“The Human Consequences”: Cost Of The Medicaid Expansion Rejection In Lives As Well As Dollars
The more research that is done on the human toll of denying people health insurance, the easier it is to place a price in lives as well as dollars of decisions like that made by nearly half the states to reject the Medicaid expansion provided for in the Affordable Care Act. At Politico Magazine (in a piece given the wonderful, Celine-esque title, “Death on the Installment Plan”) Harold Pollack of the University of Chicago utilizes the findings of last week’s study on the lives saved by RomneyCare in Massachusetts to make some suggestions for those that might be saved by making Medicaid available to more non-elderly adults:
As a matter of fiscal policy, [rejecting the Medicaid expansion] makes little sense. The federal government would initially cover 100 percent of the costs. Its share will gradually drop to 90 percent over the coming years. Over the next decade, the federal government will cover more than 95 percent of the Medicaid expansion’s total cost. Edwin Park of the Center on Budget and Policy Priorities notes that the ACA raises state expenditures on Medicaid and the Children’s Health Insurance Program (CHIP) by only 1.6 percent, when compared with what expenditures would have been in the absence of health reform.
Even the above figures overstate states’ true fiscal burden, since these federal dollars would cover many services such as mental health care, public hospital services and services to the correctional population that would otherwise be supported by states and localities. Medicaid expansion is a significant economic stimulus to the states that have adopted it. Even in deeply conservative states such as Texas, the expansion is strongly supported by the medical community, hospitals, cities and localities and other key constituencies.
Texas and other huge states like Florida are leaving tens of billions of dollars on the table. When asked to give an accounting of themselves, officials offer flimsy justifications to evade two obvious realities: First, Republican politicians do not want to embrace the centerpiece domestic policy achievement of the Obama presidency. Second, many of these same politicians display conspicuously tepid concern for the wellbeing of the expansion’s most obvious beneficiaries: poor, nonwhite, politically marginal residents of their own states….
Nearly 5 million low-income Americans are income-eligible for Medicaid under the ACA, yet live in states that now reject the Medicaid expansion. Within this rather small but critical low-income population, that same one-per-830 estimate [made in the Massachusetts study] implies that almost 5,800 people will die every year as a result of being left uninsured. That’s only an estimate. It may overestimate—or underestimate—the true human consequences. In my view, there’s no escaping the fact that partisan opposition to the ACA is costing thousands of actual human lives every year.
That’s a hell of a toll for scoring an ideological point.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, May 12, 2014
“Hedge Funds Versus Kindergarten”: There’s Nothing Natural Or Moral Going On Here
The inequality issue is one in which economic and moral considerations can quickly become tangled. That’s particularly true at a time when defenders of free-market economics are increasingly prone to advance the argument that the “natural” distribution of resources via unregulated markets is a measure of the actual value of each person’s contributions to society, with any redistribution representing virtual theft.
Consider this data point from Ezra Klein today at Vox:
Alpha magazine is out with its annual “rich list” detailing the successes of the highest earning hedge fund managers in America. The news once again is that it’s good to be a successful hedge fund manager: the top 25 earned a collective $21.1 billion this year.
Even within that group there’s considerable inequality. The top earner, David Tepper, took home $3.5 billion which is about five times as much as either of the two men tied for the tenth slot.
How does that look in context? Well, it’s about 0.13 percent of total national income for 2013 being earned by something like 0.00000008 percent of the American population. Another way of looking at it is that this is about 2.5 times the income of every kindergarten teacher in the country combined.
Now I am open to the argument that hedge funds are at least a marginally useful lubricant to the efficiency of the U.S. and global economies. But you cannot tell me a handful of hedge fund managers add more to the wealth and productivity of America than all the kindergarten teachers combined. There is nothing “natural,” much less “moral,” about a system that distributes the fruits of the economy in that manner.
By: Ed Kilgore, Contributing Wroter, Washington Monthly Political Animal, May 6, 2014
“Time For Some Happy Talk From Democrats”: Ban The Word “But” Until After The Election
Democrats, if you want to win in the fall, take some advice from Pharrell Williams: “Clap along if you feel like happiness is the truth.”
The Mountie-hat-wearing pop singer’s infectious “Happy” should be the Democratic Party’s theme song for the midterm election. Despite Republican claims to the contrary, things are definitely looking up. Democrats ought to be clicking their heels and spreading the good news.
Friday’s announcement that unemployment fell to 6.3 percent was huge. The fact that the economy added 288,000 jobs in April — despite continued bad weather early in the month in parts of the country — suggests that the recovery has greater momentum than pessimists had feared. Economists were expecting decent numbers. These are great.
The stock market, meanwhile, is flirting with an all-time high. The Dow has risen about 10 percent over the past year; the S&P 500, more than 16 percent; the Nasdaq, about 22 percent . During President Obama’s term in office, the Dow has more than doubled. If he were a socialist, as his harshest critics claim, he’d be a truly lousy one.
The numbers prove that Obama is, in fact, a skillful capitalist who guided the economy out of its worst slump since the Great Depression. He accomplished this feat despite being saddled with a Republican opposition in Congress that reflexively opposes his every initiative — even those based on policies the GOP supported in the past.
Speaking of which, the Affordable Care Act — which is based, you’ll recall, on a framework developed in Republican think tanks — is clearly a success and may soon be seen as a triumph. More than 8 million people have signed up for insurance through the federal and state exchanges; Obama’s benchmark had been 7 million. Enough of these enrollees are young and healthy to ensure the program’s continued viability.
The disasters predicted by the Republican Party have not come true. Critics have stopped talking about a hypothetical “death spiral” in which the health insurance reforms collapse of their own weight, since it is now clear that nothing of the sort will happen. Early indications are that any increase in premiums for next year will be modest. Republicans will keep attacking Obamacare because it fires up the base, but the program is here to stay.
Democrats now have a positive story they can tell in their campaign ads and speeches: “We promised you that these were the right policies to get the economy on track and reform health care. We said it would take time to see results and asked for patience. You gave us your trust, and now we’re seeing the benefits. This is just the beginning. Give us a mandate to keep moving forward on an agenda that is working.”
This is what Democrats are saying, more or less. But would it hurt to show a little enthusiasm?
Obama can be excused for his brief and relatively low-key reaction to the jobs numbers Friday. He spoke in the White House Rose Garden alongside German Chancellor Angela Merkel, with whom he had just met, and the situation in Ukraine was clearly weighing on both leaders’ minds.
“The grit and determination of the American people are moving us forward,” Obama said, “but we have to keep a relentless focus on job creation and creating more opportunities for working families.”
I propose that Democrats ban the word “but” until after the election.
Republicans are giving “but” a workout. Unemployment may be down to 6.3 percent, they say, but too many people are leaving the workforce. The jobs numbers for April may look good, but we don’t know if this rate of growth can be sustained. Enrollment numbers for the Affordable Care Act may be impressive, but have all those people actually paid their premiums?
These are not honest caveats. Republican claims about enrollees not paying their insurance premiums, for example, are based on a survey taken before many of those premiums were even due. The GOP wants to foster the notion that nothing is going well with Democrats in charge of the White House and the Senate — and that it’s time for a change.
When Democrats sound like the old “Saturday Night Live” character Debbie Downer — emphasizing what’s still ailing about the economy, promising to “fix what’s broken” in Obamacare — they reinforce the Republicans’ message rather than refute it.
Listen up, Democrats. You fixed the economy. You expanded access to health care. Oh, and you ended two wars.
Show a little happiness. It’s contagious.
By: Eugene Robinson, Opinion Writer, The Washington Post, May 5, 2014
“The Piketty Panic”: Out Of Ideas, Conservatives Are Terrified
“Capital in the Twenty-First Century,” the new book by the French economist Thomas Piketty, is a bona fide phenomenon. Other books on economics have been best sellers, but Mr. Piketty’s contribution is serious, discourse-changing scholarship in a way most best sellers aren’t. And conservatives are terrified. Thus James Pethokoukis of the American Enterprise Institute warns in National Review that Mr. Piketty’s work must be refuted, because otherwise it “will spread among the clerisy and reshape the political economic landscape on which all future policy battles will be waged.”
Well, good luck with that. The really striking thing about the debate so far is that the right seems unable to mount any kind of substantive counterattack to Mr. Piketty’s thesis. Instead, the response has been all about name-calling — in particular, claims that Mr. Piketty is a Marxist, and so is anyone who considers inequality of income and wealth an important issue.
I’ll come back to the name-calling in a moment. First, let’s talk about why “Capital” is having such an impact.
Mr. Piketty is hardly the first economist to point out that we are experiencing a sharp rise in inequality, or even to emphasize the contrast between slow income growth for most of the population and soaring incomes at the top. It’s true that Mr. Piketty and his colleagues have added a great deal of historical depth to our knowledge, demonstrating that we really are living in a new Gilded Age. But we’ve known that for a while.
No, what’s really new about “Capital” is the way it demolishes that most cherished of conservative myths, the insistence that we’re living in a meritocracy in which great wealth is earned and deserved.
For the past couple of decades, the conservative response to attempts to make soaring incomes at the top into a political issue has involved two lines of defense: first, denial that the rich are actually doing as well and the rest as badly as they are, but when denial fails, claims that those soaring incomes at the top are a justified reward for services rendered. Don’t call them the 1 percent, or the wealthy; call them “job creators.”
But how do you make that defense if the rich derive much of their income not from the work they do but from the assets they own? And what if great wealth comes increasingly not from enterprise but from inheritance?
What Mr. Piketty shows is that these are not idle questions. Western societies before World War I were indeed dominated by an oligarchy of inherited wealth — and his book makes a compelling case that we’re well on our way back toward that state.
So what’s a conservative, fearing that this diagnosis might be used to justify higher taxes on the wealthy, to do? He could try to refute Mr. Piketty in a substantive way, but, so far, I’ve seen no sign of that happening. Instead, as I said, it has been all about name-calling.
I guess this shouldn’t be surprising. I’ve been involved in debates over inequality for more than two decades, and have yet to see conservative “experts” manage to dispute the numbers without tripping over their own intellectual shoelaces. Why, it’s almost as if the facts are fundamentally not on their side. At the same time, red-baiting anyone who questions any aspect of free-market dogma has been standard right-wing operating procedure ever since the likes of William F. Buckley tried to block the teaching of Keynesian economics, not by showing that it was wrong, but by denouncing it as “collectivist.”
Still, it has been amazing to watch conservatives, one after another, denounce Mr. Piketty as a Marxist. Even Mr. Pethokoukis, who is more sophisticated than the rest, calls “Capital” a work of “soft Marxism,” which only makes sense if the mere mention of unequal wealth makes you a Marxist. (And maybe that’s how they see it: recently former Senator Rick Santorum denounced the term “middle class” as “Marxism talk,” because, you see, we don’t have classes in America.)
And The Wall Street Journal’s review, predictably, goes the whole distance, somehow segueing from Mr. Piketty’s call for progressive taxation as a way to limit the concentration of wealth — a remedy as American as apple pie, once advocated not just by leading economists but by mainstream politicians, up to and including Teddy Roosevelt — to the evils of Stalinism. Is that really the best The Journal can do? The answer, apparently, is yes.
Now, the fact that apologists for America’s oligarchs are evidently at a loss for coherent arguments doesn’t mean that they are on the run politically. Money still talks — indeed, thanks in part to the Roberts court, it talks louder than ever. Still, ideas matter too, shaping both how we talk about society and, eventually, what we do. And the Piketty panic shows that the right has run out of ideas.
By: Paul Krugman, Op-Ed Columnist, The New York Times, April 24, 2014
“And Americans Get The Bill”: The Pay’s The Thing; How America’s CEOs Are Getting Rich Off Taxpayers
It’s proxy season again, and we will soon be deluged with news profiles of CEOs living in high style as our ongoing debate on CEO pay ramps up. Last week, the floodgates opened when the New York Times released its annual survey of the 100 top-earning CEOs. Lawrence Ellison from Oracle Corporation led the list again with over $78 million in mostly stock options and valued perks, an 18 percent drop in pay from last year. Poor Larry.
Rising CEO pay has been a hugely contested issue in the U.S. since the early 20th century, particularly in the midst of economic downturns and rising inequality (these two often go together). Because the numbers are just so staggering, most of the current debate focuses on the rapid rise in CEO pay over the past four decades. While executive pay remained below $1 million (in 2000 dollars) between 1940 and 1970, since 1978 it has risen 725 percent, more than 127 times faster than worker compensation over the same period.
With any luck, ascendant French economist Thomas Piketty and the English-language release of his book Capital in the Twenty-First Century will build much-needed momentum in D.C. to institute reforms that address our CEO pay problem. This is a major driver of America’s rising income inequality, which is the central focus of Piketty’s magnum opus. One reform in particular that is critical to slowing down the growth of CEO pay and its costly impact on our economy is closing the performance pay tax loophole.
Inspired by compensation guru Graef Crystal’s bestseller on corporate excesses and skyrocketing executive pay, then-presidential candidate Bill Clinton elevated CEO pay as a core issue of his 1992 campaign with a pledge to eliminate corporate tax deductions for executive pay that topped $1 million. Clinton was successful only in part; his policy did become part of the U.S. tax code as Section 162(m), but it came with a few unfortunate qualifiers, namely the exception for pay that rewarded targeted performance goals, or “performance pay.”
The logic of performance pay comes from Chicago-school economists Michael C. Jensen and Kevin J. Murphy, who published a hugely influential piece in the Harvard Business Review in the early 1990s that argued executive pay should align CEO interests with what shareholders care about, which is higher stock prices. Otherwise known as agency theory, this idea has profoundly shaped the executive pay debate and is arguably the primary reason the performance pay loophole made it into the tax code.
Once Section 162(m) became law, what do you suppose happened next? Predictably, companies started dispensing more compensation that qualified as performance pay, particularly stock options. Median executive compensation levels for S&P 500 Industrial companies almost tripled in the 1990s, mainly driven by a dramatic growth in stock options, which doubled in frequency.
Most of us think of skyrocketing CEO pay as simply a moral problem. However, economists like Piketty and my Roosevelt Institute colleague Joseph Stiglitz have been expounding about the havoc that rising income inequality wreaks on our economy (and democracy). When middle-class wages stagnate, consumer demand diminishes, which has tremendous spillover effects in terms of investment, job creation, tax revenue, and so forth. That particular set of problems relates to how much CEOs are paid. But there are also costly problems with the structure of CEO pay, i.e. what they’re paid with.
Performance pay can (and has) made executives very wealthy, very quickly, which creates incentives for shortsighted, excessively high-risk, and occasionally fraudulent decisions in order to boost stock prices. What kind of effect does this behavior have on the economy at large? Think mortgage crisis and subsequent global financial meltdown. Performance pay also diminishes long-term business investments. According to William Lazonick, in order to issue stock options to top executives while avoiding the dilution of their stock, corporations often use free cash flow for stock buybacks rather than spending on research and development, capital investment, and increased wages and new hiring.
All this and Americans get the bill. Beyond the innumerable costs we’ve borne from the recent economic crisis, the Economic Policy Institute calculated that taxpayers have subsidized $30 billion to corporations for the performance pay loophole between 2007 and 2010. According to a recent Public Citizen report, the top 20 highest-paid CEOs received salaries totaling $28 million, but had deductible performance-based compensation totaling over $738 million. Assuming a 35 percent tax rate, that’s a $235 million unpaid tax bill. The Institute for Policy Studies calculated that during the past two years, the CEOs of the top six publicly held fast food chains “pocketed more than $183 million in performance pay, lowering their companies’ IRS bills by an estimated $64 million.”
Congress is long overdue to close the performance pay loophole. The Supreme Court just made that harder. Thanks to Citizens United and now the McCutcheon decision, the same CEOs who are benefitting from the loophole are much freer to draw upon the corporate coffers to donate big money to politicians to maintain these loopholes.
Nevertheless, there is potential for getting it done. Senators Blumenthal (CT) and Reed (RI) have introduced the Stop Subsidizing Multi-Million Dollar Corporate Bonuses Act (S. 1476), which would finally end taxpayers’ subsidies to CEOs by closing the performance pay loophole and capping the tax deductibility of executive pay at $1 million. In the House, Rep. Lloyd Doggett (D-TX) has introduced a companion bill, HR 3970.
There are many policy ideas for how to curb skyrocketing CEO pay. Piketty and his colleague Emmanuel Saez argue for a much higher income tax rate for top incomes. (The growth rate of CEO pay was at its lowest when the U.S. had confiscatory tax rates for the very rich.) In the current political climate, a more viable step toward slowing the growth of CEO pay and the damage it does to our economy is to, at long last, close the performance pay loophole. It should never have been there in the first place.
By: Susan Holmberg, a Fellow and Director of Research at the Roosevelt Institute; The National Memo, April 21, 2014
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