Category Archives: economy

All Posts, budget, economy, justice, taxes

OBAMACARE 2013

Please take a few minutes to return with me to the basics of whether “ObamaCare” or an alternative universal health coverage program should exist. The underlying question is ethical and philosophical. “Are there circumstances under which a person who is uninsured and lacks money to pay for health care should receive it?” If you answer the question “yes” then we can have an intelligent discussion of who gets care and how to pay for it. If your answer is “no” and if you find yourself uninsured and critically ill, then you have a moral obligation to die without burdening others with the cost of your care.

Today, hospitals are required by law to provide emergency services without regard to a patient’s ability or willingness to pay. Hospitals are also required to force the doctors who have privileges there to serve in on-call rotations for non-paying patients. It is not free. Hospitals and doctors try to cover the cost of serving those who don’t pay by charging more to those who do pay. The system functions exactly like an invisible tax on health services but it doesn’t provide support for preventing serious illness and hospitalization by keeping people well and treating illness early. It doesn’t provide a colonoscopy to prevent colon cancer but if you are bleeding to death from advanced colon cancer, it could get you a transfusion. The law was well intended but it is irrational.

The basic principle of ObamaCare is to strongly encourage everyone to purchase health insurance either through an employer or as an individual. For those who can afford to buy insurance and choose not to, there are tax penalties. Those penalties help pay for services that some who refused to buy insurance will surely need and receive.  For those who can’t afford the full cost of insurance, there is a subsidy to make it more affordable. For those who have incomes below 140% of the federal poverty level there is 100% federal funded expansion of Medicaid. In combination with Medicare and other existing programs, ObamaCare makes a reasonable level of health care available to all Americans. There are incentives built into ObamaCare that are intended to drive the cost of health care down and to improve the quality. It appears that some of them are already having a positive effect in reducing hospital readmissions, for example. And it bans insurance companies from onerous practices like not covering pre-existing conditions.

ObamaCare is not even close to perfect. The President would agree with that statement. It should not be compared to “perfect”. Americans could not even agree on a definition of perfect. Instead, ObamaCare should be compared to what we had before it passed. Those who want to repeal the law would take us back to the exploding costs and inefficiency of a non-system where every year the percentage of the population covered by private insurance went down because fewer employers and employees could afford it.   Many insured employees saw no increase or even reductions in take home pay because the cost of insurance escalated so rapidly. The opponents of ObamaCare have nothing to put in its place except the failed laws of the past.

After nearly a century of debate, going back to Republican President Theodore Roosevelt, we have a start in providing universal access to some level of health care. The best part of the new law is that we finally made that commitment. ObamaCare marks the beginning of the evolution of a uniquely American health care system that emphasizes consumer choice and leaves most of the health care system in the hands of the private sector.

It is time for us to rally around the idea that all of us are going to have at least a basic level of health care.   We will be forced to have the debates that have been held for generations in other democracies about what kinds of care will and will not be covered in taxpayer funded programs. Insurance market regulations will be debated and will need revisions to create health care markets that reward quality and cost, even to the extent of allowing low quality and high cost health care providers to fail financially. That, after all, is the nature of truly free markets.

I hope that attempts to obstruct the law so that it will fail or to repeal it prove futile. I know that they are counterproductive. It is long past time for opponents of universal coverage to acknowledge the end of that debate and to begin proposing their own ideas as ways to improve the law. And it is time for the North Carolina legislature and Governor to back away from their refusal to implement the Medicaid expansion. We will pay the cost of it in federal taxes regardless of what the legislature does but because of their action most of our poorest citizens will receive only emergency care. Refusing the expansion is wasteful of the tax dollars that we are already paying and mean-spirited toward those who with low incomes. It is time to quit fighting the President who finally got something done and to begin making health care better and less expensive for all Americans.

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

THE REPUBLICAN PORCH STEP

I had an uncle old enough to be my grandfather who cleared land, cut lumber, and built the home on his Tennessee farm with his own hands. As visitors approached, he warned them not to use the steps on the side of the porch. “Those are Republican steps.” he would say, “They look solid but if you trust them they’ll let you down.” Since handing over the legislature and the governor’s office to Republicans, a lot of North Carolina voters are learning what he meant. Republican candidates said it was time for a change after generations of Democratic control, pointing out numerous scandals and sloppiness in governance by one party. Republicans promised openness in government, less intrusion on personal liberties, lower taxes, improvements in public education and more jobs. Governor McCrory ran a campaign based on economic development and less intrusive government. Sadly, their actions don’t resemble their promises.

The actual Republican agenda appears to have three themes. First and foremost, hold on to power, even if that requires depriving citizens of their rights. The second theme is to financially reward supporters and punish opponents. The third is to impose the social and religious values of their extreme base on all North Carolinians.

Republicans are cementing their grip on power. By gerrymandering our districts they won 69% of North Carolina congressional seats with 49% of the votes. Now they are proposing laws designed to discourage voting by citizens they think are likely to support the opposition. They have proposed laws to:

  • Take away the $2500 per dependent tax credit from parents of college students who vote where they go to college (and live for most of the year).
  • Eliminate early voting on Sundays, which is especially popular among African American churches.
  • Cut back early voting to one week.
  • Restrict the number of early voting locations.
  • End the practice of registering and voting on the same day.
  • Pass a voter ID law, designed to deter voters who don’t have a driver’s license.

Republicans propose to financially reward supporters and penalize opponents. They want to cut corporate taxes, estate taxes, and income tax rates and pay for the cuts by expanding the scope and amount of the sales tax. By taxing food and other necessities then cutting taxes for corporations and those with higher incomes they can redistribute income from the working poor to the Republican base. There are proposed laws to reward generous Republican contributors by legalizing sweepstakes cafe gambling and payday lending (sponsored by our own Senator Tillman).   They passed a law allowing hydraulic fracturing for natural gas while severely limiting the liability of companies for pollution of ground water and land, even if it is caused by intentional violation of safety regulations.

Then they punished the poor – perhaps with the notion that most poor folks either don’t vote or vote for Democrats. They reduced unemployment compensation for the long term unemployed and raised college tuition, making upward mobility for those with low incomes even harder than it was before. Their funding cuts increased financial problems for our public schools. Their solutions include allowing charter schools to hire uncertified teachers without even doing background checks (Senator Tillman again). They rejected $15 billion dollars of federal money to pay for Medicaid expansion through 2019. That punishes the poor who need health care along with the hospitals and doctors who are required by law to provide emergency services whether they are paid or not. The Medicaid expansion would create 25,000 new jobs, mostly in the private sector. Do Republicans think voters won’t miss those jobs or notice that we still have to pay our $15 billion in federal taxes? At one time we were fighting a “war on poverty”. Now it feels like Republican leadership is fighting an undeclared war on the poor.

 

The third element of the Republican agenda has been to impose the social and religious values of their extreme conservative base on the rest of the population.   Randolph County’s own Allen McNeill co-sponsored a bill to exempt North Carolina from the US Constitution and allow government establishment of an official religion. You can find it on the legislature’s website or just Google “HJR 494”. One proposed imposition on personal freedom is a requirement to provide written notice to a spouse two years in advance and attend state approved counseling before filing for divorce – even in cases of domestic violence. There is a bill requiring doctors to get written consent from parents before providing pre-natal care to a pregnant minor or answering questions from minors about STDs or birth control. And one of the first acts of the Republican majority was to encourage a constitutional amendment which prohibits the state from recognizing same-sex marriages or unions – even those performed in states where they are legal. Soon they will be spending our tax dollars to defend that useless amendment in court.

As candidates, Republicans promised less intrusion on personal liberties, lower taxes, improvements in public education and more jobs but they are delivering something quite different. Like my uncle’s porch steps, they looked reliable but they are letting us down.

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

THOUGHTS ABOUT THE UNINSURED

What should happen when a person with no health insurance and little money needs a major health care service? Let’s imagine it for a fictitious person. Sara is a 61 year old widow who has two part time jobs, one at a restaurant and the other at a dry cleaning establishment. Neither provides health insurance. Her annual income from both jobs is about $28,000. She has little money saved and will have only social security income if she is forced to retire.

Recently Sara has had severe pain when she stands for the extended periods required by her jobs. Her doctor referred her to an orthopedic surgeon. Sara delayed follow-up because of the cost but recently her pain increased enough that she spent money for an office visit. The surgeon determined that Sara needs a hip replacement. The price of the hospital and physician fee is about $40,000 which is well beyond her means. Sara fears she will soon be fired from her jobs because she can’t be on her feet for long periods.

Should Sara be able to get the surgery that would correct her problem? Is “no” an acceptable answer? If the answer is “yes”, who should pay for it? Today, one of two things would happen. Sara might have to do without the surgery. The other possibility is that the doctors and hospital will replace her hip without payment and try to pass the cost along to those who will pay. If there are too many patients like Sara, the hospital will fail financially and many doctors will move to more prosperous communities.

There are 50million uninsured Americans today with little or no ability to pay a large health care bill. http://aspe.hhs.gov/health/reports/2011/cpshealthins2011/ib.shtml Many residents of Randolph and Montgomery Counties fall into that category. As we get ready to vote next month, I hope that Sara and the millions like her will accompany our consciences into the voting booth: a man delaying a hernia repair that he needs, a woman who feels a lump in her breast and hopes it is nothing rather than seeing a doctor today; someone who skips the colonoscopy where a polyp could be removed before it becomes colon cancer. Some of us are the uninsured. Most of us know them personally.

Two Republicans, Teddy Roosevelt and Richard Nixon; and three Democrats, Harry Truman, Bill Clinton, and Barack Obama have pushed for laws to provide health care for all who need it. In a very messy legislative process President Obama finally got a law passed which gets us most of the way there. Republican opposition was absolute and they blocked the legislative process at every turn; preventing the dialogue that could have improved and simplified the bill. From the beginning their stated agenda was to prevent the President’s re-election rather than to collaborate in governing for the benefit of all.

President Obama is praised by some and vilified by others. Critics point out that the law is complicated and imperfect. That is true. Advocates, me included, point out that when the new law is fully implemented it will be a vast improvement over what we have today.   The debate should not be about repealing it; instead we should be deciding how to improve it. In particular, we need initiatives to reduce the cost of health services so that they will be more affordable.

We need today’s Republicans to step up to the responsibility of proposing workable ways to provide more service for less money while covering the uninsured. It IS achievable. Every other developed nation has accomplished it while spending less than we do now. http://www.oecd.org/dataoecd/52/42/49188719.xls  . We can do it too. Those nations set a clear policy of universal coverage and designed economical ways of achieving the goal. Mitt Romney knows that. He is the architect of a Massachusetts program which is nearly a twin to ObamaCare. But he and Renee Ellmers, and the Republican Party have abandoned the humane ideas of Roosevelt and Nixon. While doing that, they also deserted the uninsured, the poor and the middle class.

Did you know that more family bankruptcies are caused by health care bills than by home foreclosures? http://www.washingtonpost.com/wp-srv/politics/documents/american_journal_of_medicine_09.pdf It is the uninsured middle class and the poor who will bear the burden of a Republican victory this November. Have you heard talk of “class warfare”? Well, this is it. The Republicans want to repeal a law providing health care for the uninsured while cutting taxes for the wealthy. That is economic warfare on the uninsured middle class and the poor. Otherwise, Republicans would have a proposal for how to provide health care. They have also abandoned the doctors and hospitals that are required to provide emergency service with no payment. And in their proposal to “block grant” Medicaid they have deserted the disabled and frail elderly. They pledge to cut federal Medicaid funding. Two thirds of Medicaid spending is for nursing home patients who have depleted their personal resources. Much of the remainder is for childbirth or medical care of sick children.

We can’t afford all things for all people. There will always be two or more levels of care, with the wealthy able to obtain services not available to others. But we can afford to provide most needed and effective services to everyone; and we can find ways to get our costs down. Achieving that will require a national commitment of voters and political parties over a period of many years. It begins with implementing the law that was passed after a century of effort and it should continue with gradual improvement. We are Americans and we are up to the task if we will commit to it.

How will you respond to Sara’s need and to the needs of millions like her? We should take Sara and our consciences along with us when we go to the polls. There, but for the grace of God, go I.

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

TRUTH ABOUT TAXES AND INCOMES

Much is said and circulated on the internet about taxes during election season. How high is too high? Who pays a fair share and who doesn’t? I’m going to lay out some facts for consideration and then make a few suggestions. Some of the facts will be hard to believe so I supplied internet links. Please, if you don’t find my statements credible, check it out for yourself.

I’m counting all taxation regardless of which level of government collects it or how it is collected. As Americans our total tax bill is low compared to other developed nations. Among 33 developed nations studied by the OECD (Organization for Economic Cooperation and Development) our taxes as a percent of our GDP ranked 30th. Mexico, Chile and Turkey were lower. We collected 27.3% of GDP in all forms of taxes. The median among developed countries was 36.2%. http://www.taxpolicycenter.org/briefing-book/background/numbers/international.cfm

Practically everyone in the US pays taxes and the total tax burden is very close to flat regardless of income. The top 20% of the population had 60% of the income and paid 63% of the taxes. The middle 20% of the population had 11% of the income and paid 10% of the taxes. The bottom 20% had 3% of the income and paid 2% of the taxes. The top 1% of the population had 21% of the income and paid 22% of total taxes. http://www.ctj.org/pdf/taxday2012.pdf

 

Despite propaganda, the poor do pay taxes and we are not overtaxing the wealthy. We do however; have some monumental problems to address. We are spending far more than we are collecting and if we keep on doing that, our debt will consume us. The truth is that we need to cut spending AND raise taxes. The Simpson-Bowles Commission Report made that clear as has every other credible study of our situation.

 

For three decades, the incomes of the wealthy have grown much faster than incomes of the middle class and poor. Since the 1950s the top income tax rates have been cut by more than half and the rate for capital gains (investment income) is now less than one third of the top rate for wages. It does not seem right that those who work have higher income tax rates than those who invest; but that is the case. There was indeed a time when those with high incomes paid a higher share of it in total taxes but that time has passed. Today most of us pay about the same percentage of our incomes for all governmental operations; but the incomes of the wealthy have risen while the incomes of the middle class and the poor have stagnated. http://www.census.gov/hhes/www/income/data/historical/inequality/IE-1.pdf

Today we have a growing deficit and we have some elected officials who tell us that Medicare and Social Security must be cut to balance the budget. This same crowd wants to drastically cut food stamps and Medicaid too. They would have you believe that Medicaid goes to slackers but about two thirds of Medicaid payments go to nursing homes for care of disabled and elderly. Much of the rest goes to children. http://www.cbpp.org/cms/index.cfm?fa=view&id=2223 43 percent of Food Stamp recipients live at or below half the poverty line. Only 15 percent live above the poverty line. Children under 18 account for 47 percent of all food stamp recipients. Eight percent are seniors. Forty-one percent of beneficiaries live in households with partially or fully employed workers. Their numbers sometimes include enlisted military families, paramedics, and other public servants whose pay is below the poverty line. The share of Food Stamp recipients that also receives welfare benefits is at historic lows; in 2010 it was less than 10 percent. http://www.theatlantic.com/health/archive/2012/09/who-benefits-from-food-stamps/261993/

We can help pay for vital programs by eliminating some tax loopholes. One has to do with capital gains. A person who puts aside some income in a savings account or by purchasing stock has already paid income tax on the saved money and then will have taxable income from interest, dividends, or the increase in value of the stock. The person of modest means is likely to use a savings account and his interest income will be taxed just like his earned wages.    The person of greater means can purchase stock, real estate or other investments and the increase in value of the investments will be taxed at not more than the15% capital gains rate. Fairness demands that the wages of those who work should not be taxed at a rate higher than the rate for capital gains. We should tax capital gains at the same rate as wages.

The laudable purpose of the home mortgage deduction is to make home ownership possible. So let’s limit it to a maximum mortgage of about $300,000 and also cap the lifetime amount of tax deduction for any individual. That way it won’t be used for subsidizing the purchase of second and third homes or extremely expensive homes.

We can eliminate the law which grants fabulously profitable oil companies a lower tax rate than other businesses. We could add a very low (maybe one half of one percent) sales tax on all forms of securities. A contractor pays a sales tax when he buys tools to earn money. Why should a bank or investor not pay a sales tax on their tools, like credit default swaps? Other countries have done it.   The result seems to be less speculation and more investment; less volatility from computerized trading, and substantial tax revenue. http://www.imf.org/external/pubs/ft/wp/2011/wp1154.pdf

Candidate Romney wants to reduce taxes for the wealthy even more. That will require drastic cuts to programs or huge additional borrowing. I don’t enjoy proposing higher taxes and I would enjoy paying them even less, but it seems clear that increased revenue should be part of the solution. And it would be easier to stomach cuts to human services when everyone pays a fair share.

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

HOW TO BALANCE THE FEDERAL BUDGET

I’m going to try something different with this column, giving readers some rarely discussed information about where our American money goes and how that compares to other nations. I’ve chosen health care and defense because they are very large components of our spending. In business, this technique is called benchmarking. It tells us how well we are doing compared to competitors so that we can see where we have opportunities for improvement. That is important in a global economy where jobs are easily moved to places where goods and services can be produced inexpensively. The information can be useful in setting goals for our future. The choices to be made depend on our values, but if we all start with the same facts then agreement about goals may come easier.

First let’s look at health care. If you add together all of our health care spending, it is about 17% of our total economy. That includes taxes, insurance premiums, out of pocket expenses…everything. It amounts to $7960 per year for every man, woman and child. The second most expensive nation in the world at present is Norway. Their mix of insurance, personal expenses and taxes provides some form of coverage for everyone and they spend $5352 per person. If we can find a way to tie Norway for the most expensive health care and to match them by covering everyone, we would reduce our spending by $2608 per person. Multiplied by our population of 313 million people, that adds up to $816 billion in savings in one year. Savings would come in the form of reduced government spending, reduced insurance costs and reduced out of pocket spending. All savings would benefit families in one way or another. To get that gain, we have to tie Norway for most expensive in the world. Data to demonstrate this are available for download at http://www.oecd.org/dataoecd/52/42/49188719.xls Those who look it up will find that most developed nations spend less than Norway and that their health outcomes are equal to or better than ours.

Second, let’s look at defense spending. It is probably no surprise that we are number one in defense spending, but you may be surprised to learn the size of our lead. Our annual defense budget is estimated to be $711 billion. That is 4.7% of our total economy (GDP) and it is 41% of the military spending for the entire world. Number two is China, which spends $143 billion, 2.1% of their GDP.   If we were to reduce our defense spending so that we are only tied for spending the most, we would have $568 billion available for other priorities. To demonstrate what a competitive burden this is for our economy and our families, let’s look at it on a per person basis. There are a lot more Chinese than there are Americans. We spend $2273 per citizen (men, women and children) on defense. The Chinese spend $106 per citizen. That is one reason why it is often cheaper to make things in China. Defense spending data are from http://milexdata.sipri.org/ and more information at http://www.sipri.org/

Add $816 billion to $568 billion and we save $1 trillion, 384 billion. If we were to set and achieve those two goals, the savings would be sufficient to eliminate the federal deficit and possibly begin repaying the debt. If we want to leave defense spending and health care as they are, then we must pay for them. The annual cost will be about $10,233 per person and that is $4422 more than if we match Norway and China.

It appears that our general alternatives are:

  1. Leave health care and defense alone. That decision costs $4422 more per year for every man, woman and child or $17,688 per year for a family of four. Pay for it through reduced spending on other priorities and increasing our national debt (which someone is supposed to pay back some day). It requires drastically cutting spending on education, public safety, infrastructure and social security along with covering fewer people under Medicare and Medicaid. In essence, it will require telling many of the middle class and all of the poor that if they can’t pay for health care and first class education then they can’t have those things. Some of our elected officials are leading in that direction.
  2. If we leave health care and defense alone, the other alternative is a massive increase in taxes to pay for them.
  3. The third alternative is to adopt ideas from other developed countries which have learned to provide good health care for all of their citizens and keep themselves secure from invasion or attack for far less money than we are spending.

The comparative benchmarks are not world-wide norms. They merely tie us for being the world’s biggest spender on both health care and defense. We have not even addressed whether we can afford to be tied for most expensive in both of these categories.

One way to frame up the discussion is to ask, “Are we sufficiently committed to our current systems for defense and health care that we are willing to pay $4422 more than the second most expensive nations every year for every American?” What would you decide, knowing that you will have to write the checks?

Another way to discuss it is to ask, “If we could eliminate our entire deficit in exchange for accepting Norwegian health care and being as secure from attack as China, would we do that?” Then we would not have to write the checks and we would not be forced to cut other spending or raise taxes to balance our budget.

The numbers are plain. It is 6th grade math with a whole lot of zeros added. The hard questions are about values. Who are we as Americans, and who do we want to be? Those are questions for individual consciences and for public debate. We can take our answers to the polls.