Tag Archives: Medicare

Peter Thiel Fudges Facts on JFK

By Luke Brinker

In his latest Newsweek column, Niall Ferguson extols billionaire PayPal founder and prominent libertarian Peter Thiel as “one of the most interesting and original thinkers in America today.”

Like most libertarians, Thiel’s opposition to big government comes with a “but” appended to it. In Thiel’s case, he supports massive government investment in research and development, which has significantly benefited tech entrepreneurs like Thiel himself. This particular line — which calls Ferguson’s praise for Thiel’s great mind into question — is particularly noteworthy:

However, when it comes to questions about health care, nuclear power, and education, Thiel readily concedes that government has a role to play—just not the one it plays today. As he puts it: “If Einstein sent a letter to the White House today, it would get lost in the mailroom and be treated as a joke. In the late 1960s, Kennedy focused on the space program and didn’t dedicate money to health care. Can you imagine the government doing that today?”

Set aside the fact that JFK was dead in 1963, so he didn’t do anything related to space “in the late 1960s.” What’s most appalling about Thiel’s remark is his suggestion that the 35th president emphasized space at the expense of health care. In fact, JFK pushed for the Medicare program that his vice president and successor, Lyndon Johnson, signed into law in 1965. (Faced with a more conservative Congress than Johnson dealt with, JFK had had difficulty passing much of his domestic program.) As this clip from one a 1962 speech at Madison Square Garden demonstrates, JFK was an impassioned advocate for universal health care:

With all that praise for Europe’s advances in the field of health, the JFK of Madison Square Garden would surely be labelled a radical Marxist by the Tea Party. Perhaps that’s why the right loathed Kennedy when he was in the Oval Office.

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The Most Important Takeaway from the NBC-Facebook Debate

By Luke Brinker

Willard Mitt Romney is going to be the Republican nominee, and barring the release of a sex tape or the discovery that he’s been running an abortion mill out of his New Hampshire country house, it’s hard to see what could change that. Romney’s financial juggernaut far surpasses that of his rivals. While Newt Gingrich may mar him as a “Massachusetts moderate,” Romney boasts a solid lead in conservative South Carolina, a primary won by every eventual GOP nominee since 1980. Conservative forces may talk of mounting an Anybody But Romney effort, but they can’t even agree on who the conservative alternative should be. The question is no longer whether Romney will win the nomination. It’s whether he’ll have it wrapped up by the end of the month.

Forgive me, then, if I wasn’t particularly interested in the fireworks between the candidates at this weekend’s debates. Instead, I was struck by a line of questioning pursued by moderator David Gregory in this morning’s NBC-Facebook debate. Gregory, mouthing platitudes about the “age of austerity” in which we live, asked Jon Huntsman to name three steps he’d take that would make Americans “feel pain.” Were the economic implications of the austerity regime demanded by Gregory not so disastrous, the spectacle of a lavishly paid talking head asking a candidate what he would do to make Americans “feel pain” would be rather amusing. (The loss of millions of jobs in the recession apparently wasn’t painful enough.) But one doesn’t need to be a bleeding heart to see the foolishness of Gregory’s argument. A passing familiarity with economics would suffice.

The dangers of premature austerity are well-documented. The lessening of government support from a fragile economy removes a crucial source of investment and economic stimulus. Consider the effects of President Franklin Roosevelt’s 1937 austerity regime, which halted the recovery from the Great Depression before FDR reversed course later in 1938:

For a more recent example, look no further than the case of Great Britain, where Prime Minister David Cameron and Chancellor of the Exchequer George Osborne are implementing a harsh set of austerity measures, as the Fiscal Times reported this summer:

The first year of austerity has not gone well for the Cameron government. In the public sector, where cutbacks are most severe, the figures for Cameron’s five-year plan are startling: a 68 percent cutback in government housing subsidies, a 31 percent cut in the budgets for the environment and rural support programs. Culture and sports, justice, local government, job training: All of these departments are looking at spending reductions of 25 percent or more.

Osborne’s commitment is plain: Long-term growth can be achieved only through cuts in spending. In essence, it is a replay of the phrase that made Margaret Thatcher famous among Britons back in the 1980s: “There is no alternative,” commonly abbreviated as TINA.

The Tories have options the Greeks do not enjoy, and not all has gone south. Since Britain controls its own currency, it can let the pound drop to stimulate exports. Unemployment is high, at 7.7 percent, but that is a stable figure and a marginal improvement since the spring, achieved even in the face of public-sector layoffs of more than 100,000 and counting.

But it is now clear that growth is a long way off. The economy has been stagnant since autumn, and all the major institutions—the Organization for Economic Cooperation & Development, the IMF, and a raft of private-sector forecasters—are dropping growth predictions to the range of 1.4 percent to 1.5 percent, even as Osborne sticks to a (relatively rosy) 1.7 percent estimate for the current fiscal year.

A more telling figure is the measure of retail sales. They fell by 1.4 percent in May, the most recent month reported, and we no longer have to wonder why British businesses are not investing. Why should they? The Cameron cuts are intended to restore business confidence, but why should deflationary fiscal policy make anyone confident when Britons are now demonstrating that they are too uncertain to spend?

So the results are coming in on Britain’s austerity crusade, and Americans should pay especially close attention, because we are contemplating what can now be established as the same mistake. It is this: Thinking austerity by itself will work.

Add to this a 2011 International Monetary Fund paper finding that “a 1 percent of GDP fiscal consolidation reduces real private consumption over the next two years by 0.75 percent, while real GDP declines by 0.62 percent,” and it’s clear how disastrous the economic implications of Gregory’s sadomasochism would be.

But aren’t Social Security and Medicare – the “entitlements” that Very Serious People are always calling on policymakers to “rein in” – bankrupting us? Health care costs must indeed be contained, but the solutions put forth by the Very Serious People would do nothing to solve the problem. Paul Ryan’s scheme to privatize Medicare would raise health costs for seniors, as Medicare is far more cost-efficient than private insurance. Shifting costs is ducking the problem of rising health care spending (on unnecessary tests, procedures, insurance company administrative costs, and so on), not solving it. As for Social Security, the Congressional Budget Office conducted a study in 2010 finding that a two-percentage point increase in the payroll tax paid by both employers and employees over 20 years would make up for the program’s 75-year shortfall. Lawmakers could also change the fact that only the first $90,000 of income is subject to the payroll tax.

The Village’s vapid utterances about the need to hunker down and “get serious” about “putting our fiscal house in order” have been repeated so often that their veracity is, unfortunately, taken for granted in all too many circles. But a cursory acquaintance with facts – the things David Gregory would have us believe he relentlessly pursues – puts the lie to the austerians’ economically illiterate arguments.

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Racism and the Tea Party’s Selective Opposition to Government

By Luke Brinker

Conventional wisdom holds that the Tea Party arose in opposition to the bailouts and economic stimulus programs enacted under Presidents George W. Bush and Barack Obama. Motivated by a principled opposition to “big government,” Tea Party protesters took on establishment politicians of both parties, supporting candidates committed to lower spending, minimal government intervention, and decreased taxes.

While Tea Party supporters still cling to this narrative, it’s been obvious for some time now that it doesn’t withstand scrutiny. In April 2010, CBS and the New York Times conducted a poll finding that Tea Party respondents were just as likely as non-supporters of the Tea Party to argue that Social Security and Medicare – paragons of big government – were worth the cost. “Small government” sounds blissful in theory, but here’s how Tea Partyers deal with its practical implications:

But in follow-up interviews, Tea Party supporters said they did not want to cut Medicare or Social Security — the biggest domestic programs, suggesting instead a focus on “waste.”

Some defended being on Social Security while fighting big government by saying that since they had paid into the system, they deserved the benefits.

Others could not explain the contradiction.

“That’s a conundrum, isn’t it?” asked Jodine White, 62, of Rocklin, Calif. “I don’t know what to say. Maybe I don’t want smaller government. I guess I want smaller government and my Social Security.” She added, “I didn’t look at it from the perspective of losing things I need. I think I’ve changed my mind.”

More recently, Harvard government professors Theda Skocpol and Vanessa Williamson interviewed Tea Party sympathizers across the country. Skocpol and Williamson’s findings corroborated the results of the CBS-Times poll:

In our interviews and group discussions, however, we found Tea Party members to be quite inconsistent about government. At the abstract level, all of them decry big government, out-of- control public spending and ballooning deficits. But when governmental specifics come into view, it’s a different story. Tea Partiers aren’t opposed to all kinds of regulation or big tax-supported spending. Rank-and-file Tea Party participants evaluate regulations and spending very differently, depending on who or what is regulated, and whether those who benefit from various kinds of public spending are considered hard workers or freeloaders.

The current Tea Party distinction between freeloaders and hardworking taxpayers has undertones that distinguish it from a simple reiteration of the long-standing American creed. In Tea Party eyes, undeserving people aren’t defined simply by a tenuous attachment to the labor market (USURTOT) or receipt of unearned government handouts. Worthiness is a cultural category, closely tied to certain racially and ethnically tinged assumptions about American society in the early 21st century. Tea Party resistance to giving more to people deemed undeserving is more than just an argument about taxes and spending. It’s a heartfelt cry about where they fear their country may be headed.

Drawing distinctions between the “deserving” and “undeserving” poor is nothing new. (The English Poor Law of 1601 enshrined such distinctions in statute.) For Tea Partyers, “undeserving” usually means “racial minorities.” In 2010, Newsweek carried a story on Tea Party participants’ appalling views of African Americans:

So a new poll by researchers at the University of Washington caught my eye. The findings are sure to fan the flames further. “People who approve of the Tea Party, more than those who don’t approve, have more racist attitudes,” says Christopher Parker, a University of Washington professor who directed the survey. “And not only that, but more homophobic and xenophobic attitudes.” For instance, respondents were asked whether they agreed with various characterizations of different racial groups. Only 35 percent of those who strongly approve of the tea party agreed that blacks are hardworking, compared with 55 percent of those who strongly disapprove of the tea party. On whether blacks were intelligent, 45 percent of the tea-party supporters agreed, compared with 59 percent of the tea-party opponents. And on the issue of whether blacks were trustworthy, 41 percent of the tea-party supporters agreed, compared with 57 percent of the tea-party opponents.

Of course, Tea Partyers don’t deny racism. Far from it: a 2010 survey by Public Religion Research found that while 44 percent of Americans overall saw “discrimination against whites as being just as big as bigotry aimed at blacks and other minorities,” 61 percent of Tea Partyers subscribed to that view.

While rank-and-file Tea Party supporters tend to be older, white, socially conservative Americans with outdated views on race, this is not to say that establishment figures who appropriate Tea Party rhetoric about “small government” are all motivated by racial bias. House Budget Committee chairman Rep. Paul Ryan, for instance, put forth a plan to end Medicare as a public program and replace it with a voucher system for private insurance within 10 years. As flawed as the plan was, it was certainly scaled-back government in action. How did rank-and-file Tea Partyers respond? Seventy percent of them opposed the Ryan plan.

It would be unfair to assert that the Tea Party is entirely driven by racial bigotry. Partisanship explains much of the Tea Party’s reflexive opposition to President Obama. In an August op-ed for the New York Times, Notre Dame political scientist David Campbell and Harvard public policy professor Robert Putnam noted that Republican affiliation was the “strongest predictor” of Tea Party participation. Tea Partyers oppose “Obamacare,” even though it’s modeled on a plan drawn up by the conservative Heritage Foundation in the 1990s; rail against the president’s cap-and-trade proposal on climate change, even though John McCain and Sarah Palin supported cap-and-trade as a conservative, market-based approach in 2008; and denounce the “Buffett rule” to end government preference for capital gains-based income as socialism, even though conservative saint Ronald Reagan raised the capital gains tax to 28 percent, which was then the top income tax rate. (The capital gains rate is now 15 percent.) There’s nothing wild-eyed about these Obama proposals, but because a Democrat is proposing them, the Tea Party screams.

In short, the Tea Party favors smaller government except when it disadvantages them and supports market-based health reform and climate change solutions, except when they’re endorsed by Nobama. In fact, government is okay as long as it doesn’t waste too many resources trying to help lazy blacks. And to think that critics labeled Occupy Wall Street incoherent and unfocused.


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Washington Post Fudges Facts on Deficit Debate

By Luke Brinker

Lori Montgomery has what economist Dean Baker rightly terms a “front page editorial” in today’s Washington Post. Montgomery laments that for all of the new Congress’s talk about decreasing the federal budget deficit, lawmakers took little action to actually reduce it. The piece contains two overarching flaws: its tacit assumption that not solving the deficit nownownow is something to mourn, and its analysis that to save the republic, seniors’ Social Security benefits must be cut in the future.

Montgomery ignores the empirically proven fact that harsh austerity regimes aimed at reducing a country’s budget deficit worsen the country’s economy (thereby leading to diminished tax revenues and even higher deficits). A July 2011 paper from the International Monetary Fund looked at 173 instances of austerity and determined that “a 1 percent of GDP fiscal consolidation reduces real private consumption over the next two years by 0.75 percent, while real GDP declines by 0.62 percent.” (h/t Ezra Klein).

The article asserts that “Social Security and Medicare pose a long-term threat if there are no constraints on benefits.” As economist Christina Romer might say, this claim is “oh so wrong.” Let’s start with the latter program. Montgomery makes the all-too-common mistake of conflating Medicare with the problem of rising health care costs, which are indeed driving long-term budget deficits. The solution is not to cut Medicare, with its much more efficient spending, and replace it with a less-efficient “premium support” model (like, say, the  Ryan-Wyden plan), which would only shift costs without addressing their underlying causes (too many unproven and unhelpful procedures, fee-for-service medicine, and so on).

By arguing that cutting Social Security is essential to the nation’s fiscal health, Montgomery certifies her status as a Very Serious Person among the Peter G. Peterson Foundation crowd. What she doesn’t do is display a basic comprehension of how the program actually works. Here’s Baker:

The piece also includes several comments to the effect that Social Security and Medicare will break the budget. In fact, Social Security’s costs are rising very gradually. Furthermore, its projected benefits are fully paid for through the year 2038 with no changes whatsoever in the program. Even after that date, if Congress does not change the law, Social Security cannot contribute to the deficit. It would only be able to pay out about 80 percent of scheduled benefits (roughly 10 percent more than the average benefit received by today’s retirees).

Moreover, economists at the Congressional Budget Office conducted a study last year finding that a two-percentage point increase in the payroll tax paid by both employers and employees over 20 years would make up for the program’s 75-year shortfall. (It’s also worth noting that only the first $90,000 of income are subject to the payroll tax. This means that working- and middle-class families pay a dramatically higher proportion of their incomes into Social Security than the affluent.)

Unless the Post commits itself to budget reporting that bears some relationship to reality, it’s unlikely that its flagging fortunes will be revived anytime soon.

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Politifact’s Shaky Command of Facts

By Luke Brinker

The controversy surrounding Politifact’s ridiculous selection for its “Lie of the Year” illuminates the intellectual bankruptcy of the mainstream media’s cult of balance.

According to Politifact’s high priests of truth, Democratic claims that Rep. Paul Ryan’s Medicare plan would “end Medicare as we know it” are egregious distortions of reality. But under the Ryan plan, Medicare would cease to exist as a public insurance program in 2022. Given that Medicare has been a single-payer program since its creation in 1965, any objective observer would conclude that such a proposal would indeed end Medicare “as we know it.” Alas, while Politifact promotes itself as a defender of plain facts, regardless of partisanship or ideology, it betrays its allegiance to Peter G. Peterson Foundation-style deficit hawkery, as Jonathan Chait notes:

oes the Republican plan indeed end Medicare? I would argue yes. But it’s obviously a question of interpretation, not fact. And the whole problem with Politifact’s “Lie of the Year” is that it doesn’t grasp this distinction. Politifact doesn’t even seem to understand the criteria for judging whether a claim is a question of opinion or a question of fact, let alone whether it is true. The item explaining this year’s choice largely consists of irrelevant filler. For instance, Politifact quotes a worried budget scold:

“In terms of creating a national conversation about fiscal reform, the last thing we need is demagoguing attacks against people who have put forward serious policy proposals,” said Jason Peuquet, a policy analyst with the bipartisan Committee for a Responsible Federal Budget. “It’s very worrying.”

Yes, if your agenda is to encourage politicians to propose deficit reduction, then you’ll be worried about any criticism of any deficit reduction proposal, accurate or otherwise. So what? (Matthew Yglesias further parses Politifact’s incredibly weak explanation.)

Of course, deficit alarmists are Very Serious People committed to the future of the republic, and we aren’t supposed to point out that their social program-slashing agenda is, at its core, an ideological proposition. The problem is that the Ryan plan would do nothing to rein in health costs, which drive long-term deficits. As Politifact asserts, something called “Medicare” would still exist under the Ryan plan. However, it wouldn’t be Medicare as it’s existed for nearly half a century and would instead give seniors vouchers with which to purchase private health insurance plans. Health care expert and physician Ezekiel Emanuel, who knows a thing or two about these issues, points out that the Ryan plan shifts costs, but doesn’t reduce them:

Premium support is classic cost shifting, rather than cost cutting. Unless growth in health care costs is low, Medicare beneficiaries will just have to pick up the difference between the voucher’s value and the cost of the health insurance plan they purchase. In fact, the original Ryan plan would have increased out-of-pocket costs for older people by more than $6,000 in 2022. And we can’t depend on competition to bring costs down. Competition among insurance companies in general has not lowered them — in fact, from 1970 through 2009, Medicare spending per beneficiary grew at a slower rate than that of private health insurance.

Many premium support plans contain a spending cap meant to check the growth of Medicare. But whether this works depends upon a very technical — but essential — point: How fast will the amount of the premium support grow? Will it grow with inflation? With gross domestic product? With overall health care spending? When they say the “devil is in the details” this is what they mean. Under the Rivlin-Domenici plan, the value of the voucher would be capped at the rate of overall economic growth plus one percentage point — less than health care inflation has historically been. The Wyden-Ryan plan replaces the voucher cap with an overall cap on Medicare spending using the same target. Excess spending would prompt cuts to doctors and other providers, or an increase in payments by wealthier Medicare beneficiaries.

Moreover, as Paul Krugman demonstrates, Medicare is far superior to private insurance when it comes to reining in costs:

The idea of Medicare as a money-saving program may seem hard to grasp. After all, hasn’t Medicare spending risen dramatically over time? Yes, it has: adjusting for overall inflation, Medicare spending per beneficiary rose more than 400 percent from 1969 to 2009.

But inflation-adjusted premiums on private health insurance rose more than 700 percent over the same period. So while it’s true that Medicare has done an inadequate job of controlling costs, the private sector has done much worse. And if we deny Medicare to 65- and 66-year-olds, we’ll be forcing them to get private insurance — if they can — that will cost much more than it would have cost to provide the same coverage through Medicare.

By the way, we have direct evidence about the higher costs of private insurance via the Medicare Advantage program, which allows Medicare beneficiaries to get their coverage through the private sector. This was supposed to save money; in fact, the program costs taxpayers substantially more per beneficiary than traditional Medicare.

Facts, as John Adams said, are stubborn things. Ironically, they seem to be Politifact’s biggest enemy today.

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