That's the question millions are asking as the Senate plows ahead with its plan to repeal and replace Obamacare. Okay, I don't think anyone is actually asking this question, but they should be if they are trying to take the Senate plan at face value.

As some folks may remember, we had a great wave of hysteria around the importance of the "young invincibles" for Obamacare. These were young healthy people who didn't think they would ever need insurance. The concern was that they would not sign up for the plan and instead pay the penalties, depriving the system of their premiums. Because the ratio of insurance premiums for older to younger people was set slightly to the disadvantage of the young (compared with an actuarially fair rate), the loss of these young healthy people would worsen the program's finances.

In fact, there was far less to the young invincibles story than was claimed in the hype. Kaiser did a simple analysis showing that even an extreme skewing of enrollment towards the old made little difference to the finances of the program. The basic point is that because the premiums of young people are low, it doesn't make much difference whether they sign up or not.

A column in the Wall Street Journal by Dana P. Goldman and Darius N. Lakdawalla presents a case for high drug prices by making an analogy to the salaries of major league baseball players. They ask what would happen if the average pay of major league players was cut from $4 million to $2 million. They hypothesize that the current crew of major leaguers would continue to play, but that young people might instead opt for different careers, leaving us with a less talented group of baseball players. Their analogy to the drug market is that we would see fewer drugs developed, and therefore we would end up worse off as a result of paying less for drugs.

This analogy is useful because it is a great way to demonstrate some serious wrong-headed thinking. It also leads those of us who had the privilege of seeing players like Bob Gibson, Sandy Koufax, Henry Aaron, and Willie Mays in their primes to wonder if there somehow would have been better players 50 years ago if the pay back then was at current levels.

But the issue is not just how much we should pay for developing drugs, but how we should pay. Suppose that we paid fire fighters at the point where they came to the fire. They would assess the situation and make an offer to put out the fire and save the lives of those who are endangered. We could haggle if we want. Sometimes we might get the price down a bit and in some occasions a competing crew of firefighters may show up and offer some competition. Most of us would probably pay whatever the firefighters asked to rescue our family members.

Dean Baker
Truthout, June 19, 2017

In a high-level meeting Friday, the presidents of Honduras, Guatemala and El Salvador will discuss the region’s security with American and Mexican officials. Innocuous enough, you may think. But part of the meeting will be held on a US military base in Miami, Florida ? the headquarters of the US Southern Command, the Pentagon’s regional subsidiary that oversees American military operations throughout Central and South America as well as the Caribbean.  Under President Donald Trump, the militarization of US foreign policy is about to stretch more deeply into Central America.

Central America policymaking, hardly an open book to begin with, is set to become more secretive.  With the Conference on Prosperity and Security in Central America just days away, there is no official agenda of speakers or publicly listed events and no involvement of civil society organizations, and even press access is extremely limited. What we do know is US Secretary of State Rex Tillerson will be there, as will Vice President Mike Pence, Treasury Secretary Steven Mnuchin and of course, General John F. Kelly, the director of Homeland Security and the previous head of SOUTHCOM.

On Thursday, high-level government officials will be joined by a coterie of elite Central American businessmen, invited to the conference by its hosts, the US and Mexico. Trump’s budget envisions a massive cut in US economic assistance to Central America, and officials will apparently be asking the country’s most rapacious and corrupt economic actors to fill the void.

“We must secure the nation. We must protect our people,” Secretary of State Tillerson told his staff last month in a discussion around the US’ new “America First” foreign policy. “And we can only do that with economic prosperity. So it’s foreign policy projected with a strong ability to enforce the protection of our freedoms with a strong military.” By linking economic success with military operations, Tillerson telegraphed which way the foreign aid dollars will be blowing.

While much has been made of the reduction in the budgets of the State Department and USAID, don’t expect the US to simply retreat. Rather, expect the US military to deepen its involvement in the region. There may be no new official policy announcements, but the shift appears inevitable.

The turf battle between the State Department and the Pentagon over control of foreign assistance ? and more specifically “security cooperation” ? goes back to the Obama administration. Throughout 2016, diplomats fought generals over control of the billions of dollars of US security assistance allocated each year. Surprising few, the Pentagon came out on top and with Trump’s election has been bolstered further.

There are currently more than 80 unique authorizations that allow the Pentagon ? with minimal consultation with the State Department ? to deliver security assistance to foreign nations’ military, police, and paramilitary forces. With development assistance slashed, US diplomacy in the region will more often appear in uniform.

In 2016, the Pentagon distributed nearly $60 million in counterdrug assistance to Central America. Compared to the at least marginally transparent State Department budget, the labyrinthine nature of the Pentagon budget makes it next to impossible to determine precisely how much is spent in Central America ? let alone what it may look like next year. But with Secretary Kelly, the former SOUTHCOM commander, in charge, it appears that an increased Pentagon focus on Latin America is likely.

June 14, 2017 (Prices Byte)

Dean Baker
Truthout, June 12, 2017