Tag Archives: jack heidel

Repealing and Replacing Obamacare

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The U.S. spends 18% of GDP (and rising) on healthcare, public and private, almost twice as much as any other developed country. The Affordable Care Act, passed by Congress and signed by President Obama in 2010, increases access to healthcare in the U.S. but does nothing to control its cost.

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President-elect Donald Trump and the Republican Congress want to repeal the ACA and replace it with a more effective and less expensive alternative. An excellent plan for doing this, “Transcending Obamacare” has been proposed by Avik Roy, the President of the Foundation for Research and Opportunity.  Mr. Roy’s Universal (and refundable) Tax Credit Plan will:

  • expand health insurance coverage well beyond ACA levels without an individual mandate
  • improve the quality of coverage and care for low-income Americans
  • achieve permanent solvency of U.S. healthcare entitlements
  • reduce the federal deficit without raising taxes
  • reduce the cost of health insurance for individuals and businesses

Here are the main elements of the Universal Tax Credit Plan:

  • Premium assistance. The Plan repeals the ACA’s individual mandate and expands access to health savings accounts. By lowering the cost of insurance for younger and healthier individuals, the Plan would expand coverage beyond ACA levels.
  • Employer-sponsored insurance reform. The Plan repeals the ACA’s employer mandate, thereby offering employers a wider range of options for subsidizing workers’ coverage.
  • Medicaid reform. The Plan migrates the Medicaid acute-care population onto the reformed private individual insurance market, with 100% federal funding. The Plan returns to the states full financial responsibility for the Medicaid long-term care population.
  • Medicare reform. The Plan gradually raises the Medicare eligibility age by four months each year (forever), allowing younger retirees to remain on their existing plans.
  • Veterans’ health reform. The Plan gives veterans the option of private coverage via premium assistance.
  • Medical innovation is encouraged by the Plan.

Conclusion. The Universal Tax Credit Plan is a big improvement over the ACA because it expands access, improves quality and dramatically lowers costs for both individuals and the country as a whole. Check it out!

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The Obama Legacy: Personal Popularity Coupled with Poor Judgement

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As President Obama prepares to leave office many observers are weighing in on his accomplishments, as I have already done myself, see here and here.

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Today let’s evaluate his major achievements:

  • Reviving the economy after the Great Recession. This was done but the recovery has been unnecessarily slow with annual growth averaging just 2% of GDP ever since June 2009. In fact, stagnant middle-class and especially blue-collar incomes are the reason Donald Trump eked out a victory over Hillary Clinton.
  • A giant step towards national healthcare. Even if the Affordable Care Act is repealed, its replacement will be much more universal than before. Unfortunately, however, the ACA increases access but does nothing to control the cost of healthcare (now 18% of GDP) which continues its steady rise. This is what has to change.
  • A global pact to combat climate change. Global warming is real but our response should be more circumspect. China has only pledged to reduce carbon emissions after 2030. India has 300 million people off the electric grid. It also has an abundant supply of coal. Heroic efforts by the developed world alone will have little effect on worldwide C02 levels.
  • A rash of new financial and environmental regulations. Both Dodd-Frank and new EPA regulations have contributed significantly to the economic slowdown which is why they are likely to be modified by the Trump Administration and Congress.
  • The Iran nuclear deal. The problem here is what will happen when the 10 – 15 year deal expires. Iran then will have a green light to develop nuclear weapons unless China and Russia agree to new sanctions which is unlikely.
  • American retreat from superpower status. Obama deposed a dictator in Libya but walked away from the aftermath. His premature decision to leave Iraq allowed ISIS to spring up. He let the civil war in Syria run out of control. A “reset” with Russia did nothing to prevent Putin from invading Ukraine and annexing Crimea.

Conclusion. As the first African-American President, Barack Obama is certainly a historical figure. But “a presidency of great promise is now ending in rancor and disappointment.”

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Globalization without Globalism

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Ever since the November election, when Donald Trump eked out a victory in the Electoral College, I have been trying to understand the significance of his win. Of course it has a lot to do with populism and anti-elitism as I have said previously.

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In yesterday’s Wall Street Journal the economics journalist, Gregg Ip, makes a strong argument that what is happening has more to do with globalism than with globalization:

  • Globalization refers to people, capital and goods moving ever more freely across borders. Globalism is the ideology that globalization should lead to global governance over national sovereignty. This refers to such global structures as the European Union, the World Trade Organization, NATO, the United Nations and the North American Free Trade Agreement.
  • The problem is not globalization itself, which just means specialization and trade across borders, but rather the damage which breakneck globalization has inflicted on ordinary workers. Since China joined the WTO in 2000 a wave of Chinese imports wiped out 2 million American jobs, with no equivalent boom in the U.S. from exports to China.
  • Globalists have been blind to the nationalist backlash because their world – entrepreneurial, university-educated, ethnically diverse, urban and coastal – has thrived as the whiter, less-educated hinterlands have stagnated.
  • Globalists should not equate concern for cultural norms and national borders with xenophobia. Large majorities of Americans welcome immigrants so long as they adopt American values, learn English, bring useful skills and wait their turn. Opposition to open borders does not imply racism.

Conclusion. Says Avik Roy, President of the Foundation for Research on Equal Opportunity, “There is a middle ground between a nationalist and globalist approach.”  This is what we should be looking for.

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A Major Difficulty of True Healthcare Reform

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As my regular readers know I am focused primarily on two major national problems:

  • Speeding up economic growth to create more jobs and better paying jobs, and
  • Getting our national debt under control by reducing our annual budget deficits so that our debt will shrink over time as a percentage of GDP.

The evidence continues to persuade me that entitlement spending in general and the cost of healthcare in particular will play the biggest role in solving these two problems. My last post points out that healthcare, higher education and housing are all drags on family expenses but that the cost of healthcare has by far the largest negative effect on our economy.
The United States spends 18% of GDP (and climbing) on healthcare, both public and private, twice as much as any other developed country.  This enormous expense must be reduced but how will it happen?  The Affordable Care Act has increased access to healthcare but has not bent the cost curve.
Now the Republicans (President-elect Trump and Congress) want to repeal the ACA and replace it with something less restrictive and less expensive.   A popular alternative is health insurance which has:

  • High deductibles typical of catastrophic coverage in order to hold down the cost of insurance.
  • Tax credits to defray the cost of insurance.
  • Tax preferred health savings accounts to pay for routine expenses below the deductible.

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Unfortunately it’s not this simple. Today’s New York Times has a credible Op Ed by Drew Altman, CEO of the Henry Kaiser Family Foundation, “The Health Care Plan Trump Voters Really Want,” which reports on a series of focus groups set up by Kaiser after the election to quiz Trump voters about healthcare. What Kaiser learned about Trump voters is that:

  • In the pre-ACA market, they liked their ability to buy lower-cost plans which met their needs.
  • They want lower drug costs and improved access to cheaper drugs.
  • The very last thing they want in healthcare reform is higher out-of-pocket costs.

Conclusion. What Trump voters are looking for in healthcare reform is quality healthcare at a low cost. This is also the Republican ideal.  But the high deductible plus health savings account combination is going to be a hard sell to many Trump voters.

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What Is Slowing Down Today’s Economy? II. Three Culprits

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My last post, “What Is Slowing Down the U.S. Economy,” reports on an interesting analysis by the Gallup economist, Jonathan Rothwell, making an excellent case that three of the biggest drags on the U.S. economy are the costs of:

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  • Healthcare. By far the biggest drag, healthcare costs have increased from 9% of GDP in 1980 to 18% in 2015. Mr. Rothwell notes that the average U.S. physician spends $83,000 per year to process claims and interact with insurance companies compared to $22,000 in Canada which has a single payer system. The solution, in my opinion, is to change the tax treatment of employer provided health insurance (to cover catastrophic coverage only) in order to give individuals more “skin in the game.”
  • Education. Although education costs have risen only from 6% to 7% of GDP over the past 35 years, education overall is 8.9% more expensive in 2015 than in 1980 and higher education is 11.1 times more expensive. Considering the ever increasing need for highly trained workers in today’s high-tech and globally competitive economy, such rapidly increasing cost presents a huge impediment to progress. Foundational K-12 education is also failing to close the achievement gap between low-income minority students and middle-class students. Such disparity in educational outcomes bodes ill for future social harmony. Even overall cognitive performance in math and literacy is now declining (see chart). These are tough problems to solve.

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  • Housing. Again, only a 1% increase (from 11% to 12%) in GDP from 1980 to 2015 but this translates into a rental cost increase of 19% of GDP in 1980 to 28% of GDP in 2015. Also mortgage payment costs increased from 12% of GDP in 1980 to 16% of GDP today. Mr. Rothwell attributes these increases to a tightening of local zoning restrictions. There does not appear to be any general policy solution to such a problem.

Conclusion. The costs of healthcare, education and housing are eating up greater and greater amounts of family income and therefore are retarding economic growth and social progress. What can be done about these problems?  Stay tuned!

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What Is Slowing Down Today’s Economy?

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We will soon have a new President and, even though his election was somewhat of a fluke, he will obviously want to help the blue-collar workers who elected him.  The best way to do this is to make the economy grow faster.
The Gallup economist, Jonathan Rothwell, has just issued an excellent analysis of some of the major reasons for our current slow economy, “No Recovery: an analysis of long-term U.S. productivity decline.”

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Says Mr. Rothwell:

  • The problem is severe. U.S. GDP growth per capita has declined from 2.6% in 1966 to .5% today. Small differences expand into vast gaps in potential living standards. 1% growth for the next 35 years would expand household income from $56,000 in 2015 to $79,000 in 2050 (inflation adjusted), whereas 1.7% growth would raise household income to $101,000 in 2050.
  • Changes in living standards are fundamentally linked to changes of how the quantity of goods and services relate to their cost. Deterioration in the quality-to-cost ratio for healthcare, housing and education is dragging down economic growth. These three sectors alone have increased from 25% of GDP in 1980 to 36% of GDP in 2015.capture92
  • The cost of healthcare is 4.8 times as high today as in 1980, the cost of education is 8.9 times as high today as in 1980 and the cost of housing is 3.5 times as high today as in 1980. These compare to an overall cost increase of all items of 2.5 times today compared to 1980.
  • These three sectors have all gotten more expensive (without getting more productive), thereby absorbing more of families’ incomes, making it harder to satisfy other wants.

Conclusion.  We all want schools that work, adequate housing, and quality healthcare.  The problem is how to achieve these ends in a much more affordable manner.  Stay tuned!

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The Meaning of 2016

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For my last blog post of each year I briefly summarize the main events of the preceding year and then try to evaluate their significance. Last year I was badly off in one respect. I said that the rise of Donald Trump was a disaster for the Republican Party because he could not possibly be elected president!  I badly underestimated the force of populism sweeping the country.
Here are the main events of 2016:

  • Brexit. On June 23 Great Britain voted 52% – 48% to leave the European Union. Elite opinion advocated staying in and the polls predicted majority support for staying. The world was shocked when the vote went the other way.
  • Donald Trump was elected the next U.S. President on November 8. The polls predicted a Hillary Clinton victory and she in face won the popular vote by a 3,000,000 vote margin. But Trump squeaked by in the Electoral College by winning the rust belt battleground states of Michigan, Pennsylvania and Wisconsin by a combined total of 100,000 votes (see attached map to understand the Trump electoral vote margin).capture17
  • The Mid-East Refugee Crisis, Terrorism and Russia’s Vladimir Putin were even bigger problems in 2016 than in 2015 and will present huge challenges to Donald Trump when he becomes President on January 20.

Granted that Trump was elected by a slim electoral vote margin and a smarter campaign by Clinton could have led to a different outcome, nevertheless for such a sleazy, non-politically correct candidate to have done so well, has huge significance. It constitutes a major slap down of elitism:

  • Consider where our most recent presidents went to college: Reagan (Eureka College), George H.W. Bush (Yale), Bill Clinton (Yale Law), George W. Bush (Yale), Barack Obama (Harvard Law) and Donald Trump (Fordham). In other words, Trump will be the only president since Reagan not to have graduated from Harvard or Yale.
  • Consider that since John Paul Stevens (Northwestern Law) retired from the Supreme Court in 2010, every current Supreme Court Justice has graduated from an Ivy League Law School.
  • Consider that most nationally prominent Republicans, including members of Congress, shunned Donald Trump on the campaign trail even as his poll numbers steadily increased. In other words he was elected largely without the help of the Republican establishment.

Conclusion. The American voters have decided to take a big chance on a nontraditional presidential candidate. Are the voters collectively smarter than the elites to whom they usually turn for leadership?  I am optimistic that the answer will turn out to be yes!

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The Obama Legacy II. In the tender hands of Donald Trump

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A year ago, I examined “The Obama Legacy” from a general point of view. I simply looked at his record after seven years in office:

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  • Stagnant Economy, growing at an anemic 2.1% annual rate ever since the end of the Great Recession in June 2009.
  • Massive Debt, at 74% of GDP (now 76%), the highest since the end of WWII.
  • Chaotic Middle East, the rise of ISIS in Syria, Iraq and North Africa and the resulting refugee crisis in Europe is the result of weak U.S. leadership.
  • Hyper-partisan Political Atmosphere, especially because of the above failures, leading to the rise of populist political candidates such as Bernie Sanders and Donald Trump.

Now, a year later, as he prepares to leave office, all of the above conditions are still true. The only major change is that the conservative, not the liberal, populist, Donald Trump, will succeed him in office.  Admittedly, the election outcome was a fluke.  Trump’s electoral margin was provided by a slim popular vote victory of 100,000 votes combined in the battleground states of Michigan, Pennsylvania and Wisconsin.  Such an outcome was totally unpredicted and represents a miscalculation by the Clinton campaign.
In other words, the election easily could have gone the other way, in which case the Obama legacy would have had a four year period of protection by a Hillary Clinton presidency. Nevertheless, according to the Democratic pollster, Stanley Greenberg, the Obama presidency was deficient in several fundamentally crucial ways:

  • More than 1000 state and national Democrats lost their elections during his two terms. Republicans now have total (legislative and governor’s office) control in 25 states.
  • The economic recovery from the Great Recession morphed into bailouts – bank bailouts, auto bailouts, insurance bailouts, rather than directly addressing the continuing economic struggles experienced by a majority of Americans.
  • Approximately 40% of the Democratic base of minority, unmarried female and millennial voters disapproved of how President Obama was handling his job in 2010 and 2014, and many of these voters stayed home during the 2016 election as well.

Conclusion. The fate of Mr. Obama’s major achievements of the Affordable Care Act, the Iran nuclear agreement and committing the nation to address climate change are all now at risk of being overturned by the new presidential administration.

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Understanding the Trump Agenda

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From a reader of my blog:

“I continue to enjoy your blog. A word of warning.  Trump is not a normal person and he is extremely self-centered (narcissistic).  He has never thought of anyone other than himself (& his family).  I believe that will not change.  He lies all the time so can only be judged by his actions, not his words.  He admires Putin.  I think he would like to be an autocrat who rules without any dissent.  I do not think he cares about the constitution.  Not for a minute.”

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I understand that many people feel this way about Donald Trump and I can’t argue with such an analysis. But he is also a change agent and, now that he has been elected President, I am hopeful that he will make good choices for our country.  For example:

  • The Economy. His appointments of Mnunchin for Treasury, Price for HHS, Pruit for EPA, for example, are excellent. People like these will work closely with the Republican Congress on the tax reform, regulatory reform, financial reform, etc. measures which are needed to get our economy growing faster. Boosting growth to 3% per annum as opposed to our current anemic 2% rate, which is entirely possible, will do wonders to create more jobs and better paying jobs, and therefore restore a stronger spirit of optimism to our national mood.
  • Education. DeVos for Education is also an excellent choice. Our K-12 public education system is not working for low-income, minority kids in big cities. We also need far more emphasis on career and vocational education for those unlikely to go to college.   In other words, we need big changes in education policy and DeVos is a reformer.
  • National Security. Both terrorism and Russia’s Vladimir Putin represent huge threats to the western world. General Jim “Mad Dog” Mattis is highly qualified to lead our defense in such a dangerous environment. The big question remaining at this point is whether Trump will be able to stand up to and outfox Russia’s Putin.

Conclusion. Mr. Trump is making some very good appointments for the people who will lead major governmental agencies. In this respect his presidency is off to a good start.

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How to Confront Vladimir Putin

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My last post expressed my biggest worry about Donald Trump: that he won’t be sufficiently firm with Vladimir Putin to persuade him to stop his aggression in Eastern Europe. The American Enterprise Institute’s Leon Aron has an excellent analysis of the Putin problem, “Changing Putin’s Mind.”  Says Mr. Aron:

  • Vladimir Putin has called the demise of the Soviet Union “the greatest geopolitical tragedy of the 20th century.” The overarching objective of Putin’s policies, both domestic and external, is to recover and repossess the political, economic and geostrategic assets lost by the Soviet state when it fell apart in the 1990s.
  • In Putin’s first two terms as Russian President, from 2000 – 2008, he focused on restoring the economy. But by 2012, when Putin returned to power, the domestic investment climate had slowed to a crawl with low oil prices causing a severe recession. Putin shifted the foundation of his regime’s legitimacy from economic expansion to patriotic mobilization.

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  • The reason for the annexation of Crimea, war on Ukraine and intervention in Syria is that restoring Russia’s superpower pride is essential to his regime’s legitimacy. This is the point of a classic Soviet poster (attached) with a Russian soldier admonishing Uncle Sam, “Don’t you fool around!”
  • In Syria, Putin’s goal is to help Bashar al Assad, not defeat ISIS, and so Assad must not be restored. This could be accomplished by grounding the Syrian air force, enforcing no-fly zones, etc. and forcing Putin to distance himself from Damascus.
  • In Ukraine, Putin will not stop unless battlefield dynamics begin to change by, for example, sending Ukraine defensive anti-tank and anti-aircraft weapons, radars to pinpoint Russian positions, etc. Putin must be forced to make a choice between increasing Russian deployment and thus casualties or seeking a genuine peace agreement.

Conclusion.  The choice is between two admittedly risky and unpleasant options: confronting Putin now or see him emboldened to the point where he attempts to destabilize a member state on NATO’s eastern flank.

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