Third Way Perspectives
Archive for the ‘Economic Program’ Category
February 10th, 2014
Lost in the back-and-forth over the most recent CBO report on the Affordable Care Act (ACA) is a simple fact that any expansion of health care coverage for Americans will inevitably have an impact on America’s working habits. It is no less true of GOP proposals than Obamacare.
To make coverage more affordable, any proposal must provide some sort of subsidy. For example, the recent Republican proposal from Sens. Tom Coburn (R-OK), Richard Burr (R-NC), and Orrin Hatch (R-UT) includes a tax credit for lower income workers. The act of giving someone financial assistance for health care will naturally reduce the need to work somewhat.
Rep. Paul Ryan (R-WI) thinks this creates a poverty trap. While Ryan neglects the fact that millions of Americans are bankrupted every year due to medical bills, he instead focuses on the ACA’s subsidies to buy coverage through the federal and state marketplaces. These subsidies decline as workers earn more money, which means that workers have to work a little harder to keep another dollar in take-home pay. So yes, some people will choose to work less to keep their subsidy. But does that make the ACA a poverty trap? Of course not. We have dozens of social insurance programs ranging from food stamps to the Earned Income Tax Credit, and yet we remain the world’s greatest economy.
The alternative to phasing out benefits by income is to provide the same benefit to rich and poor alike, as many European nations do. But that requires higher tax rates or cuts in government services, which, in turn, leads to greater burdens on everyone.
Here is how CBO describes this problem in their most recent report:
CBO’s estimate that the ACA will reduce employment reflects some of the inherent trade-offs involved in designing such legislation. Subsidies that help lower- income people purchase an expensive product like health insurance must be relatively large to encourage a significant proportion of eligible people to enroll. If those subsidies are phased out with rising income in order to limit their total costs, the phaseout effectively raises people’s marginal tax rates (the tax rates applying to their last dollar of income), thus discouraging work. In addition, if the subsidies are financed at least in part by higher taxes, those taxes will further discourage work or create other economic distortions, depending on how the taxes are designed. Alternatively, if subsidies are not phased out or eliminated with rising income, then the increase in taxes required to finance the subsidies would be much larger.
This is nothing new. CBO had previously estimated that the ACA would have some impact on jobs. What’s new is that the CBO has refined his estimate and made it more precise based on the latest research.
Some conservative commentators like Avik Roy have acknowledged that GOP plans will also affect working habits due to income-based subsidies. But conservatives persist in the belief that GOP alternatives are morally superior even though their actual solutions are just different choices about the amount of the subsidies and the degree of security offered to American workers.
Economics is called the dismal science because it shows the downside to any choice. But there’s nothing dismal about having security and stability in your health care. As Jason Furman, Chairman of the Council of Economic Advisors at the White House explains, the ACA provides many economic benefits. Today, under Obamacare, millions of Americans no longer have to worry about getting coverage for a pre-existing condition. They don’t have to stay in a job that they don’t like because of their health insurance. And they don’t have to worry about losing their health care coverage if they lose their job. The GOP needs to make it clear whether they disagree with the goals of Obamacare or the means.
February 4th, 2014
It is clear that HealthCare.Gov is working better. Enrollment figures are climbing. Over 3 million Americans have selected a plan through the federal and state marketplaces, and another 6.3 million are getting coverage through Medicaid. While problems remain, the level of interest in getting coverage has grown—to as many as 2 million visits to the federal website in one day.
But amid these public proof points will be another less obvious measure of success—a decline in the need for a patchwork of programs designed to help the poor who continue to lack coverage despite the Affordable Care Act (ACA).
One of those programs, called the 340B Drug Pricing Program, however, shows no signs of slowing down. 340B requires drug manufacturers to provide discounts to hospitals and clinics that generally serve low-income patients or other groups like HIV-AIDS patients. The discounts range from 20% to 50% off the cost of drugs. Those discounts are often bigger than the discounts required of drug manufacturers for Medicaid patients.
December 20th, 2013
James Madison would be “aghast.” That was one of the incendiary charges leveled at the National Security Agency and its mass surveillance activities by Judge Richard Leon in his December 16 opinion ordering the government to stop collecting some of the data that it’s been gathering on private citizens here and abroad.
But Thomas Jefferson might be horrified as well, because the NSA collection efforts are having a fairly profound effect on American business and its efforts to sell goods and services abroad. Jefferson, a big believer in the American “taste for navigation and commerce,” would be dismayed that our government was doing things that could hurt our competitiveness and our ability to set the terms of global trade.
To be sure, there has always been some tension between U.S. high-tech industries and our national security. In the 90s, the rules were fairly primitive, such as limitations on exports of high-performance computing designed to prevent countries from developing weapons of mass destruction. Those restrictions were quickly rendered outdated by Moore’s Law, but had they remained they would have prevented the exports of game consoles like Xbox.
Since then, increased globalization and the rise of terrorist organizations operating in the shadows and across national boundaries have complicated both the security and economic issues. The current debate about Edward Snowden’s intelligence revelations may seem like an unlikely place to see that tension emerge, but beyond the discussions of civil liberties and counterterrorism, it is becoming clear that the post-9/11 surveillance apparatus may be at cross-purposes with our high-tech economic growth.