they cut the early voting period in half, making it harder for those who depend on their churches or civic groups to provide transportation to the polls. They made it illegal for those who will soon turn 18 to pre-register as voters. They banned registering and voting on the same day, making it harder for unregistered citizens to vote. The targeted populations, of course, are ones that traditionally tend to vote for other parties.

Republican majorities on some local Boards of Election are adding their own means of disenfranchising their targets. In Elizabeth City, the Republican dominated elections board has denied students at historically black Elizabeth City State University the opportunity to run for elected office. The new Republican chairman of the Forsyth County Elections Board has proposed closing the early voting location at historically black Winston Salem State University. At Appalachian State University in Boone, not only will the on-campus polling place be eliminated, there will be over 9300 voters assigned to the new polling place which has only 35 parking spaces. There are no sidewalks between the campus and the polling place, just a dirt path along a highway.

Over recent decades, North Carolina has made huge strides in voter participation, moving from 47th in the nation in 1990 to 11th in 2012. During that period, we made it easier to vote through measures like same day registration and early voting. Now the same Republicans who cut taxes for the wealthy then failed to support public education, Medicaid expansion and unemployment benefits have implemented a voter ID law which will make it harder for those they have harmed to vote them out of office. Their new law is much more than an ID law. It will have the effect of discouraging voting, especially among minorities, the poor and the young.

On the Seal of the United States is the slogan “E Pluribus Unum” – out of many, one. It is a principle which has helped our nation become great.   By disenfranchising many voters the new North Carolina law makes a mockery of both “E Pluribus Unum” and the state motto.   A reversed motto, “Videri quam esse” – to SEEM rather than to BE better fits the law’s supporters but it does not fit the proud and free traditions of our state and our nation.

http://www.npr.org/2013/08/16/212664895/in-rural-n-c-new-voter-id-law-awakens-some-old-fears lack of voter fraud evidence

Bush administration 5 year study turns up no evidence of fraud: http://www.nytimes.com/2007/04/12/washington/12fraud.html?_r=2&

Annual nc voter turnout http://www.ncsbe.gov/content.aspx?ID=70

Early voting and campus voting: http://www.newsobserver.com/2013/08/19/3120626/county-elections-boards-in-nc.html

http://www.thenation.com/blog/175837/north-carolina-republicans-escalate-attack-student-voting#

http://www.journalnow.com/news/state_region/article_1bedcab6-0acc-11e3-9d20-001a4bcf6878.html

All Posts, budget, deficit, economy, justice, medicaid, north carolina, poverty, public education

NORTH CAROLINA REPUBLICAN CHECKBOOK

If you want to know what is important to people just read their checkbooks and credit card bills. They are far more enlightening than press releases or diaries. The same is true of political parties. After about seven months of total Republican control, the values of that party’s leaders have become apparent in their tax reform law and their budget.

They eliminated the tax on estates of over $5 million so that the wealthiest North Carolinians will no longer pay it when tens of millions of dollars are passed from one generation to the next; and they reformed the income and corporate taxes so that those with the highest incomes will pay less than in the past. They are sure that they reduced the State’s revenue but they are not sure by how much. Good government requires matching tax revenue with necessary spending.

After reducing the state’s income they announced that they did not have enough money to budget a salary increase for teachers. Our teacher salaries were already extremely low and may well be the lowest in the nation after another year with no adjustment. Most state employees were treated little better. Republican leaders did not consider the state’s financial obligations and the needs of our schools before they cut taxes. That is not good government.

Probably the most troubled department in State Government is the Department of Health and Human Services which is responsible for Medicaid, all of our mental health services, and many other programs. To lead this critical area, the Governor picked Dr. Aldona Wos, a physician who has not been involved full-time in health policy or medical practice for many years. She is very wealthy and has been among the largest fund raisers for former President George W. Bush and for Governor McCrory in both of his campaigns for governor. President Bush rewarded Dr. Wos by appointing her as Ambassador to Estonia. Likewise, the Governor made her DHHS Secretary and she hired a young McCrory campaign staffer, Matthew McKillip, as the Chief Policy Officer of DHHS. At age 24, he has no previous health service education or experience but he has worked for a right wing think tank and now he is leading health policy development for the state.

After only a few months on the job, he has received a 35% salary increase. That is just one example of large raises for campaign supporters while there is nothing left over for teachers or other public employees. How might those other employees feel about this?

Republican leaders said that the state does not have enough money to maintain the unemployment compensation program so they cut the maximum monthly benefit by 35% and cut the maximum length of benefits from 26 weeks to 20. As a result of the change, we lost eligibility for over $700 million in federal funds intended for North Carolina’s unemployed workers while our unemployment rate remains one of the highest in the nation.

Then they turned down the Medicaid expansion which would have been totally paid by the federal government for the first 3 years and would have been over 90% federally funded thereafter. That expansion would have covered most of our low-income working people at federal expense. Through 2019 it would have brought $15 billion federal dollars to the state and created 25,000 new jobs (mostly in the private sector). That would have helped mightily with our unemployment problem. Our middle class and poor will have to pay the federal taxes to fund the expansion but we won’t get the health care or the jobs.

The inescapable conclusion is that the Governor and legislative leaders think it is more important to cut taxes for the wealthy than it is to provide health care for low income workers and fair salaries to teachers. You can read their values in the state’s checkbook. This is particularly sad, because these are not the values of most North Carolinians; and many Republicans also disapprove. Some must be wondering how their party got away from them. In retrospect, the answer seems to be that a few very wealthy people not only bought the election with incredible amounts of spending; they also bought the soul of a once proud political party. It’s quite a set of values: Take care of your wealthy donors and reduce their taxes then pay for it by denying fair wages to teachers and other public employees and by cutting back on the public education and health services which would help the poor improve their earning power. They may preach family values but support for families is not written in their checkbook.

After doing such things, the only sure way to stay in office is to prevent those who disagree and those you have harmed from voting. That is a subject for another day.

All Posts, deficit, economy, justice, north carolina, poverty, public education

WORK AND MINIMUM WAGE

A few days ago I came across what seemed like just one more preposterous claim littering our political landscape: that Australia has a minimum wage exceeding $15 American dollars per hour and an unemployment rate of about 5%. The stunning thing is that when I checked this one out I found that it is true. For me, that raised the questions, “How did they do that?” and “Could we do it too?” This column is about some of the answers that I found.

Australia’s achievement is not unique. There are 9 substantial nations with minimum wages higher than ours: Australia, France, Belgium, New Zealand, Ireland, Netherlands, United Kingdom, Canada, and Japan. Five of the nine have lower unemployment rates than the United States. They did not achieve this by running up their national debt. Of the nine, only Japan has a ratio of debt to GDP higher than the US. All the rest have less debt in proportion to their economic output. And although each of the nations is unique, they all have a stronger social safety net for human services than the US.

In my search for answers, I found that how they did it was not particularly relevant. They each found their own ways. The thing that distinguishes them is that they chose to do it. We have not made that commitment.

If we’re missing something, what is it? The surprising answer to that question may be that we are lacking Christian social values. When that thought occurred to me, I re-read Pope John Paul II’s “Encyclical on Work” which was published in 1981. While reading it, I recalled that Dr. Martin Luther King, Jr. was assassinated in Memphis while leading a campaign for economic justice. His concern about income inequality shaped his message that work must be respected with a fair and living wage. He famously said, “On the one hand we are called to play the good Samaritan on life’s roadside; but that will be only an initial act. One day we must come to see that the whole Jericho road must be transformed so that men and women will not be constantly beaten and robbed as they make their journey on life’s highway. True compassion is more than flinging a coin to a beggar; it is not haphazard and superficial. It comes to see that an edifice which produces beggars needs restructuring.”

Returning to the Encyclical I read that, “Work is a good thing for man-a good thing for his humanity-because through work man not only transforms nature, adapting it to his own needs, but he also achieves fulfillment as a human being and indeed, in a sense, becomes ‘more a human being’. … The key problem of social ethics in this case is that of just remuneration for work done. … Just remuneration for the work of an adult who is responsible for a family means remuneration which will suffice for establishing and properly maintaining a family and for providing security for its future.” He goes on to argue that the work of one adult should be sufficient to support a family and that society will suffer if children get inadequate nurture because both parents are working. Regarding the unemployed he added, “The obligation to provide unemployment benefits, that is to say, the duty to make suitable grants indispensable for the subsistence of unemployed workers and their families, is a duty springing from the fundamental principle of the moral order in this sphere, namely the principle of the common use of goods or, to put it in another and still simpler way, the right to life and subsistence.”

In my community the wages paid to a paramedic working full time and supporting a family qualifies the family for food stamps. Here in North Carolina, that is true for many hard working people in both the public and private sectors. I can only imagine the impossibility of supporting a family in any of our 50 states on a minimum wage job or “temp” employment with no benefits.

The other nations that I listed are providing a safety net for the unemployed and they have decided that anyone who is employed merits a living wage. Those nations have better overall school performance because fewer of their students live in poverty. For the same reason, they all have fewer of their number in prison. Too many of our underpaid and unemployed are unable to participate in our economy by earning or learning or spending. That brings up an important business lesson: It is easier to make a profit if your customers have money to spend.

All of this leads me to believe that the Christian social values taught by Pope John Paul II and Dr. King have merit; and if we adopt them we will find our communities, states and nation to be better and more prosperous places to live. Like the Australians, our choice will be driven by our values.

All Posts, budget, economy, medicaid, poverty, public education, taxes

NORTH CAROLINA TAX REFORM

We create some of our own big problems when we act on our beliefs without checking to see if the beliefs are true. Governor McCrory and the North Carolina Legislature are about to do that as they reform our taxes. They have been cutting spending and now they plan to cut taxes with religious zeal based on two erroneous beliefs. One belief is that cutting taxes will stimulate creation of good jobs and economic growth. The other belief is that North Carolina taxes are too high.

First, let’s look at how much we are actually spending compared to other states. Counting all forms of state taxes including corporate and personal, we collected $2320 per person in 2011. That ranked us 34th highest among the 50 states. Gross State Product measures the total economic output within the state. Our combined state and local government spending as a percent of our Gross State Product ranked 44th among the 50 states. That means that the tax burden on our state economy was lower than all but six states.

Our spending on public K-12 education has been a hot topic. Our per pupil spending in 2011 ranked 44th among the 50 states and the legislature has already cut it below that level. As a percent of GSP, our per pupil spending ranked 46th. The K-12 tax burden on our GSP was 4.8%. Some states with low GSPs are trying to catch up with the rest of the nation. While we go backwards, low wealth states like West Virginia, Mississippi, Alabama, South Carolina and Arkansas are placing a tax burden of 7% to 8.4% on their GSP to support K-12 education.

What about the other reason for cutting taxes – to bring more jobs and economic development? High wage employers will be looking for a highly educated and skilled workforce. That is the reason, for example, that tech industries have concentrated around Seattle, San Francisco and Boston. It is because strong public education K-PhD produces a strong workforce and because those regions provide the quality of life (some of which is tax supported) which attracts and retains highly skilled people. Here in North Carolina, the Research Triangle Park has been a viable competitor for those companies. A few other communities have made some headway, mostly in proximity to universities which help attract the workforce.   A tech company might put a call center or data center in other parts of our state (and that would be a good thing) but the corporate headquarters and the R&D functions which provide the best jobs will be elsewhere.

If our taxes and wages are reduced enough, we may indeed attract some jobs because there are some businesses which consider small differences in tax rates as an important criterion when choosing a location. They are also typically looking for the lowest labor costs. They don’t need a highly educated and skilled workforce and they keep benefit costs low by using as many temporary workers as they can. Those are also the jobs which are most vulnerable to outsourcing and automation. Having a mix of jobs available is a good thing but if we can’t attract our share of the high wage jobs then why will our brightest and most ambitious children return home for their careers? Or will they migrate to other parts of the country (or the world) for better wages and the environment that they want?

My conclusion is that the legislature and the Governor have entered us in a race to the economic bottom and if they continue cutting taxes and spending we are likely to win that race. I hate waste and don’t enjoy paying taxes but I’m very willing to pay for excellence in public education from birth through college. And I’m willing to pay fair wages to public servants who make our lives safer and better, and for parks, arts, and other government programs which promote the general welfare. Business leaders already know, but may require an occasional reminder, that it is a lot easier to earn a profit when your customers have money to spend. For that to happen, we need high wage jobs and a high skill workforce and public education to support both.

Tax reforms to close loopholes, to begin taxing services, and to reduce corporate taxes may indeed be good things but the design of the changes should increase rather than decrease state revenue and the tax burden must not be shifted to the middle class and poor who are least able to bear it.

I am an optimist. I believe in the people of my community and my state – good people who are working hard toward better lives for themselves and their families. We need to see ambition and optimism from our leaders including an understanding of that phrase “promote the general welfare” from the US and North Carolina constitutions. Taxation is not a win-lose game and neither is good government. When we spend our resources wisely on education and enhancements to quality of life, we all win. When wages go up, so does demand for products and services. It is time now for North Carolina to reclaim our dual heritage as a pro-business and progressive state.

All Posts, budget, deficit, economy, justice, poverty, taxes

KEEPING MEDICARE SOLVENT

There is a straightforward way to keep Medicare financially solvent without reducing benefits, changing the retirement age, or raising taxes. Medicare should pay standard rates for each service to all health care providers and let them compete to see who can provide the best combination of cost and quality for that price. The payments should be enough to allow high quality and efficient health care providers to earn a modest profit but should not include special provisions for favored organizations or locations. Right now the rates vary to unjustifiable degrees and patients are not even aware of it.

Here is an example to demonstrate what is currently wrong. In Medicare’s diagnostic classification system, the most frequently occurring inpatient payment is for hip and knee replacement surgery on uncomplicated (otherwise well) patients. There are separate diagnostic categories with higher payment rates for complicated patients. In 2011 Medicare paid for 427,207 of these procedures and the average payment was $14,324. That adds up to over $6 billion. The best paid hospital in the country was the Baylor Surgical Hospital in Fort Worth, Texas which received $38,686 per surgery. The worst paid was Saint John Hospital in Broken Arrow, Oklahoma which received $9,130. Baylor got more than two and a half times the national average and more than four times the price Saint John Hospital would have received for the same service to the same patient. Here in North Carolina, UNC Hospital was paid the most, $20,610 while the North Carolina Specialty Hospital in Durham was paid the least, only $11,058. In the Piedmont Triad, the payments were $18,656 to NC Baptist Hospital, $14,045 to Forsyth Hospital, $13,758 to Moses Cone Hospital, $12,726 to High Point Hospital, and $12,412 to Randolph Hospital. The same pattern exists for other diagnoses and similar variances exist for medical practices.   Readers who want to explore the data in detail can find it at the CMS.gov website or Email me and I will send the link to you.

The hospitals that are paid more do not get better results for their patients. Nor do they have better patient satisfaction. Supposedly the payment variances are because of factors like regional wage differences and costs incurred in educating specialty physicians. That may sound reasonable but the net effect is that Medicare subsidizes high costs at expensive hospitals and penalizes those with lower costs – the exact opposite of a free market economy. The political clout of local congressional delegations has been a huge factor at times, with special rates being set for certain cities or states. Medicare’s proper role is to purchase good health care for beneficiaries regardless of where the patient lives or which health care provider they choose. If we taxpayers are to subsidize medical education (and I believe that we should) then money should be appropriated for that purpose and separate contracts should be established to fund the medical education that taxpayers are purchasing. Educational grants should not be hidden in Medicare.

Medicare pays extraordinarily high prices to a few organizations which often use the surplus to acquire other hospitals or medical practices at the expense of taxpayers and consumers. Then they raise the prices. The UNC system, which also gets preferential rates from the state’s troubled Medicaid system, has used its taxpayer subsidized profits to gain control of large medical practices and other hospitals. With the increased negotiating leverage of the UNC system, prices can then be raised to insurance companies and benefit plans. Private insurance markets, just like Medicare, pay more in large cities and to large hospital systems. The idea that large size brings economies of scale is mostly a myth in health care. If the myth were true, the biggest hospitals would have the lowest costs. They don’t. But they do get paid more just for being big. The American ideal of a free market in health care where high quality and low cost are rewarded can work if we will design our payment system to work that way.

If Medicare rates are set and periodically adjusted to levels that allow good quality hospitals and doctors to make a modest profit, the best hospitals and physicians will thrive. Poor performers will fail financially or be taken over by someone else. That is how competitive marketplaces work. Healthcare resources will be more evenly distributed across the country if payment rates are standardized. We will soon discover that it is less expensive and more convenient to deliver high quality care outside of the bureaucracies of huge medical centers. If payment rates for doctors were the same in extremely rural areas of North Carolina as they are in Raleigh, there would be plenty of doctors in the mountains and down east. The need for the federal agency that operates rural clinics would likely disappear.

 

A free and competitive market will bring more community based health care, less centralization around large medical centers, better quality, better accessibility and lower cost. It will also bring powerful opposition from the organizations now being paid the most.