Monday, February 8, 2010

Letter sent to Wall Street Journal

I have just sent a letter to the editor to the Wall Street Journal, commenting on an article published this morning by R. Glenn Hubbard, dean of the Columbia University Business School and chairman of the Council of Economic Advisors under President George W. Bush. Read the article here.

Here is my letter:


To the editor:

R. Glenn Hubbard, after reciting a standard list of bad trends, tells us that "If taxes were increased sufficiently to accomodate the CBO's projected increase in entitlement spending, long-term U.S. GDP growth rates would be reduced ...unacceptably lowering our future living standards."

There are two problems with this statement. First, since GDP growth increases pressure on finite resources and may surpass the carrying capacity of the environment, we should not assume that growth is good.

Second, Medicare, Medicaid, and Social Security increase personal security against bad fortune, which might outweigh any decrease in GDP and actually increase future living standards. People willingly accept reduced current consumption in order to buy the security provided by various kinds of insurance, and the same logic can apply to insurance purchased collectively via entitlement programs.

Hubbard does make an excellent point when he says that "the tax increases [to pay for the president's welfare state ambitions] must necessarily be broad-based. . . ." While elimination of favorable tax treatment for the rich, including the scandalous taxation of "carried interest" at capital gains rates, may help, tax increases on the general population will also be necessary. And if the reasons for these increases are properly explained to the public, it may be willing to support them.

Paul deLespinasse, Ph.D.
Professor Emeritus of Political Science
Adrian College
Adrian, Michigan 49221

Now living in Corvallis, Oregon

A "Mad-As Hell Doctor" writes in CommonDreams

Paul Hochfeld, a Corvallis doctor with whom I am slightly acquainted, has written an interesting article which appears in this morning's CommonDreams. Read it here.

A key point made by Dr. Hochfeld:

"Single payer means one risk pool. You've heard the slogan. Everyone in. Nobody out. We gather all the money that employers and individuals are currently paying for health care. It's not more money. It's the same money, already being spent on health care, but by pooling it, we can save 20% right off the top."

This may be true, but two key problems standing in the way of such a reform are:

1. Because of the current financing of medical care largely through "employer-paid" insurance which does not show up on individuals' pay stubbs as income most people are not aware how much this insurance is already (indirectly) costing them.

2. Nobody has come up with a system for capturing "all the money that employers and individuals are currently paying." How to get from here to there may be the most troublesome question facing reformers here.

Tuesday, February 2, 2010

Letter to Andrew Tobias

The Wall Street Journal's summary of the proposed budget (page A-5) this morning notes that "Fund managers would lose the ability to claim capital-gains treatment on certain income by using "carried interest" rules."

This is wonderful!

We have discussed this before, and I hope you will lead the cheers for this proposal and see what you can do to discourage Senator Schumer from helping shoot it down again. This situation is absolutely disgraceful. President Obama should announce that he will veto any legislation that does not incorporate this reform.

Although this would be a drastic change, I wonder if we do not need to change federal tax law so that ALL (and I do mean ALL!) income is taxed at the same set of rates without regard to its source. This may be the only way to avoid gross unfairness in favor of those with the money to hire creative tax lawyers and CPAs to figure out how to exploit existing loopholes and lobbyists to implore Congress to create new ones.

If it proves impossible to get Congress to discipline itself on this matter, it might be interesting to bring a lawsuit based on the equal protection component of the due process clause of the Fifth Amendment to see if the courts will rule that discriminatory tax rates for different kinds of personal income are unconstitutional.

I am aware that the favorable treatment of capital gains helps compensate for the taxation of asset price increases caused by inflation. However a more appropriate remedy for that problem might be to index capital gains. Or if that is too unwieldy, perhaps we should just tax the inflationary gains, figure that a little injustice cannot be avoided, and hope that creating a class of wealthy and influential people with a strong interest in preventing inflation might have beneficial results for everyone.

Paul F. deLespinasse, Ph.D.
Corvallis, Oregon

Monday, January 25, 2010

A second chance to get health care reform right

I was intrigued to read an op-ed in this morning's Oregonian which is very similar in basic outlook to my most recent discussion of medical reform.

The author, Ron Mock, is an associate professor of political science and peace studies at George Fox University here in Oregon. With kind permission from Prof. Mock, I am posting his piece here. As he notes, "We do make similar points about the process, with enough differences that we won't be redundant to one another. "


A second chance to get health care reform right


By Guest Columnist
January 25, 2010, 9:00AM


By Ron Mock

I voted for Barack Obama in 2008 and celebrated his win. I rooted for Scott Brown this year in Massachusetts and am celebrating his win, too, because Brown's victory gives Obama a second chance to be what he promised to be.

Barack Obama won my vote because he was idealistic and pragmatic and trans-partisan. I believed him when he said he was committed to addressing the big issues where we had allowed things to drift into dangerous territory because of the flaws in our old politics: overdependence on special interests and growing polarization.

I believed Obama when he said he would appeal to our most fundamental human values and our most important overarching goals. He would help us see where we all -- Republicans and Democrats, blacks and whites and others -- shared ideals and dreams. Then he would help us develop the creative new ideas that would allow us to work together to face the big issues, not sidestep them.

Obama as a candidate in 2008 said health care costs were growing at a rate that would bankrupt our country. People without insurance were being left out of the system. All attempts to reduce government deficits were doomed to fail if health care costs continued to mushroom. He told us we needed to change the dynamics so health care would be accessible to all while consuming less of our national wealth, rather than constantly consuming more.

I agreed with all this. To get health care cost containment and expanded health care coverage, we needed a president who recognized the urgency of the issue, would go all out to address it, and would be able to create a trans-partisan creative environment in which the best ideas of each political faction could become resources for a new solution.

So far, Obama has not lived up to my hopes or our needs when it comes to health care policy. He didn't come equipped with a rock-solid vision for a new system that would work. He didn't look very far for ideas. He left the initiative to congressional leaders with truncated partisan perspectives. He endorsed a flawed approach. And worst of all, instead of presiding over trans-partisan creativity, he sat by while tawdry backroom politics were used to sell off favors in exchange for votes.

The current Democratic plan is hardly the product of a reality-based process. Health care costs are skyrocketing because so many of us use insurance paid for by someone else to fund most of our health care. We practically ignore the true costs of our health care, even if we pay modest co-pays and deductibles, because the most important costs are covered for us. As a result, neither those who consume health care, nor those who produce it, have any natural incentive to curb costs.

We are playing with a law of nature here. If people making choices about consuming health care are insulated from the costs of their choices, they will consume more health care. The more they are insulated, the more they will consume. Insulate them entirely -- make health care free -- and there will be no effective limit to how much they will consume, unless that limit is provided by some outside force.

The Democrats' insurance reform proposal will make insurance available to more people, but in every other way it will reinforce the dynamics that are inflating costs -- unless government officials start limiting our access to the system. Costs will go up faster or access will be limited by agencies beholden to the political system (with all the attendant opportunities for incompetence, indolence, corruption and abuse), or both. Most likely both.

I oppose the Democratic health care plan because I'm certain it will make problems worse, not better. But I also think good health care reform is possible. I have seen ideas with elements that, when combined, could do much better than the current plan. Oregon Sen. Ron Wyden proposed some of them last year. Martin Feldstein proposed another approach last fall in which every American would get vouchers with which to purchase health care insurance, with a deductible scaled to income calibrated to make consumers pay attention to costs but still be manageable under most families' budgets.

These aren't perfect ideas. But now that Scott Brown has been elected to the Senate, Obama will need to recalibrate his approach. If he can learn from the botched first attempt, open lines to all points on the political spectrum, and start mining them for ideas and cultivating them for allies, he has all the intellectual and personal tools to pull off real health care reform this summer, or maybe in 2011 -- and in the process establish his credibility to tackle the even bigger issues (our stagnant economy, global warming, terrorism) that lurk just beyond health care.

Ron Mock is an associate professor of political science and peace studies at George Fox University in Newberg.




Saturday, January 23, 2010

The problem with public employee collective bargaining

I have just sent the following letter to the Cascade Policy Institute in Portland, Oregon. I think it raises questions which may be of general interest, and refers to a Wall Street Journal article and new book that may also be interesting to many readers.
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To: Cascade Policy Institute (selected people)

This morning's Wall Street Journal featured an article by the author of a new book: , Steven Greenhut. The article is "Public Employee Unions are Sinking California." The book is Plunder: How public employee unions are raiding treasuries, controlling our lives and bankrupting the nation. Read the article at [here].


I have long been pretty sure that Oregon schools were fully operational and fully staffed during the (I hope "the"!) Depression, unlike the recent times when days and staffing were cut during hard times. It seems to me (see op-ed article, below) that an important difference between then and now is that we now have public employee unions, making it difficult and sometimes impossible to save the needed money by cutting compensation while retaining all employees.

But I wonder: Has anybody done research on the extent to which teacher and other state employee compensation was reduced during the Depression? I know from my own family history that my father was earning $100 a month on a 9 month basis teaching high school over in Adrian, Oregon when I was born, which would equate to $13,804 a year according to the price level calculator at the Federal Reserve Bank. And he was considered fortunate to have a job.

Are there still records showing public employee compensation for particular people, including teachers, back that far? It seems to me that this might be a worthwhile research project for your staff or one of your associates.

Cordially,

Paul deLespinasse, Ph.D.
Corvallis, Oregon


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Copyright © 2004 by Paul deLespinasse. November 2004. This ran in the Corvallis Gazette-Times.


TIME TO END PUBLIC SECTOR COLLECTIVE BARGAINING?

The increasing rancor [ “Contract dispute turns ugly”, GT, November 10] in negotiations between local teachers and the Board of Education is very unfortunate.

Why has school finance become a can of worms? Even during the hard days of the Depression, Oregon schools were fully staffed and ran full-length years. What has changed?

Democratic government is inherently experimental. Some policies may sound attractive but turn out to have unanticipated problems. It is now clear that Oregonians made a terrible mistake several decades ago when we decided to allow teachers and other government employees to engage in collective bargaining.

The argument for collective bargaining with private employers is that it strengthens the hands of workers who otherwise might be exploited by high-handed and greedy corporations. This argument does not apply to government workers because the greater danger is that they will be overpaid, not that they will be underpaid.

Teachers and other government employees are substantial parts of the electorate in every political subdivision in the United States. Elections are often very close. No official wants to alienate a voting bloc that could determine whether he or she will be re-elected. Nor are the officials who would decide, in the absence of collective bargaining, what teacher and civil servant salaries would be, paying these people out of their own pocket. It is easier to be “liberal” with other people’s money.

If government were to set salaries too low it would be unable to attract sufficient numbers of qualified people to work for it, and would be forced to pay more. There is no similar mechanism that can force a correction when salaries are too high.

In the private sector union demands are moderated by competition, which can destroy a corporation paying its workers too much. We thus see pilots’ unions agreeing to major salary cuts from United Airlines, Delta, etc., because if their employer disappears, so do their jobs. Private sector union demands are also sometimes moderated by the danger that work will be outsourced to other countries.

The work performed by government employees is harder to outsource and not generally subject to competition. It is easy to understand why public employee unions are outraged by privatization and absolutely panicked by the concept of vouchers allowing parents to send their children to private schools (competitors!) with money provided by taxpayers. It is not so clear that it is in the interest of the general public to accommodate the unions in this matter.

Public officials have a duty to drive the best possible bargain on taxpayers’ behalf when setting the salaries and fringe benefits of teachers and other people doing the public’s work. They need flexibility to make changes when economic conditions change. Collective bargaining prevents our representatives from doing either of these things, and we should therefore give serious consideration to eliminating collective bargaining for government employees.

Of course it won’t be easy. But most worthwhile reforms aren’t easy. Oregon has often lead the United States in recognizing the need for reform, and perhaps the time has again come for us to march at the front of the line.
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Paul F. deLespinasse is professor emeritus of political science at Adrian College in Michigan. He can be reached at pdeles@proaxis.com.


Wednesday, January 20, 2010

Needed more than ever: a bipartisan commission on health care reform

President Obama's famous luck continues to run. He has been saved from having to sign the medical "reform" atrocity that was being ground out by congressional sausage-makers by last night's election of Republican Scott Brown to "Ted Kennedy's seat" in the U.S. Senate.

I was a nearly lifelong Republican who was converted to becoming a Democrat by George W. Bush's foreign policy, particularly the totally unnecessary Iraq war, and by the incompetent management of that war until implementation of the "surge" during Bush's second term. I voted for Obama in 2008 and do not regret doing so in the slightest, though he has not lived up to my admittedly optimistic expectations.

I believe that the key to successful health care reform lies, not with the Democratic Party, not with the current Republican leaders, but rather with those members of the electorate who consider themselves conservatives and/or Republicans. It seems to me that from the point of view of these people, much of which I share, a carefully-designed single payer insurance system would be a much better approach than the outrageously complicated, constitutionally-dubious scheme of mandating that individuals buy insurance.

It will not be possible to scale down the recent bills to just "reform insurance". To prohibit insurance companies from discriminating based on preexisting conditions without also mandating that everybody buy insurance or be covered by employer-purchased insurance would be to make the insurance business an impossible one. If we could wait to buy fire insurance until our house catches fire, fire insurance would have to cost as much as the repairs or replacement of the house-----in other words, it wouldn't be insurance.

If we are going to require everyone be insured, why not just insure everybody and pay for it with a broadly based tax (not just soak the rich!---there aren't enough of them).

President Obama should announce in his State of the Union message next week that he would like to create a bipartisan commission to study the health systems of all foreign countries that have them, analyze their strong points and weak points, and design a system for the U.S. that incorporates as many of the strong points and as few of the weak points as possible. This proposal would then go to Congress for an up or down vote.

I believe that a properly-designed public relations campaign could sell such a system to the American people in spite of efforts by self-interested groups like insurance companies, drug companies, and others to confuse the issue.

If public opinion, especially among conservatives and Republicans, came to favor a single-payer system, the congressional Republicans would come around and support that system . . . . or be thrown out on their ears. By analogy, remember how George Wallace, who won elections proclaiming "segregation forever," changed his tune completely when large number of black people started voting after enactment of the Voting Rights Act of 1965. I can foresee a similar miracle among Republican politicians when public opinion broadly comes to support single-payer.

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This article has run in the Adrian (Michigan) Daily Telegram.

Tuesday, January 19, 2010

I wish I had read more biographies, when . . .

This morning I finished reading an excellent new biography of Supreme Court Justice Louis Brandeis. Like other well-done biographies, the book gave me a lot of new insight into what was going on during lifetime of the subject.

Since I retired ten years ago I have turned to reading biographies in a big way, largely because of my dissatisfaction with the alternatives: fiction, and non-biographical non-fiction.

At our local library, I have had trouble finding novels that were not utterly predictable and boring and appparently written to formula. And much of the nonfiction I have tried is either loaded with details in which I am not interested or full of high level abstractions that sound good but which don't get me very far in my efforts to think things out.

Biographies, which are full of details, can make them interesting because they are the details of an individual human life, an intrinsically interesting thing. And of course life is much stranger, and therefore more interesting, than fiction.

In the last couple of years I have read biographies of Justice Scalia, Franklin D. Roosevelt, Eisenhower, Andrew Johnson, Andrew Jackson, James K. Polk, Prokofiev, Stalin, Yeltsin, Tony Blair, Booker T. Washington, and many others who do not presently come to mind. They all kept my interest and drew my attention to questions and issues that I had never thought about or noticed.

For example, the book about the impeachment of Andrew Johnson pointed out that the clause in the original Constitution in which slaves only counted for 3/5 of a person in calculating each state's representation in the House of Representatives was put in at the insistence of delegates to the Constitutional Convention from the north----the southern delegates wanted them to count the same as anyone else, which would have increased the south's clout in the House. (Of course, they had no intention of letting the slaves vote!)

And I had not realized that Franklin D. Roosevelt was fluent in French and German, had studied in Europe, and as a youth had gone on a bicyling tour of Europe with his tutor.

I now wish that I had read more biographies while I was still teaching, as I would have picked up countless anecdotes that would have interested my students and illustrated points I was making for them, as well as a much better understanding of the periods whose politics we were studying.