Category Archives: politics

Job Creation or Deficit Reduction — How Should We Spend Your Money?

Posted on December 9, 2009 | Leave a comment
By Marc Seltzer; originally published on December 9, 2009, at care2.com

. . .

Should the unused TARP funds go to support middle class job creation or be used to pay down the deficit?

The question has arisen recently after the Treasury reported that its losses on the 350 billion dollars that Congress provided for the administration’s Troubled Assets Relief Program (TARP) are expected to be much lower than originally predicted.

The President and Democratic leaders are calling for a portion of the remaining funds (as much as $200 billiion) to be used for job creation programs.  The President has outlined several ideas that the administration believes could help bring unemployment rates down faster than at the current rate of economic recovery:

  1. Small business financial assistance and tax breaks
  2. Unemployment benefits, cobra subsidies, and emergency assistence to seniors
  3. Additional infrastructure and incentives for home energy conservation

However, this money could alternatively be used to pay down the deficit and Republicans are calling for committing all of the funds to deficit reduction.

The PBS Newshour recently featured a brief debate between Princeton Professor and Nobel Laureat economist Paul Krugman and columnist and former Treasury official and Reagan administration advisor Bruce Bartlett on whether President Obama should direct unused TARP funds towards creating jobs or paying down the deficit.

Krugman called for action on the basis that the unemployment rate was devastating and unacceptable.  He noted that unemployment was expected to remain far higher than normal in the next two years.  Extended unemployment would cause lasting harm to people who were forced to use up their savings and cause long-term damage to future employment prospects, he argued.

Bartlett cautioned that Congress had appropriated the money specifically to help financial institutions under TARP and that it should not be rerouted without congressional approval.  While he said he was “agnostic” about the President’s ideas for job creation, he did not support action now because Congress had already enacted substantial stimulus legislation.

Paul Krugman:  “And we have what is really an ongoing economic emergency. I mean, this — it’s not just that we’re not creating jobs. The level of unemployment we have got is doing enormous damage. So, I think the president is justified in reaching for whatever mechanism he can.

If — if he can say — you know, it really doesn’t make a difference in terms of the economics, where it’s funded from. If he can say, look, what we’re doing is redirecting funds, and make it happen, then he needs to do it, because, ultimately, what we have is a jobs crisis. Action must be taken. I think the paperwork is relatively less important at this point.”

BRUCE BARTLETT:  “Well, I thought, if we were facing the kind of crisis situation that we were when TARP and the original stimulus were enacted, that would be one thing.  But I don’t think we’re facing that. I think we have — we did enact the stimulus. The money is — there’s a lot of money still to come from that in the pipeline. I think we have only spent about a fourth of it so far.

The unemployment rate is coming down. I think that there’s a case for, let’s wait a little while. Why not wait until after the president submits his budget in February? Why rush to act this minute?”

With high deficits and high unemployment there are strong competing interests for the money.  What do you think is the most important priority at this time?

For a podcast conversation on jobs stimulus between care2.com blogger Jessica Pieklo and myself, follow this link and click on the December 9, 2009, podcast.

Follow me on Twitter

Leave a comment

Posted in Barack Obama, economics, politics

Tagged , ,

Bailout Losses Smaller Than Expected

Posted on December 6, 2009 | Leave a comment

By Marc Seltzer; originally published on December 6, 2009, at care2.com
. . .

The good news is that the losses from the government bailout are far less than many feared.  The New York Times reported yesterday that the Treasury currently counts losses of only 42 billion dollars out of its several hundred-billion-dollar rescue program.

Of course, 42 billion is still beyond comprehension.  It is bad news to lose those public funds, and there are other funds still at risk.  Nonetheless, it’s better than the hundreds of billions that were in doubt.

In fact, for those who feel that the government bailed out Wall Street at the expense of Main Street, the facts may prove otherwise.  It turns out, for example, that the banks are rapidly repaying much of what was given to them.  The financial industry still has TARP funds that may cause public losses over time — no final accounting is available — but the largest share of the current estimated losses, 30 billion, come from the bailout of automobile giants G.M. and Chrysler.

The bailout of the Detroit automobile companies was designed to protect Main Street, not Wall Street.   Middle class workers at the big factories and at the auto-parts supplyers would have lost their jobs without government intervention.  The U.S. was losing more than 500,000 jobs a month at that point.  Adding auto factory closures, that number might have hit a million a month, and who knows what else might have collapsed?

I am still haunted by Thomas Friedman’s New York Times Op-ed saying that giving money to G.M. and Chrysler might stop smaller, greener, entrepreneurial auto innovators from inventing the wonder cars of the future because the competition from a subsidized G.M. was too great to overcome.  Be that as it may.  Main Street jobs and an entire industry were saved at a point when the economy was very vulnerable.

The bailout of the banks, though ostensibly done to save the financial system, gave the government rescue a bad name as it appeared to protect Wall Street over Main Street.  It certainly saved financial industry shareholders and employees from their share of losses.  It turned even uglier when it created windfalls in compensation for the already rich.  However, if the bulk of the money lost went to saving middle class jobs and helping the car companies retain some value in the bankruptcy reorganization process, we may need to rethink who we say was bailed out and why.

Follow my writing on Twitter.

December 7th, 2009 UPDATE:  Food for thought in Newsweek’s take on the jobs data.

December 9th, 2009 UPDATE: A NYT article on the congressionally mandated review of TARP’s effectiveness.

Leave a comment

Posted in Barack Obama, economics, politics

Tagged , ,

Employment Poised to Turn Positive

Posted on December 4, 2009 | Leave a comment

Job losses Reported Through November 2009

By Marc Seltzer; originally published on December 4, 2009, at  care2.com.

. .

Despite doom and gloom in Republican talking circles, the overall jobs data is right on track in reflecting a rebound in economic activity.  Just released unemployment numbers show the lowest number of monthly job losses in two years, down to 11,000.

When Republicans handed over the Presidency to Barack Obama in January 2009, the monthly losses were 741,000.  If the automobile companies had folded, as they would have in the Spring without government support, another  million-plus people would have been thrown out of work, sending the monthly number over 1,000,000 for several months in a row.

It would have been preferable if private business activity had caused employment to improve.  But the financial freeze robbed businesses of their confidence and their financial capital, so businesses have shedded jobs, delayed plans, and closed down.

The government rescue gave money to states to stop layoffs at schools and police departments.  In other ways, from the Fed’s low interest rates to funds for infrastructure, education grants, promoting green technology and the like, the government injected money into the economy.  Job losses in September of this year were down to 139,000 and in October, 111,000.  The stimulus is working, despite Representative Boehner’s (R-Oh) claims of failure.

Jobs are a lagging indicator, which means that new business planning, funding and activity happens first, and then the hiring of employees occurs many months later after confidence improves, and opportunities require new staffing.  The growth rate for the economy as a whole was around three percent for the quarter ending in September, in line with the positive growth rates that the U.S. hopes to sustain for long-range growth, although more is desired now to make up for negative growth during the recession.

The goal is for employment to come roaring back and for private business to take over for public support of the economy. However, businesses large and small are still shell-shocked by the financial freeze and destruction of wealth that it wrought.  They must also adjust to lower spending as consumers behave more responsibly and unemployment remains significantly elevated. Fortunately, there is still a lot of stimulus money left to power infrastructure projects before the handoff to the private sector takes place.

The government has done the lion’s share.  It still needs to implement sound financial reform legislation, giving the public and financial industries confidence in a sound and fair system.  In addition, health care reform in the public and private sectors could free up wasted money for productivity in other areas that serve American business, such as exports.

Insurance regulation and universal coverage, already contained in proposed legislation, will spread the burden of costs more equally.  However, systemic overspending in health care robs families of wages and businesses of profits that could be put to better use.  Following evidence-based medicine rather than custom and practice and market-driven medicine could go a long way to giving us more for our money.  Malpractice reform, consistent with evidence-based medicine, would also eliminate waste.

Look for December or January employment numbers to finally turn positive and fourth quarter growth to remain healthy.  This will be welcome news to the unemployed and businesses, and should give the country more confidence that we are, in fact, on the road to recovery.

Follow my writing on Twitter.

December 8, 2009 UPDATE:  Bloomberg Economics podcast of Dec. 7, 2009.  Tom Keen’s interview with Steven Wieting, Managing Director of Economics and Market Analysis reflects on the jobs data and recovery.   It’s technical, but provides some thoughtful observations.

(The original publication of this story contained an older employment graphic; this version has been updated).

Leave a comment

Posted in Barack Obama, economics, politics, Uncategorized

Tagged , , , , ,

Federal Reserve Independence Under Threat

Posted on December 1, 2009 | Leave a comment

By Marc Seltzer; originally published on December 1, 2009, at care2.com

. . .

Readers of this website (care2.com)  have a healthy skepticism of government. They see that well-heeled special interests assert too much power in Congress.  Our representatives in Washington should devote themselves to the public interest, but too often appear to serve lobbyists and work for campaign contributions, instead. This view is held by Democrats and Republicans alike, one of few shared beliefs.

Unfortunately, this bipartisan, anti-government nexus has led to legislation to audit the Federal Reserve, the powerful financial stewards of the economy.

This is likely a bad idea and one that suckers good activist public energy down the wrong path.  The reason that the Federal Reserve is unelected and insulated from political manipulation is that its powers would be very tempting to misuse for political gain.  If Congress or the President could, for example, force the Federal Reserve to lower interest rates and stimulate the economy when unemployment goes up, they would do so.  However, the Federal Reserve manages long-term monetary policy to obtain stability and growth in light of concerns over inflation, exchange rates, and productivity.  This may include inflicting a certain amount of household suffering on the American economy to fight inflation or deal with crises where sacrifice today insures wealth and stability tomorrow.  If politicians could interfere, this would never happen.

The audit legislation responds to anguish about the failure of the government to regulate financial activity and risk in the lead-up to the current crisis. It also channels anger over the solutions to the crisis that the Fed has created.

Those who are against corporate greed and excessive wealth could better use the tax code to force corporations to pay their fair share.  Moreover, the proper response to failures of deregulation is increased regulation forcing private institutions to have higher capital reserves, lower leverage ratios and more significant safeguards and oversight than existed since Clinton-era deregulation.  No one is claiming that government got it all right.  But remember, it was political and financial interests that led to the current crisis.  And note that politicians have proposed everything from doing nothing to nearly twice the stimulus that was passed in response to the crisis.

The Federal Reserve is made up of professional economists and financial experts fulfilling a public service.  It is not immune to mistakes, but the Federal Reserve has, with specific limited exceptions, maintained a healthy independence from political authority.

Sacrificing that independence when the Fed makes mistakes or when we don’t like its decisions — which is what this legislation is really about — is not the answer.  Once the Federal Reserve is damaged, political and financial interests will use the Fed to serve current political goals at the expense of the long term financial health of the nation.

We know what that scenario looks like in practice because we have the example of Congress.  Congress never cuts expenses because our representatives are beholden for their jobs to special interests served by that government spending. One of the great examples of cost-cutting in government was done by the Base-Closings Commission, an independent panel appointed for the purpose of solving a problem that congress could not otherwise solve.

What we need is more fiscal responsibility, not less.

May 6, 2010 UPDATE:  The Senate voted down an amendment to the financial reform legislation today that would have subject the Federal Reserve to more congressional authority.

Leave a comment

Posted in Barack Obama, economics, financial regulation, politics

Tagged , , ,

President Obama, is Afghanistan more like Vietnam or Germany?

Posted on November 30, 2009 | Leave a comment

By Marc Seltzer; originally published on November 30, 2009, at care2.com

. . .

When President Barack Obama addresses the nation on Tuesday evening, December 1, from the U.S. Military Academy at West Point, I will be looking for the President to answer specific questions I have about the United States’ conduct of the war in Afghanistan.

I would like to hear Mr. Obama state clearly the current objective.  Is it to build a modern nation in Afghanistan, create a quasi-democratic state, or simply stand a government that can police its own population and take actions that support U.S. security objectives?  Eighty percent of Afghanistan’s population live in 32,000 rural villages. Economic and political life is different there than in modern societies, and I want to see that the President’s plan does not rest on unrealistic expectations and assumptions.

President Bush’s military mission in Afghanistan was to remove the Taliban from power and stop Al Qaeda and its associates from conducting violent action against the United States.  The initial invasion succeeded in ending the Taliban national government, and the ongoing campaign has forced Al Qaeda to seek more hospitable territory elsewhere.  However, installing a democratic government with control of the entire country has proved impossible, and in the face of such difficulty, the mission has become less clear.

The most important issue in the war in Afghanistan may be its impact on Pakistan.  If any nation could be the catalyst for a WWIII scenario it is a nation with a nuclear arsenal and a violent extremist insurgency.  Pakistani Taliban and other insurgents are actively fighting against the democratic government of Pakistan and lethal bombings of civilian and military targets are becoming daily occurrences.  An all-out civil war in Pakistan would be catastrophic and could require international forces to secure nuclear weapons, at the very least.  If this is part of the calculation of continuing our military effort in neighboring Afghanistan, Mr. Obama should say so. The Bush administration played fast-and-lose with the reasoning behind the invasion of Iraq, and confidence in American credibility suffered as a result.

And then there’s the Vietnam question.  Are we even capable of defeating the Taliban?

In Vietnam, we were unwilling to risk a direct military confrontation with the Soviet Union and China, and yet could not defeat the North Vietnamese people without risking such an all-out superpower war.  Thus, we were in an unwinnable war with no good diplomatic solutions.

While there is no superpower behind insurgent forces in Afghanistan, there is significant support in the population and financial backing from abroad.  We have been fighting insurgents for eight years and are no closer to victory.

It is a combination of troop strength and strategy that will make or break the U.S. effort in Afghanistan.  Not just critics of the war, but top military brass, have said that a political solution is ultimately necessary.  In Iraq, an important part of the “surge” strategy was hiring the unemployed former army members and others who were fighting against us.  The concurrent increase in U.S. troops also supported government and military efforts to control violence, but the change in strategy was key. A similar initiative to pay local Talibs to switch sides is now underway in Afghanistan.

If the new strategy for Afghanistan is not producing positive results in a year or two, will the President accept defeat and withdraw our resources?  There is evidence that President Lyndon Johnson did not want to be involved in the Vietnam war and did not think it was winnable.  Yet, he continued to increase American participation based on domestic political consequences and complex international uncertainties.  However, our resources are precious and should be used with serious intentions, not squandered, or commited by default.

Will there be an honest assessment as to whether the new strategy in Afghanistan is working?  Does the President have the courage to recognize and accept failure?  It was one thing to refuse to accept defeat in a WWII.  The war against Germany and Japan saw a far greater commitment of resources and manpower.  Our entire nation was transformed into an armament factory and the committment to destroy the enemy and remake its society was total.  On the military front, we used all the force we had and accepted both our own heavy losses and devastating destruction of German and Japanese civilian targets.  Total victory was necessary and total defeat was not an option.  However, the situation in Afghanistan is not a world war.  Failure of a operation does not mean the surrender of all objectives.  Only fourteen years after South Vietnam fell to the Communist North, the Berlin Wall came down and international communism was on its way out.  (If you still have an image of Communism guiding China and Vietnam today, travel there and test your ideas.  Both nations provide thriving business environments and gradual reforms).

The lesson here is that we should not follow a failing strategy for long.  The risk of failure is substantial, and the President and his military command must be able to evaluate and change course, as necessary, including abandoning losing causes.

I will listen with an open mind to the President’s reasoning on Afghanistan.  What I hope to hear is not so much an answer that fits my preconceived notions, but an explanation of the U.S. mission there and a realistic assessment of strategy designed to achieve our goals.

For an Afghan voice and perspective (although somewhat dated), see my Interview with Massoud Quiam and Commentary by Massoud Quiam.

December 2, 2009 Update: C-Span 3 is covering live Congressional testimony of Defense Secretary Gates and Admiral Mullen on Afghanistan.

Point of contention is whether it makes sense to ramp up the battle now, while at the same time saying that we intend to start transferring responsibility for security to the Afghan authorities by mid 2011.  Is this just the usual attack on the President, or is there a contradition here?  Can we say that we are only willing to spend so much time and money (and risk to our troops) and that that time is running out — a limmited commitment — without hurting our chances of success?  It is a legitimate question, but the benefits of such a policy may still outweigh the costs.

Leave a comment

Posted in Barack Obama, foreign policy, politics

Tagged , ,

Obama Approval, Progressive Politics and Democratic Unity

Posted on November 25, 2009 | Leave a comment

By Marc Seltzer; originally published on November 25, 2009, at care2.com

. . .

Pundits have focused recently on President Obama’s declining public opinion polls.  As the President drops to fifty percent approval ratings, the talk speculates on whether the poor economy will sink Democratic prospects in the 2010 midterm elections.  The economy is important and the administration’s policies will not cure recession blues before the election, but of greater concern is the question of Democratic political unity.

Republicans have criticized the President’s leadership and policies from the get go, but with Progressives attacking the administration and fracturing the President’s base, some of the moderates who elected him are beginning to wonder.  Have the progressives gone off in search of Ralph Nader?

Neither the left nor the right have a majority in national American politics.  The candidate that convinces the pragmatic middle to join the ideological left or right wins both in electing candidates and in charting policy.  President Bush succeeded in maintaining the right-middle coalition between 2000 and 2008.  He used the power he was given to lower taxes on the wealthy, promote hands-off financial oversight, conduct aggressive foreign and military policy and tilt the delicate balance between rights and security not so delicately in favor of security.

President Obama won back moderates in 2008, promising to shift economic policy towards the middle class, embracing government regulation in finance, the environment and health care, and seeking new strategic solutions in international relations.  His is not, in fact, a liberal vision, despite Republican characterizations, but it is a more moderate one than what came before, and one that aims to learn from the experiences of prior administrations.As long as his coalition continues, the President’s approach to taxes and budget, justice and rights, and foreign policy and war will prevail.

However, after nine months in office, it seems the President can no longer count on the Progressive wing for support.  In the guise of influencing the President to move to the left, Progressive critics attack the President and his administration.  Calls for Treasury Secretary Geithner to resign by Rep. Peter DeFazio D-Or are but the most recent example.  The left is also troubled by economic decision-making and the potential increase in troops headed for Afghanistan.  Of course, any coalition will contain different viewpoints.  A goal of our democratic process is for hearty debate to distinguish the best ideas from all others.  But Progressives fail to grasp that the President needs the full support of those that elected him in order to achieve his agenda and present a successful Democratic party to the electorate in 2010 and 2012.  If the party is not unified, the President will not succeed and the power will shift back to the Republicans.

It is only because President Obama joined, at least temporarily, the moderate center of the electorate with the traditional Democratic party that he succeeded in bringing his moderate voice to the fore.

Follow me on Twitter

Leave a comment

Posted in Barack Obama, Elections, politics, Uncategorized

Tagged , , , , ,

In Republican Victories a Lesson for President Obama

Posted on November 5, 2009 | 1 comment
By Marc Seltzer; originally published on November 5, 2009, at care2.com

. .

What does a master politician learn from defeat?

Republicans are claiming the November election shows a renunciation of Barack Obama’s nine months of leadership.

Democrats are reassured by the Owens victory in New York: The Conservative candidate was too far to the right for mainstream America.

But President Obama must surely be licking his wounds.  He, and his party, should have won the Virginia and New Jersey governors’ races.

Candidate Obama won those states forcefully in November 2008.  How could they be lost so decisively now?

Mr. Obama has been in office 9 months. The public saw in candidate Obama a fix for the errors of President Bush:  Bad wars would be ended; good wars would be fought successfully; special interests would be put in their place; the super rich would pay their taxes; average Joes would find jobs, and decisions on health care, foreign policy, financial regulation and immigration would solve knotty problems of budget woes, and nuclear fears while making humanitarian advances.

Ruling is far different from campaigning.  We are three-hundred million people living under the representational leadership of one head-of-state who shares power with 500 or so others representing each and every bit of our union from the Hawaiian Islands to the Eastern seaboard.

Every President suffers in the elections following their inauguration as the public’s hopes are dashed by the realities of governance.  What seemed so obvious and positive in a speech during the campaign becomes so complicated and expensive when you face it squarely and manifest it in policy and law.

But is that it?  Is it just disappointment with reality?

I don’t think so.  It’s more than that.

The President has presided over one of the most remarkable economic events in U.S. history.  The financial industry – a core pillar of American and international business — was brought to the brink of collapse.  Democratic and Republican leaders acted quickly and creatively without a playbook to rescue the financial sector.  This was not an average recession, but an international crisis of finance that was bigger than the financial system itself.  That’s why the government had to step in, but the results will be debated and lessons included in the next generation’s history books.

Possibly fearful of making a mistake, the President has hesitated to explain clearly to the American people just what has happened.  Treasury Secretary Timothy Geithner and a league of economists in government and academia have spoken to the causes and reform proposals.  With all due respect to Secretary Geithner’s intellect and articulateness, President Obama, with his commanding charisma and office of authority, must lead on this issue.

If the nation had plunged into a depression, rather than skirting perilously around the edge, the President would be expected to lead us through.  The fact that we may have avoided more catastrophic losses does not obviate the profound need for leadership to speak powerfully to the causes, remedies, and reform.  It is not enough that competent leaders work the process through congressional committees and administrative working groups.  The President must face the event squarely and communicate to the public about his presidency’s relationship to these historic times.  When I think of the Great Depression, I think of Roosevelt telling the nation “the only thing we have to fear is fear itself.”  When I think of the bombing of Britain, there is Churchill saying, “I have nothing to offer but blood, toil, tears, and sweat.”  But when I think of the financial crisis of 2008-2009, I think of Paul Krugman and Bloomberg Economics.

And this leads back to November 3, 2009.  The reason that the Democrats lost in battles against Republicans is that the public is concerned about direction of the government on the economy.   What has the President done in 9 months of office?  He has addressed the financial crisis and pushed ahead on health care.  Both of these programs deal fundamentally with economics (if money grew on trees, we wouldn’t bother with insurance reform) and the fiscal state of the nation.  Yet the President has not yet done what he is capable of to express a coherent financial plan on either issue.  He is, of course, subject to Republican criticism no matter what, but more important than that, he does not have the confidence of the moderate middle of the country who decide close elections.

Bill Clinton lost a great deal of his authority in 1994 when the Republicans retook power in Congress two years into his presidency.  President Obama has had a hint of what can happen in the losses in Virginia and New Jersey.  A gift in disguise?

Mr. Obama needs to refocus his communication priorities to explain to the American people his short- and long-term economic vision.  He needs to include a convincing dose of reality in his message rather than campaign rehtoric — not just “economic recovery” and “bend the cost curve” but targets for deficit and debt, goals for long term spending and revenue, transition from stimulus to private economic activity.  And the President must deliver and stay on the message himself in order to inspire confidence in the majority of Americans.

Follow my writings on Twitter.

1 Comment

Posted in Barack Obama, Elections, politics

Tagged , , , ,

Taxing Health Insurance Plans

Posted on October 13, 2009 | Leave a comment

By Marc Seltzer; originally published on October 13, 2009, at care2.com

When is a tax a good idea?

NEVER!  (Say it cause it feels good.  Then get real and move on.)

One important proposal for lowering costs in health care is taxing higher-value health insurance plans.  The principle here is that currently the U.S. government is subsidizing high-level insurance plans purchased by employers.  Health insurance premiums are not taxable, while employers do have to pay tax, such as payroll/social security tax, on income paid to employees.  The employers thus provide additional compensation to their employees without paying full price.  This deduction encourages over-spending by employer and employee.  By comparison, individuals who purchase insurance cannot deduct their premiums or costs of health care from their income.

The thinking goes something like this:  An employer deciding to purchase insurance looks at an $8,000 plan and a $10,000 plan.  It realizes that the $10,000 is a deal because of the subsidy, and it knows its employees will value the plan and consider it as part of the reason to work there.  The employee then has incentive to use medical benefits more than on the lesser plan because the higher-cost plan has lower deductibles, coverage of alternative care and lower co-pays.

There is nothing wrong with an individual choosing to pay more for health insurance and then making use of more in benefits.  But if the U.S. government is subsidizing the plans, then the incentives are distorted.  When conservatives talk about what is wrong with taxation and government, their best argument is that government does not efficiently allocate resources because it distorts the market to redistribute wealth in wasteful ways.  This is a prime example.

If progressives want the government to distort the market in health care, it would make sense to provide help to those who can’t afford care, or to provide subsidies to promote certain types of care such as free annual physicals that could be valuable in improving health or lowering costs, through prevention for the public as a whole.  But there is no reason that the government should redistribute wealth to encourage high-end employer-provided insurance and use of such plans to the fullest.

The result of the system in place today is that working individuals with expensive plans are encouraged to get any and all recommended medical care.  Some procedures are covered 100%.  Some 90%, 80%, 75%. What’s the right formula, where people correctly balance the need for health care against the cost?

Take away the subsidy and find out.

In my own experience, I broke my leg badly, while covered by a great insurance plan.  Surgery was recommended and the $30,000 bill turned into only $1,500 in out-of-pocket expenses.  This is exactly what insurance is designed to protect against and it worked well for me.  This involved emergency hospitalization, which, though expensive, is often well covered by all types of plans.  However, in rehabilitation, I sought chiropractic, acupuncture and physical therapy and remember that my out-of-pocket expenses were remarkably low or non-existent.  My firm offered this plan to compete for employees in the marketplace, but the tax code also underwrote my plan.  Remember, under current law, the more an employer spends on health care plans, the more money it avoids paying tax on.

Current proposals are structured to tax plans on the part of the premiums that go above $8,000 per year and family plans on the premiums above $21,000 (For example, $10,000 in premiums for an individual would be taxed on the $2,000 above the exemption at a rate of 40% for a tax of $800.)  The tax would affect employers and individuals who purchase insurance equally and would likely have several impacts:

1.   It would lower the number of high-end plans, as employers and individuals sought to avoid the tax.  In that case, affected employees, who previously would have received higher-value insurance packages underwritten by the government subsidy, would have lower-value insurance with somewhat higher co-payments.  Shifting some additional burden to the insured in this way would lower national spending on health care, yet continue individual choices on where to spend and where to save.

2.   It would raise an estimated $200 billion dollars from tax revenue on plans that were higher end.  Thus, employers and individuals who continued to purchase high-value plans would pay a new tax on those plans.  This revenue would go to underwrite the efforts to subsidize insurance to those who cannot afford it.  $200 billion represents about 1/4 of the cost estimated to subsidize insurance over the period of ten years.

3.   For people at or below the limits, there would be little change in premium or co-payment prices.  Theoretically, the lower use of medical resources would lower the price of health care in the overall marketplace.  This would likely be countered by the increased use of medical services by individuals who will gain coverage through the new legislation.  However, if the new legislation did not contain this tax provision, prices would continue to rise from increased demand as more people with insurance sought health care services.

There are a number of different ways that health care costs can be lowered and different options for how to bring more people into the insurance marketplace.  The current proposal is but one piece of reform.  Taxing of high-cost health plans is bound to be controversial because Americans are allergic to all tax hikes.  However, this proposal removes a tax loophole that encourages overuse, or at least subsidized use, of the health care system.  Even without the use of the revenue to provide subsidies for those who cannot afford health care, this tax makes sense.

N.Y. Times has an excellent story with political background including issues for unions whose members have received high-level benefits in lieu of compensation.  A detailed Huffington Post piece discusses how the tax may impact middle class Americans and a Commentary blog suggests it will change the health care we have now, against Obama’s promises.  Be that as it may, a loop-hole is a loop-hole, and it creates distortion and waste among executives and union employees alike.

Senator Olympia Snowe, (R)-Maine, who announced today that she is supporting the Democrats’ Senate Finance Committee bill (the Baucus bill) being sent to the full Senate today, supports taxing insurance plans, although she aims to ensure that middle and lower income members of the public and those above age 55 do not bear the burden of the tax.

We all want an efficient government that does not encourage waste of resources.  Calling or writing your congressional representative to demand a tax on excess health care premium plans is the same as demanding the end of an egregious tax loophole.  Remember, the point of health care reform is to insure more Americans and strengthen the financial foundation of the nation.

Leave a comment

Posted in Barack Obama, economics, health care, politics, Uncategorized

Tagged , , , , , ,

Obama Nobel Prize for Multilateralism

Posted on October 9, 2009 | Leave a comment

By Marc Seltzer; originally published on October 9, 2009, at care2.com

President Obama’s winning of the 2009 Nobel Peace Prize recognizes his multilateral emphasis in resolving international conflicts.  Critics, who wonder what he has done, are overlooking the importance of this cooperative approach to the rest of the world.

During the first decade of the 21st Century, President Bush rattled Europe with his willingness to take unilateral action and use force to achieve America’s international goals. The U.S. is more willing to go this route in part becauses it has not been scarred by international wars on its home soil.  The attacks on Pearl Harbor, New York and Washington D.C. were painful, but Europe lost far more than fifty million lives, many of them civilians, during World War II.

President Obama struck a chord with the Nobel committee and people of all nations when he spoke of working in cooperation with the international community.  With the benefit of hindsight, President Obama recognizes that problems such as Middle-East conflicts and totalitarian regimes are not so easily fixable by the United States, despite great diplomatic and military power.

It is worth noting that many European nations were still monarchies in the 20th century.  Even as those monarchies were replaced by democracies, Europe plunged into two destructive wars and needed help from the United States to free itself, first of Nazi aggression, and then of Soviet oppression.

In many ways immitating the U.S. and Canadian models, European nations have now solidly pursued a democratic vision and free markets, trade and immigration among member states.  These policies have led to prosperity, stability and increased international leadership.

Since the Second World War, Europe gradually built a stable community of nations using organizations such as European Union and NATO and determined, constructive, diplomatic efforts.  European nations have used negotiation to form a union.

The current U.S. concerns over nuclear proliferation, totalitarian regimes, and violent extreamists may or may not resolve through diplomatic efforts.  But President Obama’s multilateral approach is the best option for peaceful resolution of conflicts.  Finding common ground with China, Russia and the European Community can bring tremendous power to our efforts to diffuse dangers abroad.  There is no magic wand that guarantees peaceful solutions, but the President is both realistic and savvy about how to ally the greatest force against enemies of democracy and peace.

In this light, the Nobel prize is a high honor for Barack Obama, a recogotion of a new attitude in U.S. foreign policy, and a confirmation that there is great desire in the world for 21st century international cooperation.

Follow my writing on Twitter.

Leave a comment

Posted in Barack Obama, foreign policy, politics, Reflections, Uncategorized

Tagged , ,

Irony of Obama’s Opposition

Posted on October 5, 2009 | 1 comment

Marc Seltzer ⓒ 2009

By Marc Seltzer; originally published on October 5, 2009, at care2.com

. .

By my calculation, we elected in Barack Obama, a leader who is expert in reasoning.  He distinguished himself academically to get into Harvard law school, and there, he competed in talking and writing about law and society to become editor-in-chief of the Harvard Law Review.

He went on to teach others to learn, analyze and debate at the University of Chicago Law School, a critical-thinker’s heaven.

More recently, his presidential campaign included a vision of bringing more reasoning to governance:  Rules against conflicts of interest and restrictions on lobbying aimed to insulate decisionmaking-by-reasoning from special-interest influence.

And now, as President, Mr. Obama consistently speaks of solving problems by using “what works,” instead of employing ideological approaches.  This too is reasoning and judgment, rather than resort to theory without consideration for the facts on the ground.  It does not mean that the President will not consider free-market economics, on the one hand, or government intervention, on the other, but he looks for solutions that take into account the myriad of consequences, rather than simply going with a principle, results be damned.

What is ironic, although maybe karmicly inevitable, is that this king of reason is being confronted with logic’s nemesis:  emotion, belief and intentional deception.

Take, for example, Mr. Obama’s first acts as President.  The economy was diving into a deeper recession.  The financial industry was frozen.  The President supported a huge rescue program.

He was branded a socialist revolutionary — taking society in a new direction.  Honestly, what would have been truly radical would have been to do nothing.  What he did was big and risky but not radical.  Radical would have been allowing the chips to fall where they may. It would have been emotionally satisfying, and some would have preferred to risk economic depression, international bank failure, destruction of real estate, stock and who-knows-what other markets to bailouts.  Mr. Obama could have stood firm and said, “I am a man of principle, and being responsible means paying the price for your mistakes.”  Many a man-on-the-street was calling for this approach, but it would have had radical consequences.

And to health care.  President Obama says, let’s fix the system.  A liberal vision would be the single-payer model, successfully used in Canada (see first-hand “comments” to blog).  It cuts costs and delivers excellent universal health care.  It is tax-payer funded and not connected to employment.  But the President seeks no such leap of faith from the American people.  He simply wants to adjust the current system, to bend the cost curve so that public systems he inherited do not go bankrupt in ten years, and so that more people can afford health care.  He doesn’t have to do this.  Medicare will not go bankrupt on his watch, and any action taken to solve this problem will be unpopular in some circles as excess is taken out of the system.  But acting now, instead of waiting for a crisis, is prudent.  In truth, President Obama’s approach is again quite cautious.

Yet look at the arguments stacked against him:  “Citizenship,” “Socialism,” “Nazism,” “government takeover,” “revolutionary policies,” “health care for illegal aliens,” “death panels for grandma,” and “take back our country.”  Lively conspiracy theories, expressions of fear and its anger, and political taunts, but hardly addressable through reason.

Insecure times have brought anger and fear to the fore.  Humans project their dislikes onto suitable targets, whether reasonable or not.  If we do it to our relatives, colleagues and celebrities, we certainly do it to our presidents.

If President Obama were publicly casting blame on the Muslim fundamentalists or communists in our midst, or stoking up anger and fear of some enemy, he would channel the feelings bubbling up.  Instead, he is playing the technocrat, using logic to solve problems and avoiding the messy emotions spewed about.  In areas like climate change, health care and the economy, where real-world concerns need to be addressed, the work of the government is finally getting done.

But feelings of fear and anger may be unsatisfied and may exacerbate if the economy fails to improve quickly enough.  Is the President, who reasons so well, who almost never shows anger, able to deal with the unreasonable?

Is reason itself an antidote, or is this like the dark forces bringing Kryptonite to Superman?

1 Comment

Posted in Barack Obama, humor, politics, Reflections, Uncategorized

Tagged , , , ,