Columnist.
When it comes to what ails the economy, there is a miracle cure. It's called growth. For the last 50 years real income per person in the United States has grown at a rate of about 2.3% per year. That may not sound like such a big deal, but it adds up year after year. So much so that real incomes will actually double every 31 years. If we think of the average year for childbirth as close to 31, then income will double for every generation. Let's assume you're in an average-income family earning about $50,000 a year. If your children also earn an average income, by the time they grow up and reach your age they'll be earning $100,000 a year -- in current dollars.
A proposal made in January by the Centers for Medicare and Medicaid Services would cause almost 14 million seniors to lose their Medicare Part D stand-alone drug plans next year, essentially banning the most popular Medicare drug plans by 2015. Nearly 39 million Medicare beneficiaries, including both seniors and the disabled, have subsidized drug coverage through the Medicare Modernization Act (MMA) of 2003. Of these, nearly 36 million individuals are enrolled in drug plans known as Medicare Part D. [See Figure I.] However, the Centers for Medicare and Medicaid Services (CMS) has proposed new regulations that would eliminate the most popular plans: ones that offer seniors lower premiums (and lower cost sharing) in return for patronizing a *preferred pharmacy* network.
The topic du jour on the left these days is inequality. But why does the left care about inequality? Do they really want to lift those at the bottom of the income ladder? Or are they just looking for one more reason to increase the power of government? If you care about those at the bottom then you are wasting your time and everyone else's time unless you focus on one and only one phenomenon: the inequality of educational opportunity. Poor kids are almost always enrolled in bad schools. Rich kids are almost always in good schools. So what does the left have to say about the public school system? Almost nothing. Nothing? That's right. Nothing. I can't remember ever seeing an editorial by Paul Krugman on how to reform the public schools. So I Googled to see if I have missed something. The only thing I found was a negative post about vouchers. And Krugman is not alone.
Today I'm going to get personal. The reason? To see if readers have had similar experiences. There were about 450 students in my high school graduating class. I don't remember a single one I would call "poor." Only one would I call "rich." All the rest were squarely within the 20 yard lines. Socioeconomically, we were all very much alike: solidly middle class. We went to school together, played sports together and socialized with each other. Since my school was segregated by law at the time, all of the students were white.
The most important question in health reform is this: How should the government subsidize private health insurance? And both parties are in broad agreement on the answer. The subsidy should be in the form of a fixed sum tax credit. Consider the traditional way of encouraging health insurance. For employer-provided insurance, the subsidy is in the form of an exclusion. Unlike wages, employer premium payments are not included in the taxable income of the employee.
People who worry about death panels are missing the forests for the trees. Yes, people with expensive-to-treat conditions may someday be denied life-saving treatment because of ObamaCare. But there is a far greater danger for ordinary mortals: government and its health insurance proxies telling doctors how to practice medicine. In treating patients with various symptoms, doctors are increasingly pressured to follow guidelines or protocols. This "cookbook" approach to medicine is the opposite of personalized medicine -- an approach which aims to tailor the therapy to the characteristics of the patient, including her genetic makeup.
After delaying the employer mandate to provide Obamacare health insurance to all full time employees for a year, the administration has delayed the mandate for medium size business for a second year. It has also relaxed the mandate for large businesses (they only have to cover 70% of their workers the next year). All of this is lawlessness of course. The statute clearly says that the mandate is supposed to kick in this year. So why is President Obama taking the extra-constitutional step of letting employers temporarily off the hook?
Take a look at the graph below. From the end of World War II until 1964 the poverty rate in this country was cut in half. Further, 94% of the change in the poverty rate over this period can be explained by changes in per capita income alone. Economic growth is clearly the most effective antipoverty weapon ever devised by man. The dotted line shows what would have happened had this trend continued. Economic growth would have reduced the number in poverty to a mere 1.4% of the population today ? a number so low that private charity could probably have taken care of any unmet needs.
If I were to reduce to a bumper sticker the way the left thinks about the world these days, it would read: **Inequality happens** If I were to reduce to a bumper sticker the way the right thinks about the same subject, it would read: **Inequality happens for a reason** This is not a small distinction. For President Obama, inequality is the public policy issue du jour. And like lemmings, left wing editorial writers and bloggers can think of nothing else to write about. But here is something that may surprise you. The most interesting analyses of the problem are on the right, not the left. For the most part, all the left does is deplore. They seem to have no interest in understanding why we have a problem. (I have a theory on that below.)
Cities With Unfunded Health-Care Commitments Are Getting Ready to Dump Their Retirees On the State Exchanges.
The health reform law is trying to force $15 an hour workers and their employers to buy more than a million dollars of coverage when they don't have anything like a million dollars in assets to protect. Further, some of these families are being forced to give up ["mini-med" plans](http://healthblog.ncpa.org/which-is-better-mini-med-plans-or-obamacare/) that paid the first $2,000 or $3,000 of medical bills and enroll in plans with deductibles of $10,000 or more. Why do we need to force a family at this income level need to pay the first $10,000 of medical costs? We don't.
During the 2008 presidential election, Barack Obama was asked if he would favor a higher capital gains tax rate, even if the government received less revenue as a result. His answer: Yes. When you stop to think about it, that's a remarkable answer. By hypothesis, everyone is worse off. The owners of capital are worse off. The government is worse off. Poor people who depend on government are worse off.
"Inequality is the defining challenge of our time," according to President Obama. It's certainly the topic of the day for Paul Krugman, Joe Stiglitz and a whole raft of liberal pundits. But have you noticed that hardly anyone else is talking about it? When is the last time you heard a shoeshine person or a taxi cab driver complain about inequality? For most people, having a lot of rich people around is good for business. But if average folks are not complaining should they be?
"Pope Francis attacked unfettered capitalism as 'a new tyranny,'" reads the lead of the Reuters story by Naomi O'Leary. She is referring to the *Evangelii Gaudium*, the latest apostolic exhortation from the Holy Father. Similar headlines appeared at NBC, at the Daily Kos, in the Nation and elsewhere. But as Robert Ramono points out, nowhere did the pope actually say those words. Still, the document is a mixed bag. It does contain some anti-capitalist rhetoric, using phrases familiar on the left. But it is also full of anti-statist, anti-collectivist exhortations. On balance the entire document looks like it was written by a committee whose members all have different views.
President Barack Obama claims that Republicans have no alternative to Obamacare. Has he really forgotten that his presidential campaign spent millions of dollars attacking the health plan of Sen. John McCain? What follows is an update of McCain's approach, coupled with the more recent thinking of many Republicans in Congress. This approach would take us from where we are now to a health care system that empowers patients, allows real competition and minimizes the role of government in the medical marketplace.
At this point we have no idea how many people will become newly insured under ObamaCare. For the first year out, the number of people with insurance may actually go down! But the administration's goal is to insure an additional 30 million people and eventually a lot of those people will acquire health plans. When they do, the economic studies predict that they will try to double their use of the health care system.
On Thanksgiving eve, a Nicholas Kristof editorial instructed us on how to think about poverty in The New York Times. The main reason there is poverty, he tells us, is bad luck. We don't choose our parents, after all. Or the household or neighborhood we are born into.
What I'm about to show you is in my opinion an embarrassment to the economics profession and I wish more of my colleagues would express their strong disapproval. Take a look at the blue line in the chart below. It shows the annual rate of change in U.S. health care spending.
Affordable Care Act regulations have forced health insurers to cancel the policies of an estimated five million Americans. By the end of the year, the final number of people who receive cancellation notices could reach seven to 10 million. These victims of ObamaCare are being forced into the new health-insurance exchanges. But the exchanges don't work. The federal exchange is such a disaster that the administration announced a "tech surge" to get it right -- as if the bureaucracy were launching a foreign war.
Here is irony: the people who talk the most about the need for a social safety net (including the president himself!) are cheerleaders for a health reform that is going to shred it. How is that happening? By means of the Affordable Care Act (ObamaCare). Through the Medicare and Medicaid programs, the federal government provides billions of dollars in subsides every year to hospitals that see a disproportionate number of patients who are poor and uninsured or who are on Medicaid. In both cases the result is the same: hospital revenues fall well short of the cost of care they dispense.
