Monday, September 26, 2011
It would seem that raising taxes on the wealthy is the sort of thing that would only appeal to pinko-liberal commies like me, and that by advocating tax increases for the rich, Obama is abandoning his long record of compromise and seeking the center (working with Republicans to cut spending, pushing for "grand bargain" with Boehner, not advocating a public option, agreeing to extend Bush's tax cuts, etc).
However, this is clearly not the case, based on recent polling (New York Times (.pdf), Washington Post, NBC/Wall Street Journal (.pdf), Gallup). Depending on how the question is asked, between 54% and 80% of moderates and independents favor these tax increases.
Obama's electoral strategy, as previously discussed, will likely depend on portraying himself as the "adult in the room" trying to govern the nation while Republicans refuse to compromise. Republicans would be helped by stories of Obama playing to his base. But the numbers show that's not what he's doing.
I think a Romney nomination would be a gift to Obama's re-election bid, as Romney fits right into Obama's previously-discussed strategy of showing the Republicans will attack the things they used to support, leaving the government gridlocked and incapable of doing anything. On issue after issue, Mitt Romney has lurched significantly to the right, as has the rest of his party.
In 1994, when he ran for Senate against Ted Kennedy, Romney said he would support Sen. John Chafee's (R-RI) health care bill, which included a federal mandate to buy health insurance. He later, as Governor, put in place "RomneyCare", which includes a mandate to provide insurance.
This election, he attacks health care reform as strongly as any of his Republican colleagues. With Republican voters whipped into a frenzy over ObamaCare, to do anything else would end his chances of nomination.
In 2005, Romney was strongly involved with negotiations to set up the Regional Greenhouse Gas Initiative, a cap-and-trade system among New England states. Initially, he supported the measure, saying "I think it is good business" and "we can effectively create incentives to help stimulate a sector of the economy and at the same time not kill jobs."
When running for the Senate in 1994, Romney stated "I believe that abortion should be safe and legal in this country." When running for Governor in 2002, he said "I will preserve and protect a woman's right to choose, and am devoted and dedicated to honoring my word in that regard."
In 2008 and 2012, he has repeatedly said he is pro-life and would support overturning Roe v Wade.
In 1994, Romney advocated strict campaign spending limits and the abolition of PACs. In 2002, he suggested public financing of campaigns through a 10% tax on private contributions to privately-funded candidates.
In 2008, he said "Do we really want government telling us when we can engage in political speech, and what form it can take". He has since been strongly opposed to McCain-Feingold and other efforts to limit campaign contributions and spending. Recently, he has received rather shady large contributions from corporations which form, give him a check for lots of money, then close.
In 1994, Romney wrote a letter (.pdf) to Log Cabin Republicans saying he supported gay and lesbian soldiers being allowed serve openly.
He recently said "Don't Ask, Don't Tell" should have been kept in place.
In the interest of brevity, I'll stop there, but he has a similar record of strong right-ward turns on issues such as gun control, immigration policy/amnesty, capital gains taxes and others.
Vast majorities of voters agree that Washington is broken. Parties that used to be able to compromise with each other are now unable to do so. A Mitt Romney nomination would be great news for Obama and Democrats because he personifies the truth that the separation between the parties is the result of the Republican Party tilting heavily to the right.
Next up, we'll get back to discussing why Obama's recent strategy of pushing for tax increases on the rich is not "playing to his base", as his critics claim.
Upon entering the race, he shot to the top of the polls. Unfortunately for him, his position invited lots of scrutiny and attacks, and multiple cracks have shown. His main strength, his jobs record, has been shown to be largely a mirage, with a study showing that 81% of the jobs created in Texas going to immigrants, which doesn't play well with Republican voters. Many of the jobs created were also government jobs. Others were poachedfrom other states, making his model difficiult to apply nationwide.
More generally, he's shown himself to be, well, kind of dumb. His debate performance have hurt his campaign rather significantly, particularly his debacle in last Thursday's debate. A video of an answer about abstinence-only education emerged that showed his complete inability to articulate a position or use facts to support his argument. He defended his policy of giving in-state tuition rates to children of illegal immigrants by saying those who don't support it "don't have a heart." Not exactly a good way to get votes in a GOP primary.
It's particularly unfortunate for him that he doesn't have great rhetorical skills, with the number of questionable positions he has to defend. In his book "Fed Up", he called Social Security unconstitutional and ""a crumbling monument to the failure of the New Deal." He now says he wants to reform the program but hasn't really addressed the "unconstitutional" attack. Given how popular it is, particularly with older people (who tend to vote more), he needs to come up with a better answer.
He has also taken a lot of heat for issuing an executive order requiring girls to get the HPV vaccine, making Texas the first state to require it. While the HPV vaccine is a great thing that I personally think each and every girl should get, there was some appearence of "crony capitalism" in how the order came about. Perry's former chief of staff was a lobbying for the vaccine's maker, Merck. Perry also received about $29,500 from Merck since 2000. Merck has also donated $352,500 to the Republican Governors Association since Perry became active in that organization in 2006.
And he let his state murder a guy and has since been covering it up.
In sum, Perry is Bush circa 2000 but with a worse record as governor and more controversial positions to have to defend. Bush wasn't a great orator, but he didn't really have all that much as governor to answer for. Unless Perry starts showing more skill on the campaign trail, Romney's looking pretty good for the nomination. More on him next post.
Wednesday, September 21, 2011
Unfortunately, they seem to be unable to apply the same logic to teachers, firemen and police officers. By stripping union rights from these groups, and generally opposing efforts by the Obama Administration to use federal funds to keep them from being fired, Republicans are dis-incentivizing workers who provide these vital services. Just as the economy would be damaged by having fewer "job creators", it will also be weakened by having fewer good teachers.
In determining how to close the deficit, we must, through our democracy, decide how much each of us will contribute in addition to what we already do. Republicans want to exempt a segment of society from contributing, despite their being the segment most able to afford it.
In my next post, we'll discuss the ridiculousness of calling Obama's tax policy "playing to his base" and "giving up on compromise".
Tuesday, September 20, 2011
She apparently thinks HPV vaccines cause mental retardation, on the basis of one anectdotal report from the campaign trail. That she could be so easily convinced shows her lack of scientific insight and knowledge. That she would pass along the claim in a national interview shows her lack of political instincts. This episode, along with a long history of misstatements and/or fabrications, as well as having never in her 4+ years in Congress written a single bill that has become law, shows that she just doesn't have the intelligence or ability to be President.
But there is a path for her to win her party's nomination, which in this economic and political environment, gives her a path to the White House. Her campaign was doing very well, including a win in the Iowa Straw Poll, until Gov. Rick Perry entered the race. He has taken over much of her support as the Tea Party "anti-Romney". It is unlikely that Bachmann will win the nomination unless Perry is knocked out of the race.
Bachmann seems to recognize this, given the vigor with which she attacked him at the last debate. Her attacks regarding Perry's decision to mandate the HPV vaccine in Texas, along with pointing out possible corruption on Perry's part (more on that in my post about him) have managed to hurt Perry somewhat, particularly in the head-to-head with Obama.
Hopefully, even if Bachmann were nominated, the months of scrutiny of her record and her abilities would prevent her from being elected. But one can never be too sure.
Monday, September 19, 2011
The case is best summarized in this New Yorker article. Being a New Yorker article, it's fairly lengthy, but I think it's worth it, particularly with Perry being the GOP frontrunner.
If not, the basic summary is that he was convicted of setting a fire in 1991 which killed his 1 year old twins and 2 year old daughter. The main evidence against him were patterns in the burned house which suggested "puddles" of accelerant (e.g., lighter fluid), as well as marks that indicated more than one source point for the fire. These analyses of the burn patterns is not based on any science, and instead were based on practices handed down from generation to generation of fire investigators. A psychiatri st who pretty much made his living "diagnosing" murder suspects as sociopaths, and who has since been expelled from the American Psychiatric Association, labelled Willingham as such based on an Iron Maiden poster in his house. He was convicted and sentenced to death, despite there being no motive given besides his supposed mental illness, and no evidence besides the non-scientific analysis of the burn patterns.
Just before Willingham was executed, his case was reviewed by Dr. Gerald Hurst, a fire investigator who actually (gasp!) uses scientific methods. He reported on the advances in fire investigation since the 1991 fire. It had since been discovered that accidental fires can form the same patterns (puddles, apparent multiple starting points) as those found in the Willingham house. He gave his report to Perry's office and the clemency board. Internal e-mails show no evidence that anyone in the Governor's office or on the board even read Hurst's report. He was executed (or, if you prefer, murdered) by Texas on February 17, 2004.
Since his death, there was a state panel set up to investigate the use of forensic investigation in Texas. The panel hired another fire investigator to look at how arson cases were investigated in Texas, and he came to similar conclusions as Hurst. Just days before the panel was set to publish its conclusions, Perry removed several of its members and appointed an ally to run the panel. Since then, the panel has assigned the Willingham case to a sub-committee, which allows its hearings to be closed to the public. They have also moved their full meetings to obscure, hard-to-reach areas of the state to discourage reporters from attending.
Rick Perry is the frontrunner in his party's race for the White House. His record, policies and personality have been the focus of the last couple Republican debates. He talks proudly on the campaign trail of the use of executions in his state; he has presided over 235 executions, including Willingham's, in his time in office. If it is true that his state executed an innocent man on his watch, that should disqualify him in the eyes of voters. Hopefully the moderator at an upcoming debate, or anywhere else during the campaign, will have the guts to ask him about it.
Friday, September 16, 2011
They talk about completely overhauling the tax while claiming, as Boehner did in his speech, that the big reason employers aren't hiring is "uncertainty" about their future taxes. So their plan to turn around the economy is to put every single line of the tax code on the table, endangering every subsidy, loophole and incentive that every business in America depends on to keep their doors open. Sounds like their plan would cause a lot more uncertainty for job creators.
It would be one thing if they thought they'd be able to do this quickly. But, given the current environment, heading into an election year, there's no chance it would be a fast process. And every lobbyist in town would prepare to fight tooth-and-nail against any elimination of their specific loophole.
Meanwhile, nothing would be done to help the economy in the short term. So we'll still be stuck with high unemployment even longer, with the Republicans not only standing in the way, but actually making things worse, according to their own rhetoric.
Tuesday, September 13, 2011
It is utterly indefensible of Blitzer to not include Paul in the Fed discussion. Mitt Romney had even set up Paul's response by saying "We need to have a Fed... because if we don't have a Fed, who's gonna run the currency? Congress?! I'm not in favor of that." Had Blitzer then gone to Paul, I'm sure that he would have quoted Article 1, Section 8 of the Constitution, which says that Congress has the power "To coin Money, [and] regulate the Value thereof".
This is just one more example of the media's anti-Paul bias, which I think is due to his being the most anti-corporate candidate in the race. Despite having solid backing among Republican primary voters and his close second-place finish at the Iowa straw poll, he is marginalized as a non-contender. Doing so elevates the ideas and policies of dunces like Rick Perry and Michele Bachmann to the center of these debates, instead of the more interesting (but ultimately wrong) ideas of Paul.
He favors a gold standard, which would fix the value of the dollar to the value of gold. The US was on the gold standard until 1971, when it was ended by Richard Nixon. Returning to the gold standard today, as well as going to a full-reserve banking system that Paul and other Austrians support, would cause massive deflation. By limiting the supply of dollars and requiring banks to hold more of them in reserve, the value of the dollar will increase significantly. For people (like me) with student loans, or a 30 year mortgage, or any other debt, which becomes harder to pay back when each dollar is more valuable, a Ron Paul presidency would be a disaster.
It wouldn't only be a disaster for debtors. As discussed in a previous post, much of the reason for the current poor state of the economy is due to less consumer spending, as people are saving more to make up for the lost value of their homes. Deflation, by making people's mortgages and other debts larger in real terms, would have a similar effect, further driving down consumer spending and worsening the economy.
I've previously discussed the refusal of some to accept that there are some spheres, such as limiting health care costs, where government programs might be better than the private market. Paul has never met a government program he wouldn't cut/eliminate. He has such a limited view of federal power that he opposes mandates in the Civil Rights Act of 1964 that desegregated restaurants/hotels/etc.
While Ron Paul's ideas are frequently wrong and/or harmful, he has enough support that his ideas deserve more attention than they're getting. Hopefully in future debates and media coverage, he'll have more of a chance to share his ideas, rather than the media deciding which ideas merit consideration.
Monday, September 12, 2011
Also, apologies to Fred Karger (gay rights activist), Buddy Roemer (former Louisiana Gov. and Congressman who lost to former KKK leader David Duke in 1991 before disappearing for over a decade), and Gary Johnson (libertarian former New Mexico governor), who are so far behind that they can't get into the debates.
Herman Cain, former CEO of Godfather's Pizza
Herman Cain is running the campaign Donald Trump wishes he could have run. Cain has never been elected to anything, but he's had a good run in this field, with his support reaching double digits after a well-received debate performance in South Carolina back in May. He has since faded, but still maintains enough support to stay in the debates.
My impression from watching him in debates is that he excels at telling Republican voters what they want to hear, even if he doesn't have much of an idea what it means. After making several statements about the Israel-Palestine conflict a few months back, it became clear that he had no idea what the Palestinian "Right of Return" is. Being a rather important issue in the conflict, that was the moment that I wrote off his chances of being a serious contender.
Newt Gingrich, former Speaker of the House
Despite leading the Republican war against the Clintons in the 90's, Gingrich also demonstrated an ability to work with President Clinton on big initiatives such as welfare reform. In 2005, he had high-profile discussions with then-Sen. Hillary Clinton about health care reform. It is this willingness to work with Democrats that made Newt my preferred candidate (though in this field, that's not saying much).
Unfortunately for Newt, his campaign had one of the worst rollouts in recent history. He appeared on Meet the Press and denounced the Republican/Paul Ryan budget as "right-wing social engineering". He picked a bad year to fight the new Republican/Tea Party orthodoxy. He was forced to quickly walk back his statement, and his candidacy has never recovered.
Jon Huntsman, former Utah Governor
I am flabbergasted that Jon Huntsman is doing so much worse than Mitt Romney. Both are handsome, Mormon, rich, moderate former governors. Huntsman has a better record creating jobs in his state than Romney did in his, as Huntsman and Perry pointed out in last week's debate. Most importantly, Huntsman does not have the "RomneyCare" baggage that should be poisoning Romney's chances among Republican primary voters.
In the recent debate, he denounced those of his competitors (read, Perry and Bachmann) who have led to his Party being viewed as "anti-science". While accepting the role science should play in a modern society might help him in a general election, it will make it very difficult to emerge from a Republican primary.
Rick Santorum, former Pennsylvania Senator
Santorum's appeal is pretty much limited to social conservatives who don't like the Tea Party, or at least those who don't like Bachmann and Perry. He's militantly anti-gay and anti-abortion. He was also defeated, as an incumbent, by 19% in his re-election bid in 2006.
Sunday, September 11, 2011
The recession was caused by the breaking of the housing bubble. Housing prices dropped by about a third. This had a particularly strong effect on consumers because many of them had a large percentage of their net worth tied up in their homes. As a result, the average Americans' net worth fell by almost 25% during the recession. To make up for this shock, and given the uncertainty in the labor market, many Americans have started saving instead of spending. Given that consumer spending makes up about 70% of the economy, that's a recipe for a recession and a slow recovery.
It's also a recipe for making Republicans' plans for across-the-board tax cuts ineffective. Untargeted tax cuts are likely to be saved, particularly those tax cuts given to top earners, adding to the piles of cash banks are already sitting on. Money saved is not as stimulative as money spent, as we need people buying things to mkae up for the drop in consumer spending. Untargeted tax cuts might also be used to buy things from overseas.
Republicans are also pushing for corporate tax cuts. Corporate income taxes in America already add up to a smaller total, as a percentage of GDP, than corporate income taxes in any other OECD country. Corporations are sitting on a record amount of cash. Corporate profits are at an all-time high. I have yet to see any convincing evidence that jobs will come if we just give corporations just a little bit more, but that's what Republican candidates are proposing.
Obama's preference in the American Jobs Act for targeted tax cuts, including payroll tax cuts and tax credits for hiring veterans and long-term unemployed, ensures that any lost government revenue is spent specifically on the best solution, American jobs. Instead of giving tax cuts to people who may or may not use it to add jobs, Obama's plans will only give tax cuts to job creators. And instead of labelling every rich guy and job-cutting corporation a "job creator" as the Republicans do, the only way to get tax benefits is to actually create jobs.
Saturday, September 10, 2011
-Prior to the recent debt ceiling fight, the debt ceiling had been raised 74 times since 1962 without controversy and without conditions. The vast majority of current Republican who were in Congress during the Bush administration voted for increases each of the 7 times it was increased. These Republicans now decided that trillions in cuts must be attached to the recent increase.
-7 Republican Senators (Robert Bennett of Utah, Sam Brownback of Kansas, Mike Crapo of Idaho, John Ensign of Nevada, Kay Bailey Hutchison of Texas, James Inhofe of Oklahoma, and John McCain of Arizona) co-sponsored a bill to set up a deficit commission which Congress would be forced to vote on. After Obama came out in support of the bill, all 7 removed their names from the bill and voted against it. As a result, we got a weaker commission without a binding requirement for a vote.
-During the health care reform debate, Republicans stated they wanted 4 things in the bill:
1. Allow people to buy insurance across state lines. This is in Obama's law.
2. Allow individuals and small businesses to pool together to buy insurance. This is what the health insurance exchanges established by Obama's law are.
3. Allow states flexibility to experiment with different approaches. This is in Obama's law, which allows states to opt out if they have a better proposal.
4. Tort reform. No particularly strong elements of this in the bill, though it hasn't particularly been shown to work when it comes to limiting health care costs.
Despite including these elements in the law, as well as support from such noted Socialists as Bob Dole and Obama's refusal to push for a public (government-run) option, Republicans uniformly voted against it and decry reform as an affront to all that is right and American.
Why are Republicans acting this way? Why do they demonize proposals which they used to support, just because Obama supports them? Why do they refuse to compromise with him, rejecting deals like Obama's "Grand Bargain" which included between $3 and $5 in spending cuts for every dollar of tax increases?
Republican Senate Minority Leader summarized the Republicans' position very succinctly when he said "the single most important thing we want to achieve is for President Obama to be a one-term President." He didn't say their number one goal is to put Americans back to work, or let them keep more money in their pockets, or anything else not hyper-partisan. Their goal is to make Obama fail, and simple game theory demonstrates that this can't happen by giving him anything he wants.
There are two possible scenarios come Election time; either the economy improves, or it doesn't. If it improves, history tells us that Obama would be more likely (though not a lock) to be re-elected, whether he had some Republican support or not. If it doesn't improve and Republicans had supported some of Obama's initiatives, Obama would be able to share the blame with them, much as Bush stuck John Kerry and the Democrats with some blame for Iraq during the '04 election. If it doesn't improve and Republicans voted against him all the way, he gets all the blame and is an easy target come 2012.
So, given that their stated #1 goal is to make him a one term President, it makes sense that they would deny everything to Obama. There is even motivation for them to actively prevent the economy from improving. Given their refusal to support previously non-controversial things like raising the debt ceiling and infrastructure spending, there's reason to think that's what they're doing.
Thursday, September 8, 2011
In 2003, when Medicare Part D was passed, it was projected that 93% of eligible seniors would sign up for the program. In fact, only 77% of those eligible enrolled. Additionally, overall drug spending, not just spending within Part D, came in 35% below the projections made in 2003. This is due to several drugs becoming available generically, fewer new expensive drugs, and the rise in the number of prescriptions per senior not rising as quickly as projected. Most if not all of the "savings" Ryan points to come from factors which have nothing to do with the private nature of the plans.
Looking at Medicare since implemented, it has consistently shown a superior ability to control costs than private health insurance plans. As shown in the National Health Expenditures Data (.pdf, page 17, Table 14), between 1970 and 2009, the per-enrolee expenditures for Medicare have increased at an annual rate of 8.3%, compared to 9.3% for private health insurers. Since 1999, the annual advantage for medicare has been larger, between 2 and 2.5% per year. Thanks to the miracle of compound interest, it works out to private costs increasing over 60% faster than Medicare over the past decade (my calculation based on the percentages in the .pdf above).
Per the CBO, a Medicare plan for a senior is 11% cheaper today than providing the same benefits would cost if purchased from a private insurer. This is largely due to the massive bargaining power that Medicare has, given the huge number of people it covers. The CBO projects, based on the different rates of growth like I discussed in the previous paragraph, that by 2030, a Medicare plan would cost 30-40% less than a private plan.
Rep. Ryan's plan proposes a subsidy for private insurance that, in 2030, would be worth about 32% of the cost of a private plan, per the CBO. Given that a Medicare plan would be cheaper by just about that same amount, seniors would be better off if the government kept Medicare going but completely eliminated the subsidies than they would be with being forced into a subsidized private plan.
Ryan and other Republicans are incapable of recognizing the errors in their approach to Medicare because it is antithetical to their free-market dogma to think that a government program could be more efficient than a privatized system. We have 40 years of Medicare history that clearly demonstrates that they are wrong.
The President's speech tonight, along with yesterday's debate, which was the first to include front-runner Texas Gov. Rick Perry, marks the true beginning of the 2012 election. President Obama will be laying out proposals to increase jobs. If the "leaks" are to be believed, he will be proposing somewhere between $300 billion and $500 billion in new spending and tax cuts for things like an extension of unemployment benefits, a payroll tax cut extension, job training, school construction, and infrastructure spending. I haven't seen any specifics on how he will propose to pay for this spending, but it is likely it will include closing some tax loopholes as he advocated during the debt ceiling fiasco.
He will essentially be daring the Republicans to vote his proposals down. Republicans have spent the last 3 years villifying Obama and his policies, so it seems fairly likely that they'll oblige him in this dare. Given that Republicans have been attacking policies they used to support (which we'll be discussing more in depth in future posts), it will be politically untenable for them among their own base to vote for hundreds of billions in new spending.
Once they are on the record as voting down a jobs bill, Obama will be able to go to voters and make a surprisingly good case that he's done all he can on jobs and the economy, given the relative lack of power he has on economic matters vis-a-vis Congress.
-The recent downturn in job creation corresponds fairly closely to the draw-down of the original stimulus spending.
-The CBO estimates the stimulus bill meant there are now 1.3 million to 3.3 million more jobs than there otherwise would have been.
-Some liberal economists, such as the New York Times' Paul Krugman, argue that the stimulus should have been bigger, but since the vote in the Senate barely beat a Republican filibuster, it is unlikely that he could have gotten a bigger package passed.
-Depending on the analysis, the spending cuts forced through by Republicans during the deficit debate, along with failing to extend payroll tax cuts and unemployment insurance, will cost as many as 1.8 million jobs in 2012.
-The things he is reportedly proposing tonight would have been fairly non-controversial just a few years ago. Refusing to go along with things like infrastructure spending, job training and tax cuts for workers will make it much easier for Obama to lay the blame for the economy at the feet of Republicans in Congress.
Wednesday, September 7, 2011
In my previous post, I discussed that, since most voters don't know how the federal government spends money, Tea Partiers were able to get into office on a vague pledge to "cut spending", without ever being specific about what spending would be cut. After they got into office, besides some invectives hurled at budgetarily-trivial organizations like Planned Parenthood and NPR, their main budgetary proposal was Wisconsin Rep. Paul Ryan's "Path to Prosperity". Its main cost savings come from changing traditional Medicare into a system oddly enough quite similar to Obamacare. Instead of being a government-run, subsidized health insurer, Medicare would give seniors vouchers with which they could purchase private insurance on government-run exchanges, just like Obamacare. While it would decrease government expenditures on health care, it would increase health care expenditures overall and vastly increase costs for seniors. That means that current workers, who of course are tomorrow's seniors, would have to immediately start paying thousands of dollars a year in a hidden "tax" to make up for the supposed "savings" Republicans want to impose.
As currently constituted, Medicare offers subsidized insurance. The total cost of insurance is made up of both government subsidies and seniors' out-of-pocket expenses. The Republican plan, which all but 4 Congressional Republicans voted for, would not change anything for anyone already on Medicare or anyone 55 or above. That is, if you're 65 years old and get into Medicare before 2022, it doesn't change anything. According to the Congressional Budget Office (.pdf) and the Kaiser Family Foundation (.pdf), the average Medicare beneficiary, under current law, would get about $8,000 in subsidies in 2022 and have to pay about $6,200 out-of-pocket every year, for a total cost of about $14,000 a year.
Under the Republican plan, seniors would instead get a voucher for $8,000, the same as the government's cost in 2022 under current law, and purchase private insurance via a government-run exchange. The CBO estimates that a plan providing similar benefits to Medicare via a private insurer would cost a bit over $20,000 a year, or over $6,000 more than a traditional Medicare plan. This is because, with Medicare's bargaining power, they are able to pay lower reimbursement rates to doctors and hospitals. Because the federal government's contribution stays at $8,000, the out-of-pocket cost for a senior in 2022 would be over $6,000 higher than they would pay out-of-pocket with traditional Medicare.
The savings for the government come via limiting the rate at which the voucher's value increases over time, as well as by pushing back the age at which citizens qualify for the voucher (going from 65 in 2022 to 67 in 2033). Instead of the current system, where the government's cost increases in step with the rise of health care costs, the Republican plan would index increases in the govenment's cost to overall inflation, which historically is well below inflation in health care costs. This means that the percentage of seniors' health care costs which are paid by the government will decrease over time, as the voucher increases in value more slowly than health care costs go up. The CBO also projects that the difference in price between a traditional Medicare plan and a similar private plan will continue to increase over time. So people younger than 55 would get an even worse deal than today's 55 year olds.
So let's look at how much a 55 year old today would have to save in order to cover the increased costs in their retirement. All the calculations are my own, and I'd be happy to share more details if anyone cares:
-The Social Security Administration projects that a person who turns 65 in 2022 can expect to live 19 years.
-In order to pay $6,240 more out-of-pocket, per the Kaiser projection, for each of those 19 years (which is a very kind assumption, as the actual out-of-pocket cost will increase faster than inflation), assuming a 5% return on investment, would require a nest egg of $77,764 at age 65, which would be spent down to $0 over the next 19 years
-In order to have a nest egg of $77,764 by age 65, again assuming a 5% return on investment (which is also very kind and very close to the average 5.3% rate of increase of the Dow over the 20th century, given the current return on a 10 year government bond of about 2%), a current 55 year old would have to save just over $5,200 a year, or $100 a week, starting today to not lose ground.
-If you drop the expected rate of return on investment to 3%, which again relative to the 10 year T-bill is kind, a current 55 year old would have to save just over $7,000 a year, starting today, to not lose ground.
-When you consider that health care costs have increased by 4.9% in real terms over the past 4 decades, which means that health costs have gone up faster than the Dow increased in the 20th century (4.9% real is actually more than 5.3% nominal, which doesn't include inflation), it is likely that younger workers will get an even worse deal than current 55 year olds. They'll have more time to save up their nest egg, but in real terms they will have to save/deposit even more to make up the difference.
All of this boils down to the fact that Medicare, due to its massive, bordering-on-monopsony power to control reimbursement rates, is more effective at limiting costs than private insurance. If your goal is to limit health care costs for the government, the Republican plan is one way to go. But if your goal is to limit overall costs, which at the end of the day is what matters, then it's a big step in the wrong direction. Instead of paying thousands more a year into individual accounts to pay increased out-of-pocket costs in our retirement, we would be better off to pay more than we currently do into the Medicare system.
In the next post, we'll discuss why Republicans' claims that privatization will actually decrease costs, which seem to be largely based on their misinterpretation of the effects of Medicare Part D (Medicare prescription coverage), are flawed.
Let's begin again by returning to my "What is everyone so angry about" series. In Part 1 and Part 2, we discussed the distortions and outright lies that Republicans were using to demonize the President as an un-American Marxist in order to provide cover for refusing to negotiate with him. Now we will discuss why voters are so vulnerable to these tactics.
The average voter is woefully misinformed and/or ignorant about the federal budget.
Some facts before we begin. Here's a rundown of where the money actually goes. Highlights include 67% of spending going to Social Security, Medicare/Medicaid/CHIP, defense spending, and interest on the debt. Another 14% goes to safety net programs like unemployment insurance, food stamps, low-income housing assistance, school lunches, and such.
In a poll in November 2010, when the Tea Party made their historic gains in Congress and state legislatures, Americans were asked what percentage of the federal budget they thought went to foreign aid, and then what percentage they think should be spent. The median responses were that 25% of the budget (which would work out to about $900 billion/year) was sent to other countries, and that an ideal amount of aid would be 10%.
The actual percentage of the federal budget for foreign aid is less than 1%.
When it comes to military spending, most voters vastly underestimate how much we spend. The defense budget for 2011 is about $719 billion(.pdf). This represents about a fifth of the total federal budget and is about 7 times the amount spent by any other country. A Rasmussen Reports survey from earlier this year finds that only 25% of voters think that we should spend even 3 times as much any other country and 40% think we should spend less than that. Reducing our military spending to only 3 times the next closes country would save us $400 billion a year and would result in 10-year savings of around double the savings agreed to in the budget battle last month.
Since my last post, I called into a nationally-syndicated right-wing radio show, The War Room, to correct the host on the amount of spending on earmarks. He said several times during a rant that there are "hundreds of billions wasted on earmarks", when in fact the actual number is about $16 billion a year.
A poll(.pdf) from March 2011 shows that voters believe, on average, that 42 cents of every federal dollar are wasted. Wasted!!! A stunning 60% of voters think that our deficit problems can be eliminated by simply eliminating "waste, fraud and abuse". As mentioned above, the vast majority of government spending is in popular programs like Medicare, Social Security and defense, which voters consistently say they don't want to be cut (.pdf).
To the average voter who belives these falsities, it would be pretty easy to become frustrated and angry with President Obama for not doing more to cut the "waste, fraud and abuse", which of course no one would miss. Republicans capitalized on this anger by running a vague campaign in favor of "spending cuts". Voters, the media and their Democratic opponents never provoked Republicans to get specific about where they would cut, so they were able to skate into office without taking politically-bold stands about which popular programs (Medicare, Social Security, etc.) they would cut.
In my next post (which won't be 17 months from now, I promise!), we'll discuss the Paul Ryan budget (.pdf), which would replace the current Medicare program with vouchers, or, if you prefer, premium supports. Sneak preview: it would result in a huge cost increase for future seniors who, as current non-senior workers, would essentially have to pay a new tax today to save for their increased future costs.