Public Policy and Governance – Page 336

Begging to Differ

David Brooks is one of the few remaining conservative columnists whose commentary is always rational. I may agree or disagree with the substance of any given column, but Brooks is a remnant of the days when liberals and conservatives disagreed about aspects of a shared reality–unlike today, when they appear to inhabit different solar systems.

It is in that vein that I want to take issue with a column Brooks wrote earlier this week, in which he suggested that the health reform debate is really a debate over competing values, which he defined as additional security on the one hand versus social “vitality” on the other. He seemed to be echoing (albeit in a far more reasonable fashion) cultural arguments over the “Europeanization” of America–the argument that our entreprenuerial energy will slowly give way to a wave of genteel European social welfarism, and in the process will somehow destroy our “special” American character.

I get the argument, but I think Brooks’ central assumption is faulty.

As any economist will tell you, the largest single drag on job creation and entreprenuerial activity in the US today is the cost of providing health care. We are currently the only advanced country where health insurance continues to be provided primarily through employers–an aspect of the current landscape that current healthcare reform proposals will not change, unfortunately.

The business sector currently spends an amount in excess of its net profits to provide health insurance for employees. The difference between what it costs an employer to create a new position and the amount that employee actually receives is sometimes called the employment “wedge.” As health costs and insurance premiums escalate, the wedge grows larger, and inhibits hiring additional workers. In good economic times, that is troubling; in times like these, it can be catastrophic.

For the shrinking number of companies that can afford to offer health insurance, negotiating and administering medical benefits, and complying with the government regulations attendant to them, consumes untold hours of HR time. This is a drag on productivity—a generator of overhead costs that reduce profits and divert effort away from the core business operations. Single-payer would remove those costs and that burden, but even the inadequate proposals contained in the Senate bill would significantly ameliorate them.

Then there is competitiveness. If you don’t think that healthcare reform would be economically significant, let me share an example. In the case of our struggling auto industry, amounts paid for employee health add somewhere between 1800 and 2000 of the price of each new car. No wonder American automakers have found it difficult to remain competitive! (In the single payer systems with which we compete, not only are those product costs eliminated, but doctors’ expenses are reduced as well: currently, medical offices spend considerable sums on personnel whose only job is dealing with insurers—confirming coverage, complying with insurer regulations, submitting claims on multiple different forms and collecting amounts due.) Doctors and employers alike could save millions of dollars each year just by standardizing insurance forms!

Smaller companies—the real engines of economic growth and job creation, the “entreprenuers” about whom Brooks is so worried—are increasingly unable to offer benefits, and that puts them at a competitive disadvantage when they try to hire good employees. If health coverage were de-coupled from employment, the United States would become a much more attractive location for new businesses, and incentives to outsource production to overseas workers would be reduced. (Not too long ago, Toyota was looking for a site for a new factory in North America. Several southern states were offering tax abatements, infrastructure improvements and other incentives worth millions. Toyota decided to go to Canada, which was not offering anything. When asked why, the company explained that in Canada, they didn’t need to provide healthcare.) We aren’t going to solve that problem any time soon, but almost everyone I know has a story about someone who wanted to start a business, but couldn’t due to an inability to get reasonably-priced health insurance, or any at all.

Contrary to Brooks’ assumption, rationalizing American healthcare, and removing the burden of providing insurance from employers, would unleash a new era of productivity and usher in an entreprenuerial renewal.

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The Problem with Faith-Based Contractors

There really is no constitutional problem with government contracting with religious organizations for purely secular services. The state can purchase medical care or babysitting or welfare services from any organization, religious or secular, having the capacity to deliver those services in a constitutionally appropriate way–i.e., without proselytizing vulnerable populations, etc.

A problem that is rarely discussed, however, has become painfully obvious in Washington, D.C.

The Catholic Archdiocese of Washington has announced that it will be “unable” to continue the social service programs it runs for the District if the city passes a proposed same-sex marriage law, a threat that could affect tens of thousands of people the church helps with adoption, homelessness and health care.

So–do we allow religious organizations to make their continued participation in these programs contingent upon the District’s denial of fundamental rights to gays and lesbians? Or to put it another way, can the government give in to demands that its public policies be consistent with the religious beliefs of a contractor?

One of the problems with privatization in general is that too often, it is accompanied by a “hollowing out” of governmental capacity to provide essential services. In such cases, the contractor–secular or religious–has officials by the proverbial “short hairs.”

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The Economics of Healthcare Reform

It’s getting so I hate to turn on the television, unless I’m watching something I have TIVO’d, and can zip through the commercials. On live TV, there is an ad that runs every few minutes declaring that healthcare reform will add to the national deficit and raise taxes. The ad ends by darkly warning that “America cannot afford” to reform healthcare.

Complex issues are never accurately addressed by slogans and bumper stickers, of course, but those of us who have actually been following the various proposals and arguments cannot help but be offended by the intellectual dishonesty of this particular 30-second spot. There are a number of proposals still on the table, for one thing, that would have different results. None of them currently would do any of the things this ad claims, for another. The Congressional Budget Office says that the version in the U.S. House would REDUCE the deficit by some 100 billion dollars over the next ten years.

Since I grit my teeth every time this particular bit of propaganda airs, I was gratified to see release of the following open letter from several of the nation’s most eminent economists.

Successful health care reform is vital to the nation’s fiscal and economic future. The legislation the House will vote on in the coming days will guarantee security of coverage, limit the costs of care, create incentives for improved quality of care, and set us on the path towards sustainable economic growth. In short, the House health reform legislation takes the steps necessary to promote our economic health.

Specifically, the bill:

Reduces the deficit by over $100 billion in the first 10 years, and continues to reduce the deficit in subsequent years, as judged by the Congressional Budget Office.

Takes initial steps to “bend the cost curve,” and thus might lead to even larger cost savings than official estimates suggest.

Covers nearly all American citizens and legal residents.

We urge House passage of the legislation, which provides a historic opportunity to realize the long-delayed goal of significant health care reform.

Signed,

Dr. Henry J. Aaron, The Brookings Institution
Dr. Mike Chernew, Harvard University Medical School
Dr. David Cutler, Harvard University
Dr. Judy Feder, Georgetown University, Center for American Progress Action Fund
Dr. Dana Goldman, University of Southern California
Dr. Jonathan Gruber, Massachusetts Institute of Technology
Dr. Len Nichols, The New America Foundation

Clean Water, Vibrant City

I often read the Urbanophile’s blog; he has a good grasp of urban issues, and generally includes a wealth of data and perceptive commentary. In this post, he tells us about an ambitions program that–if successful–will yield benefits to the environment AND to city life. Worth pondering.

Playing Politics

Last week, the Indiana Court of Appeals struck down the state’s controversial “Voter ID” law.

For those of you who somehow missed the intensely political arguments about the motives for and effects of that measure—the most restrictive in the nation—let me briefly recap its somewhat checkered history.

The measure was originally championed by Secretary of State Todd Rokita, and passed by Republican majorities in the Statehouse. Democrats sued, supported by a number of organizations, including the AARP, Rock the Vote and the NAACP. They argued that the law violated the federal constitution by effectively disenfranchising many poor and elderly voters who, not so incidentally, tend to vote disproportionately Democratic. They also pointed out that Indiana had been unable to identify any instances of in-person voter fraud. (Where fraud had been confirmed, it was within the absentee ballot process, but the Voter ID law doesn’t apply to absentee voting.)

The Democrats lost in a split opinion in the U.S. Supreme Court, although the Court left the door open for a future challenge. The Supreme Court based its opinion largely on the absence of concrete evidence that the law had prevented people from casting ballots. The Democrats had been unable to identify real people who had been adversely affected by the law.

The recent Indiana Court of Appeals case was brought by the League of Women Voters, and was based on a different theory and a different constitution. This time, the argument was that Indiana’s Constitution requires all voters to be treated uniformly, and that the Voter ID law treats absentee voters and in-person voters differently. The Court unanimously agreed.

If the legislature wants to keep the law, in other words, they’ll have to apply it to all voters, not just those who show up in person.

This seems eminently reasonable, but Governor Daniels was quick to accuse all three judges who issued the opinion of “playing politics.” This rhetoric is unfortunate on a number of levels. It betrays unfamiliarity with the arguments involved, and—worse—paints judges as no more than partisans in robes. Such attacks, as the Indiana Bar Association pointed out, undermine the legitimacy of the judicial system.

Daniel’s intemperate reaction also appears to confirm suspicions that the Voter ID law was itself a partisan effort. As Doug Masson of Masson’s Blog observed in the wake of Daniel’s outburst, “The facts fit together better if you discard the premise that voter fraud was the purpose of the Voter ID law, and replace it with the premise that one political party, temporarily ascendant, saw fit to pass a law that would shave a percentage point or two off the other side’s votes. The Republicans made a calculation that the voters who would vote in person and not have identification would skew Democratic. That calculus changes if you apply the ID requirements to those who vote absentee. Therefore, the absentee voters weren’t subject to the same level of scrutiny.”

In other words, the judges weren’t the ones playing politics.