Over the next few days, I'll try to as briefly as possible summarize my thoughts on the Republican Presidential candidates. I think there are four candidates with a realistic path to the nomination, Texas Gov. Rick Perry, former Massachusetts Gov. Mitt Romney, and to a lesser degree, Minnesota Rep. Michele Bachmann and Texas Rep. Ron Paul. Each of them will get their own post later on. In tonight's Republican debate, there will be four other candidates, who I'll discuss here.
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.
Monday, September 12, 2011
Sunday, September 11, 2011
Why Obama's jobs bill makes sense
This recession and recovery has been terrible. More jobs were lost, and they're taking longer to come back. Why is that, and what can government do to help?
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.
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
Why are Republicans acting this way?
First, some background:
-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.
-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
Medicare and Republican Dogma
When defending his plan to replace Medicare with vouchers, Rep. Paul Ryan often points to Medicare Part D, the prescription drug component of Medicare, which relies heavily on private prescription coverage. Ryan points to the government's costs for Part D being about 40% under the projections made when the bill was passed in 2003. He claims that this proves that competition and private markets are more efficient than public programs. Unfortunately for him, the facts of Medicare Part D, as well as a comparison of Medicare vs. private health insurance, demonstrates that this is just not the case. The failure of Republicans to recognize these facts is another example of the zealous misplaced faith in free markets as a solution for every problem every time.
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.
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.
Preview of Obama's Speech Tonight
With the President giving a speech before a joint session of Congress tonight, I'm going to push back the conclusion my analysis of the Republican plan to eliminate (or save, if you prefer) Medicare. I'll also be discussing last night's Republican debate, and more generally my opinions on the Republican field, in the near-future.
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.
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
Hiding the costs of cutting
(Very long post. The take home point is that the Republican plan to modify/replace Medicare will result in massive increases in out-of-pocket expenses for beneficiaries, because private insurance is just straight-up indisputably more expensive than Medicare. In order to be able to cover these increased costs, each of us would have to start saving thousands of dollars a year starting today to make up the difference. So why not just pay more in Medicare taxes, the increase of which would be less than the amount we would have to set aside should Republicans get their way?)
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.
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.
The long-awaited return of The Political Doctor!
Hello again, friends! After a long layoff during which I completed my Pediatrics residency and getting a job back home in Akron, it's time once again to fire up the computing machine and share my political thoughts with the world! Aren't you lucky?!
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.
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.
Thursday, May 6, 2010
What is everyone so angry about? Part 2
As discussed in part 1, conservative media repeatedly portray Obama as a socialist in order to provide cover for not negotiating/compromising with him. In addition to portraying deficits and spending as out of line with historical norms (despite being in line with Bush's last months and CBO projections at the start of his Presidency), they frequently cite the federal government taking a partial ownership in banks and car companies as a condition for saving those companies from extinction with billions of dollars of taxpayer dollars. What Hannity & Co. miss, with these claims, is that it was noted Socialist George W. Bush who required banks give stock to the government in exchange for a bailout, and that doing anything else would have required either a second Great Depression or a massive giveaway to Wall Street.
There was a legitimate debate around the time of TARP (the bank bailout bill) about whether or not taking an ownership stake in companies was a good idea. Just about everyone agreed that letting the banks go out of business would destroy the economy. It was also widely agreed that government cash was the only way that these companies would be kept from closing their doors. Numerous prominent Republicans supported taking ownership in bailed-out banks, including the Bush White House, Senate GOP Leader Mitch McConnell, House GOP Leaders John Boehner and Eric Cantor, along with 89 other House Republicans and 32 other GOP Senators. You can't call Obama a socialist for taking over banks without putting the same label on the GOP. Theirs was not the socialistic goal of achieving government ownership of production; it was to save our (mostly-) capitalist economy.
This claim that Obama took over banks also rings somewhat hollow as he, ya know, wasn't President then.
When Obama actually was President, he applied the same logic that Bush and the GOP leadership (and then-Sen. Obama) did with TARP in bailing out GM and Chrysler. Bush had already allocated billions of dollars to save the two. Obama followed Bush's deal with the banks that, if the federal government was going to share in the risk of loss of billions of dollars, that they should get a share of the potential profits as well.
Another problem with the "Obama-as-Socialist" meme is that he's so bad at it, were that his actual goal. Under Obama's administration, the government has sold back most of the stakes it took in banks, and GM has repaid billions of its debt. His supposed socialist takeover of our health care system expands private insurance much more than it expands government-run plans. In one breath, they criticize Obama as a Socialist who is out to lead a government takeover of the banks, and in the next breath, they say he is in bed with them. They'll twist reality in any way necessary to attack Obama and de-legitimize his policies.
One of my biggest beefs with the Tea Party and the conservative media is that they overemphasize critiques of Obama policies without properly acknowledging the alternatives to those policies. The only alternatives to Obama's action regarding partial ownership of GM and Chrysler were either letting the companies fail by refusing to help them, which would have destroyed millions of jobs, or to give the corporations something for nothing, giving them billions without asking for anything in return. Those alternatives, of course, don't look as good on a sign at a rally as a picture of Obama with a Hitler mustache.
I hold out hope that as November approaches, conservatives will be forced to say what they will do if returned to power, instead of just what they oppose. Opposing Obama's deficits and spending is all well and good in the abstract, but you can't slash the deficit or lower taxes without specific ideas about what spending to cut. As we'll discuss in Part 3, Tea Partiers, and Americans in general, are susceptible to such vague rhetoric because they have no idea what the government actually spends taxpayers' money on. As Americans become more interested and educated during the upcoming campaign, they will more carefully consider alternatives to Obama's policies, and those policies might not look so un-American anymore.
There was a legitimate debate around the time of TARP (the bank bailout bill) about whether or not taking an ownership stake in companies was a good idea. Just about everyone agreed that letting the banks go out of business would destroy the economy. It was also widely agreed that government cash was the only way that these companies would be kept from closing their doors. Numerous prominent Republicans supported taking ownership in bailed-out banks, including the Bush White House, Senate GOP Leader Mitch McConnell, House GOP Leaders John Boehner and Eric Cantor, along with 89 other House Republicans and 32 other GOP Senators. You can't call Obama a socialist for taking over banks without putting the same label on the GOP. Theirs was not the socialistic goal of achieving government ownership of production; it was to save our (mostly-) capitalist economy.
This claim that Obama took over banks also rings somewhat hollow as he, ya know, wasn't President then.
When Obama actually was President, he applied the same logic that Bush and the GOP leadership (and then-Sen. Obama) did with TARP in bailing out GM and Chrysler. Bush had already allocated billions of dollars to save the two. Obama followed Bush's deal with the banks that, if the federal government was going to share in the risk of loss of billions of dollars, that they should get a share of the potential profits as well.
Another problem with the "Obama-as-Socialist" meme is that he's so bad at it, were that his actual goal. Under Obama's administration, the government has sold back most of the stakes it took in banks, and GM has repaid billions of its debt. His supposed socialist takeover of our health care system expands private insurance much more than it expands government-run plans. In one breath, they criticize Obama as a Socialist who is out to lead a government takeover of the banks, and in the next breath, they say he is in bed with them. They'll twist reality in any way necessary to attack Obama and de-legitimize his policies.
One of my biggest beefs with the Tea Party and the conservative media is that they overemphasize critiques of Obama policies without properly acknowledging the alternatives to those policies. The only alternatives to Obama's action regarding partial ownership of GM and Chrysler were either letting the companies fail by refusing to help them, which would have destroyed millions of jobs, or to give the corporations something for nothing, giving them billions without asking for anything in return. Those alternatives, of course, don't look as good on a sign at a rally as a picture of Obama with a Hitler mustache.
I hold out hope that as November approaches, conservatives will be forced to say what they will do if returned to power, instead of just what they oppose. Opposing Obama's deficits and spending is all well and good in the abstract, but you can't slash the deficit or lower taxes without specific ideas about what spending to cut. As we'll discuss in Part 3, Tea Partiers, and Americans in general, are susceptible to such vague rhetoric because they have no idea what the government actually spends taxpayers' money on. As Americans become more interested and educated during the upcoming campaign, they will more carefully consider alternatives to Obama's policies, and those policies might not look so un-American anymore.
Wednesday, April 28, 2010
What is everyone so angry about? Part 1
Anyone who listens to 2+ hours of conservative talk radio a day like I do can tell you that the Republican Party is defined above all by anger. What's frustrating being a liberal listening to these shows is that the vast majority of that anger is based on claims which are demonstrably false. Over the course of the next several posts, I'll show that Conservative claims that Obama exploded the deficit, that he "shoved ObamaCare down our throats", that we are overtaxed, that Obama is a socialist gobbling up banks and car companies, and that the solution to the deficit is spending cuts are all based on clearly incorrect ideas.
We'll start with Sean Hannity's daily claim that "Obama quadrupled the deficit!" Whenever Hannity is challenged on his frequent claims that Obama is a radical socialist, Hannity trots out this deficit lie as seeming proof of Obama being something peculiar and unprecedented in history. Other presidents have raised or lowered the deficit, the argument goes, but Obama QUADRUPLED it.
Portraying Obama's policies as out of line with any other administration in history is necessary for the conservatives' strategy of resisting absolutely everything the Democrats try to do. You can't refuse to compromise with your opponent unless they are seen as so extreme that even meeting them half-way would be a radical change. Convincing people that Obama quadrupled the debt goes a long way to making him too extreme to be bargained with.
Here's the calculation one has to do to arrive at "quadrupling". In February 2008, Bush's White House projected a deficit for the 12 months from October 2008 through September 2009 to be $407 billion. This number didn't include any of the $150 billion being spent in Iraq and Afghanistan that year, which as part of accounting tricks used to keep the headline deficit number artificially low, were funded via supplemental bills. $407 billion's a dishonest start, but at least it's a start.
In February 2010, Obama projected total debt for Fiscal Year 2010 of $1.6 trillion. As you might be aware, $1.6 trillion divided by $400 billion is 4. A talking point is born.
Of course, kind of a lot happened in the two years between the two budget projections (i.e., guesses about future deficits). Massive unemployment, which led to both a decrease in tax revenue and an increase in demand for government services, along with lost wealth exploded the deficit in the last months of Bush's presidency. In January 2009, before Obama took office, the Congressional Budget Office was projecting a deficit of between $1.2 and $1.3 trillion.
By the time Obama took office, we were losing ~800,000 jobs per month. Obama and the Democrats chose to follow good ol' Econ 101 Keynsian policies, by increasing deficit spending to spur growth in the economy. And so, the projected deficit bumped up by about $400 billion. Which is a lot. I'm not trying to convince you that Obama has been a deficit hawk. But it's only half the increase in the budget deficit that occurred under Bush.
It's much easier to refuse to negotiate with a Marxist than a Keynsian. To try to portray him as the former, Hannity and other conservatives cherry-pick numbers to arrive at claims that are removed from reality. They try to do this in order to further stoke the anger among the Tea Party. As we'll continue to discuss throughout this series, this anger is based on ignorance and misinformation, and is certainly not an appropriate basis for a political party.
We'll start with Sean Hannity's daily claim that "Obama quadrupled the deficit!" Whenever Hannity is challenged on his frequent claims that Obama is a radical socialist, Hannity trots out this deficit lie as seeming proof of Obama being something peculiar and unprecedented in history. Other presidents have raised or lowered the deficit, the argument goes, but Obama QUADRUPLED it.
Portraying Obama's policies as out of line with any other administration in history is necessary for the conservatives' strategy of resisting absolutely everything the Democrats try to do. You can't refuse to compromise with your opponent unless they are seen as so extreme that even meeting them half-way would be a radical change. Convincing people that Obama quadrupled the debt goes a long way to making him too extreme to be bargained with.
Here's the calculation one has to do to arrive at "quadrupling". In February 2008, Bush's White House projected a deficit for the 12 months from October 2008 through September 2009 to be $407 billion. This number didn't include any of the $150 billion being spent in Iraq and Afghanistan that year, which as part of accounting tricks used to keep the headline deficit number artificially low, were funded via supplemental bills. $407 billion's a dishonest start, but at least it's a start.
In February 2010, Obama projected total debt for Fiscal Year 2010 of $1.6 trillion. As you might be aware, $1.6 trillion divided by $400 billion is 4. A talking point is born.
Of course, kind of a lot happened in the two years between the two budget projections (i.e., guesses about future deficits). Massive unemployment, which led to both a decrease in tax revenue and an increase in demand for government services, along with lost wealth exploded the deficit in the last months of Bush's presidency. In January 2009, before Obama took office, the Congressional Budget Office was projecting a deficit of between $1.2 and $1.3 trillion.
By the time Obama took office, we were losing ~800,000 jobs per month. Obama and the Democrats chose to follow good ol' Econ 101 Keynsian policies, by increasing deficit spending to spur growth in the economy. And so, the projected deficit bumped up by about $400 billion. Which is a lot. I'm not trying to convince you that Obama has been a deficit hawk. But it's only half the increase in the budget deficit that occurred under Bush.
It's much easier to refuse to negotiate with a Marxist than a Keynsian. To try to portray him as the former, Hannity and other conservatives cherry-pick numbers to arrive at claims that are removed from reality. They try to do this in order to further stoke the anger among the Tea Party. As we'll continue to discuss throughout this series, this anger is based on ignorance and misinformation, and is certainly not an appropriate basis for a political party.
Tuesday, April 27, 2010
Oklahoma mandates rape before abortion
Today, Oklahoma's legislature passed a law which forces a woman to have a vaginal ultrasound showing her fetus before she is allowed to have an abortion. If you've never had the pleasure of having or at least watching a vaginal ultrasound, let me describe for you the ultrasound probe.
See, you can get a better picture of the fetus if you put an ultrasound emitter into the vagina, where it's closer to the uterus. Some engineer somewhere many years ago had to figure out the best shape to use to enter a vagina. Nature had the same problem and created an erect penis, and our engineer wound up inventing a similarly-shaped device. Having a vaginal ultrasound means getting this penis-shaped probed placed in your vagina. It's fairly unpleasant in a medical setting, as you might imagine. But it gives you a better picture than a traditional ultrasound which places the probe on the woman's abdomen, and sometimes it's medically necessary to get a REALLY good look at a fetus (or gynelogical cancer, or anything else you'd want a good look at).
At the hospitals where I've trained, like hospitals everywhere, they're concerned about passing infections from patient to patient. When it comes to vaginal ultrasound probes, they had to find something to cover the probes as they're being used. At my hospitals, they use condoms. Regular ol' off-the-shelf Trojan condoms.
So Oklahoma just mandated by law that a medical professional put a condom over a penis-shaped object and insert it in a woman's vagina, whether she likes it or not, before that woman can have an abortion.
Government-sanctioned rape; it's not just for war-torn African countries anymore!
As a medical doctor, it strikes me as quite unethical for gynecologists and ultrasound technicians to participate in this. Hopefully the American Congress of Obstetricians and Gynecologists (ACOG) will provide support to its members who don't want to go along with mandated rape.
See, you can get a better picture of the fetus if you put an ultrasound emitter into the vagina, where it's closer to the uterus. Some engineer somewhere many years ago had to figure out the best shape to use to enter a vagina. Nature had the same problem and created an erect penis, and our engineer wound up inventing a similarly-shaped device. Having a vaginal ultrasound means getting this penis-shaped probed placed in your vagina. It's fairly unpleasant in a medical setting, as you might imagine. But it gives you a better picture than a traditional ultrasound which places the probe on the woman's abdomen, and sometimes it's medically necessary to get a REALLY good look at a fetus (or gynelogical cancer, or anything else you'd want a good look at).
At the hospitals where I've trained, like hospitals everywhere, they're concerned about passing infections from patient to patient. When it comes to vaginal ultrasound probes, they had to find something to cover the probes as they're being used. At my hospitals, they use condoms. Regular ol' off-the-shelf Trojan condoms.
So Oklahoma just mandated by law that a medical professional put a condom over a penis-shaped object and insert it in a woman's vagina, whether she likes it or not, before that woman can have an abortion.
Government-sanctioned rape; it's not just for war-torn African countries anymore!
As a medical doctor, it strikes me as quite unethical for gynecologists and ultrasound technicians to participate in this. Hopefully the American Congress of Obstetricians and Gynecologists (ACOG) will provide support to its members who don't want to go along with mandated rape.
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