Archive for March 2012

Will Wisconsin Be The Answer?

March 31, 2012

Listening to radio and television coverage of Rick Santorum and Mitt Romney’s last minute campaigning in anticipation of the Wisconsin primary, you got the feeling both candidates were tired and just wanted the Presidential candidate selection process to end.  They sounded like they were just going through the motions.

The 2012 GOP process has been expensive and potentially damaging to both the GOP and the candidates.  GOP leaders tell us a tough campaign makes the party stronger.  What else would you expect them to say?

Santorum’s line is that it is too soon to decide.  Republican voters need more time to indicate their support for him.  Romney supporters, just as expected, see things the opposite.  Secretly the Romney team is hoping to end the campaign and conserve some cash.  Campaigns are expensive even with Super PAC money.

Romney has honed the one-two punch.  First his Super Pac trashes his opponent (Gingrich at first, most recently Santorum).  Second he personally campaigns against President Obama citing statistics that are mostly accurate but totally irrelevant.  He is ready for the Convention and fall campaign.

So with the prospect of lunar colonies or no-sex as campaign mottos, I think the GOP mainstream is ready for the “least worst” of four losing hands.  Romney is actually credible and could, under the right circumstances, be a good President.

The differences between Romney and Obama will be seen better in the actual Presidential campaign.  During that campaign the fight will be somewhat fairer.  President Obama (and his Super PACs) will have just as much money as Romney and mud will be matched with mud.

I can almost see the add with Bo riding in the car with the President and another car passing in the opposite direction with a dog riding on top of the car.

 

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A Real Third Party Candidate?

March 29, 2012

In today’s Wall Street Journal, Mayor Michael Bloomberg, writes in an op-ed column what the Presidential standard bearers of both parties should be saying.  We need a clear economic agenda which combines some tax increases, some spending reductions, and a healthy economy.  Whoa, that was simple.

Bloomberg believes the Bush tax cuts should be allowed to expire.  He says they should expire across the board for everyone.  Bloomberg rightly points out that fixing the deficit is everyone’s task.

He is less prescriptive about entitlements and other government spending but points to Simpson-Bowles as a good starting point.  An op-ed column is not long enough to include  a lot of detail.  Just the same, detail is important.   In this case, Bloomberg’s column asks the reader to make that point to the Presidential candidates.

The thrust of Bloomberg’s message is that by laying out a long term deficit reduction plan business leaders will see in the plan some certainty about the future.  Bloomberg likens that reaction to business’s reaction when Bill Clinton raised taxes.  There was an explosion of business activity rather than the anti-tax crowd’s prediction of doom.

A booming economy coupled with Bill Clinton era rates would bring in a good deal of tax revenues.  Coupled with sensible changes to the spending side of the equation would begin the process of getting things back under control, implies Bloomberg

What exactly to do about health care or social security or spending upon the infra-structure are details not found in Bloomberg’s column.  We are left to guess.

But can you imagine what a race this could be with President Obama, Governor Romney, and Mayor Bloomberg all running?

Is All The Buzz A Wake-up Call?

March 28, 2012

Listening to the many news reports on the Supreme Court “Affordable Care Act” deliberations, one almost wonders what one is hearing?  Is this America?  Is this taking place in the world’s wealthiest country?  Doesn’t anyone see what’s happening?

The Supreme Court is about to rule on Constitutional limits of Congress, not how to provide minimum adequate health care.  They have left the reservation and some Justices seem set to rule without regard to the greater context.  If the Federal Government can not regulate the health care industry, who then can ensure that each and every citizen can access basic health care.  Who can keep this vital service from bankrupting individuals first, and the country second?

When President Obama addressed health care reform, a strategic decision was made.  Rather than expand a national program like Medicare, the Obama Administration concocted a plan based upon the current “for profit” insurance companies.  This was an unfortunate choice for health care but understandable from the existing business model.

The Obama Administration promised insurance companies more customers (from the individual mandate) and in return, the insurance companies promised to not deny coverage for pre-existing conditions and to agree to offer higher risk individuals the same low rates equivalent to other average individuals.  A deal with the devil often does not turn out the way you want.

Now the future of the Affordable Care Act hangs at the mercy of an esoteric deliberation.

A “no” from the Court will mean mass confusion with thousands and thousands again back on the no insurance road.  These individuals will still get treated (emergency rooms) and those costs will still flow to all the rest of us.

There is another aspect of Affordable Care Act that should be of interest.  This provision expands Medicaid coverage significantly.  In this land of wealth, why should so many people (earning less that $20,000 per year) be in need of Medicaid?

The fundamental issues which is not part of the discussion, is how can such as rich country as the US not view basic health care as a right and instead a playground for profit making middle men?  You can not help but ask, also, why are there so many people who can’t afford insurance coverage and must rely on Medicaid?

I wonder why no one is asking these questions?

Motive, Means, and Opportunity

March 27, 2012

The tragic murder investigation playing out in Florida seems to be once again emphasizing the value of due process.  Due process often does not satisfy the public’s emotional thirst but in the end it usually reminds us of the weakness of a rush to judgement.  The case of Trayvon Martin, while not closed, is following this path.

Initially public opinion was incensed with an apparent case of police playing judge and jury.  The alleged suspect was George Zimmerman, a white man, and the victim was Trayvon Martin, a 17 year old black youth.  George was armed, Traymore had a bag of Skittles and a bottle of ice tea.  Zimmerman said he feared for his life and shot Trayvon in self defense.

The public questioned the lack of a thorough police investigation and no arrest as proof that the police were biased.  African American leaders claimed this same situation has been played out too many times before.  Not this time, they said.

With the pressure of public opinion swelling, demanding an arrest, the Sanford, Florida police leaked some information they had collected.  This information revealed a fight where Trayvon was the aggressor and Zimmerman was the recipient of head and nose injuries before the actual shooting.  This could put the incident in a quite different light.

The police inaction does not seem so irresponsible in this light.  The African American community reaction, however, could seem excessive is this were all there was too the story.

At first, attention was focused on the Florida “stand your ground” law and everyone blamed that law.  Next this became a racial hate crime.  But all along the necessary causes has not been discussed.

A crime conviction normally needs evidence that the accused possessed motive, means and opportunity to have committed a crime..

Zimmerman called 911 and reported seeing a suspicious person.  The 911 dispatcher told him police were on the way and to “back off”.  Zimmerman did not.  This episode could have ended with nothing more has he followed instructions.  At the worst, Zimmerman might have gotten a bloody nose had he not also possessed the “means”.

Zimmerman was packing.

It is one thing to be in your own home and an intruder enters with intent to rob or do bodily harm.  Using a weapon might be justified under certain circumstances.  Driving around a sub-division, then following someone on foot even after being told not to, is over the line.  The elements of motive and opportunity seem evident.

Zimmerman was carrying a gun and that provided the means.  He may, in the quietness of his home never thought about shooting someone.  In the heat of the moment, who knows?

Zimmerman could have held deep resentment for blacks, this is not a crime.  Community watches are not crimes either, especially  if Zimmerman had backed off.   No tragedy had to have taken place except if the means were present.

At the root of this tragedy is senseless packing of a weapon.

The Individual Mandate Moral Dilemma

March 26, 2012

A goodly number of the pundits, health care experts, and political junkies are all over the Supreme Court hearing this week.  Will President Obama’s Affordable Care Act survive Constitutional muster?

Critics rail against the “over reach” of the Federal Government.  “How can the government mandate that a citizen must buy any product”, they ask? Others cite the case as fraught with political overtones.  If the individual mandate is struck, it eliminates the alleged greatest accomplishment of the Obama Presidency.  Oh, but wait, if it is struck, then what will Republicans have to campaign against?

For sure it is discouraging to think that the Supreme Court would even for a second consider this case in political terms.

What strikes me as the most significant aspect of this case (as it was when the original law was formulated and formed by Congress) is the absence of the thinking over two issues.

  • How can a wealthy country like the US not provide basic health care access to all its residents?
  • How can an advanced country like the US not have the management skills to provide affordable basic health care?

Providing health care is not about giving health care away for free.  Rather it is somewhat like the military.  The military’s mission is to defend all the citizens by providing national security.  Everyone pays for the military in some way at some time in their lives.  Generally, the wealthy pay more for the military (through higher taxes), but everyone pays if they can.   The key point is that no one gets more or less military protection for any reason.  Health care services should be the same.

The affordability of health care is just as important.  The US currently is spending almost twice as much per capita, more than any other country in the world, and the US is experiencing yearly increases at 2-3 times the rate of inflation.  This is a system that is both too expensive and out of control.

So, suppose the Supreme Court were to decide the Federal Government could not organize a national health care program by requiring all citizens to be a paying member.  How could the US ever achieve health care for all?

There is a risk too if the Supreme Court approves the individual mandate.  The Affordable Care Act piggybacks on the current “for profit” private insurance providers.  In addition to tacking 10-14% on top of actual health care costs, these companies are not insurers, they are really just plan administrators.  Profit orientation drives them to seek smaller and more select pools of individuals so that their risk is minimal.  There is a strong incentive to deselect some individuals.

We are told, however, that competition between health care insurers is good.  It will offer variety and through the natural forces of capitalism, drive down cost.  Please name any business that makes its profit by adding a percentage on top of the service provided that cares about driving down cost.

This is a time for greatness.  The pundits, the health care experts, and the honest brokers among the political junkies need to look inside themselves and find the courage to see the moral dilemma.

I am hoping they will but I am not holding my breath.

Tax Policy Perspective

March 25, 2012

If you want to wave a red flag in front of a fiscal conservative, just announce you are in favor of raising taxes.  If you want to see steam puffing out of that conservative’s ears, mention that current tax revenues are not covering what Congress is spending much less helping to reduce the debt.  “Government has no right to my money”, huffs those Uncle Scrooges.

Without a doubt, tax policy is an inexact science.  One hand levies taxes and the other hand grants loopholes, exemptions, and outright tax credits.  Most people like the loopholes, exemptions, and credits, and like even more the politicians who provide them.  Raising taxes generally draws less applause even from progressives, unless of course those higher taxes are on the rich.  How then does the country get its fiscal house in order?

Recently the New York Times reviewed a government report which listed the estimated 2013 budget impact of tax code exclusions, deductions, and credits.  Would you believe the amount added to over $1 trillion?

Hold that thought.  There are over $1 trillion in exclusions, deductions and credits in a budget that projects collection of only $1.3 trillion in individual income taxes!

And consider that the projected 2013 deficit (on the same basis) is $800 billion.  Without exclusions, deductions and credits, the budget could produce a surplus and begin reducing the debt.

So it should be easy to to balance the budget, right?

Take a look at a partial list of exclusions, deductions, and credits (published in the NYT).  The three big hitters are “employer contributions to health care insurance”, “pension and 401K contributions by employers”, and “reduced tax rates on dividends and capital gains”.  These three add up to over $400 billion.  That is equal to about 1/3rd of the $1.3 trillion in federal income tax actually collected.

But who is not for health care and retirement?  The reduced rate on dividends and capital gains is a little more contentious.  Health care and retirement affect everyone while a tax break on dividends and capital gains is highly skewed in favor of wealthy Americans.

Most Americans like the mortgage deduction as well as deductions for State, Local, and property taxes.  And saving taxes with charitable gifts seems wholesome.  The earned income credit also targets an economic class, the poor.  Who will be the first to take a shot at eliminating this deduction?

Here’s the list.

Exclusions

  • Employer contributions for health care                                  $147.8
  • Pension and 401K contributions by employers                       147.0
  • Value of Medicare benefits                                                               73.1
  • Exclusion of capital gains at death                                               43.9
  • Benefits like flexible spending accounts                                      39.6
  • Untaxed Social Security and Railroad retirement benefits     39.2
  • Interest on Municipal Bonds                                                          38.2
  • Investment income on life insurance and annuities                29.6
  • Capital gains on sale of home                                                         26.1
  • Veterans benefits                                                                                  7.0
  • And many more…

Deductions and reduced tax rates

  • Reduced rate on dividends and capital gains                          $110.4
  • Mortgage interest deduction                                                             89.6
  • State and local tax deductions, including property taxes         68.8
  • Charitable deductions                                                                        46.9
  • Individual retirement accounts (IRAs)                                          19.2
  • And more

Credits

  • Earned Income credit for low-income workers                           58.1
  • Children under 17                                                                                25.7
  • And more

It is clear that the tax code plays a large role in fostering private and social goals.  Healthcare, retirement, and raising some Americans above the poverty level are examples.  The tax code also encourages home ownership and investment in a wide range of enterprises.  That the tax code is complicated is an understatement.

So when we hear our politicians cry out that they are for eliminating loopholes, exemptions, and credits, think about this $1 trillion list of exclusions, deductions, and credits shown above.  Who would you trust to pare them back?

A reasonable person could reach the conclusion that it might be a fruitless task trying to cut back much of this $1 trillion given there is something in the tax code for everyone.   Reductions in government spending are, for sure, part of the formula but they will also encounter the special interest protection.

So, one comes face to face with the only tool left, the first steps towards fiscal sanity must be in the direction of greater tax revenues built in part upon higher tax rates.  Reductions in spending along with cuts in exclusions, deductions, and credits can and should follow.  The questions are when, where, and for how much?

What Are Those Justices Thinking Now?

March 23, 2012

The Supreme Court begins deliberations Monday on the Affordable Care Act.  Pundits are abuzz on whether the Justices will decide the individual mandate is allowable under the Constitution.  Just how much the Constitution will play in this matter remains to be seen.  Political leanings may play a big role too.  Interpreting the Constitution will be necessary since the issues involved could never have been anticipated in the 18th century.  But how will the Justice interpret?

It has been said that former Justice Sandra Day O’Connor always tried to form her opinions close to the main stream of public opinion.  Public opinion, in this matter, is not easy to read.  Those opposed to the Affordable Care Act have done an effective job of saying the government can not make you buy a product, and if they could, maybe they would make you buy broccoli.  This, of course, misses cleverly the real point behind ACA.

Health care is like no other private sector product.  It is a product we all need and will use in varying degrees through out our lives.

In general, one is healthier in early years, and encounter more needs for health care as they age.  When preventive health care measures are not used, patients usually end up consuming a lot of health care services at a much higher cost than if they had consumed preventive measures.

Most Americans do not have a clue what health care actually costs.  They are insulated by employer provided health insurance and by the government through Medicare and Medicaid.  They may experience a co-pay or have to pay a fraction of the premium but for the most part Americans have no direct knowledge of health care’s cost.  To them, health care insurance comes with the job.

If you are unemployed or for any reason do not have employer supplied coverage, the picture looks different.  First, coverage of single subscribers is expensive.  Second, for far too many, coverage is even more out of sight expensive or just not available due to some pre-existing condition.

Why should someone with medical condition A be covered when they are part of an employer’s group plan and someone else who also has medical condition A, not be able to obtain coverage (or pay more for it) just because they are a single (not part of a group)?

Of, course there are business answers.  Insurance companies assess risks of large groups (composed of younger and healthier individuals) and determine that a single individual represents a higher risk of costing them more.  But, why are rates set on groups and not for the entire population?

So, back to the individual mandate.

There are many people who choose to be self insured, that is they do not purchase insurance coverage.  There are many reasons from “I don’t need it” to “I can’t afford it” to “I am going to get insurance next week”.  But today, they don’t have it and suddenly must go to an Emergency Room.  Under the law, hospitals can not refuse service to anyone simply because they can not afford to pay.  These unreimbursed costs get plowed back into all other fees charged by the hospital or doctors.  In this way, everyone else pays more than we might otherwise have.

The first order of Court business will be to decide whether the individual mandate is Constitutional.  Is it ok to make everyone buy insurance?

The implications are serious.  If the individual mandate is held constitutional, the US may be stuck with our current health care delivery system for much longer, probably until Medicare/Medicaid collapse financially.  Then, the Country will be faced with having to revamp the entire health care delivery system.

If the mandate is struck, the long term expectancy for our health care system is the same, Medcare/Medicaid will topple the delivery system eventually.  Unfortunately, the Country will have to live with the shame of denying some proper health care by discriminating against those with pre-existing conditions.