A NYT article reporting on the fact that banks are proving much more willing to forgive debt on second mortgages than first mortgages highlighted the case of Danette Rivera, a 38-year-old single mother, who had $115,000 of second mortgage debt forgiven and is facing foreclosure by Bank of America over unpaid debt on a first mortgage. The piece told readers:
“The bank, citing customer privacy concerns, declined to comment.”
It would have been helpful to remind readers that Bank of America has no privacy concerns in discussing its general policy on debt forgiveness. While the bank should rightly have refused to discuss the specifics of Ms. Rivera’s case, it certainly could have discussed its normal practice in dealing with underwater homeowners in cases where they hold both the first and second mortgage. (It’s not clear whether that was the case in this situation.)
A NYT article reporting on the fact that banks are proving much more willing to forgive debt on second mortgages than first mortgages highlighted the case of Danette Rivera, a 38-year-old single mother, who had $115,000 of second mortgage debt forgiven and is facing foreclosure by Bank of America over unpaid debt on a first mortgage. The piece told readers:
“The bank, citing customer privacy concerns, declined to comment.”
It would have been helpful to remind readers that Bank of America has no privacy concerns in discussing its general policy on debt forgiveness. While the bank should rightly have refused to discuss the specifics of Ms. Rivera’s case, it certainly could have discussed its normal practice in dealing with underwater homeowners in cases where they hold both the first and second mortgage. (It’s not clear whether that was the case in this situation.)
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David Brooks is unhappy that:
“Voters disdain the G.O.P. because they think Republicans are mindless antigovernment fanatics who can’t distinguish good government programs from bad ones. Sequestration is a fanatically mindless piece of legislation that can’t distinguish good government programs from bad ones. Sequestration carefully spares programs like Medicare and Social Security that actually contribute to the debt problem. Sequestration will cause maximum political disgust for a trivial amount of budget savings.”
While voters may well end up being appalled by many of the Republicans’ mean-spirited budget cuts on poor and helpless people, it is hard to believe that they would be happy if the Republicans tried to cut Social Security and Medicare. These are both programs that enjoy overwhelming support among Republicans as well as Democrats.
Brooks later gives his recommendation:
“In a normal country, the politicians would try some new moves. For example, if they agreed to further means test Medicare they could save a lot of money. Democrats would be hitting the rich.”
Brooks’ proposed solution also would produce a trivial amount of savings unless he manages to hugely redefine “rich.” While rich people do makes lots of money, and therefore it is possible to get considerable amounts of revenue by taxing them, they don’t get much more in Medicare and Social Security benefits than anyone else.
When it came to repealing tax cuts, the cutoff for those who would pay higher rates was set at $400,000. If this same cutoff for being “rich” was applied to seniors, it would include less than one-quarter of one percent of people receiving benefits under these programs. That means the most we could save by taking away their benefits altogether would be a quarter of one percent of the cost of these programs. Since high income seniors already pay for a substantial portion of their Medicare benefit, the savings would be even less. The savings would be somewhat higher than one quarter of one percent on the Social Security side since the benefits of high income earners tend to be higher than average.
The only way to achieve substantial savings in these programs through means-testing would be if we applied means testing to people with income around $50,000-$60,000 a year. This would be a major redefinition of “rich.” (That’s one way to make more rich people.)
David Brooks is unhappy that:
“Voters disdain the G.O.P. because they think Republicans are mindless antigovernment fanatics who can’t distinguish good government programs from bad ones. Sequestration is a fanatically mindless piece of legislation that can’t distinguish good government programs from bad ones. Sequestration carefully spares programs like Medicare and Social Security that actually contribute to the debt problem. Sequestration will cause maximum political disgust for a trivial amount of budget savings.”
While voters may well end up being appalled by many of the Republicans’ mean-spirited budget cuts on poor and helpless people, it is hard to believe that they would be happy if the Republicans tried to cut Social Security and Medicare. These are both programs that enjoy overwhelming support among Republicans as well as Democrats.
Brooks later gives his recommendation:
“In a normal country, the politicians would try some new moves. For example, if they agreed to further means test Medicare they could save a lot of money. Democrats would be hitting the rich.”
Brooks’ proposed solution also would produce a trivial amount of savings unless he manages to hugely redefine “rich.” While rich people do makes lots of money, and therefore it is possible to get considerable amounts of revenue by taxing them, they don’t get much more in Medicare and Social Security benefits than anyone else.
When it came to repealing tax cuts, the cutoff for those who would pay higher rates was set at $400,000. If this same cutoff for being “rich” was applied to seniors, it would include less than one-quarter of one percent of people receiving benefits under these programs. That means the most we could save by taking away their benefits altogether would be a quarter of one percent of the cost of these programs. Since high income seniors already pay for a substantial portion of their Medicare benefit, the savings would be even less. The savings would be somewhat higher than one quarter of one percent on the Social Security side since the benefits of high income earners tend to be higher than average.
The only way to achieve substantial savings in these programs through means-testing would be if we applied means testing to people with income around $50,000-$60,000 a year. This would be a major redefinition of “rich.” (That’s one way to make more rich people.)
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The Washington Post ran a major PR piece for the Trans-Pacific Partnership, headlining an article with the possibility that Japan might join the pact, “Japan’s economic turmoil may provide an opening for the U.S.” As the article points out, Japan’s trade barriers to U.S. exports are already very low. It is unlikely that the Trans-Pacific Partnership will increase U.S. exports to any substantial extent.
Towards the end of the article the Post tells readers;
“With similar talks underway between the United States and the European Union, the administration hopes it can shape global intellectual property, Internet commerce and other policies in ways that work to the advantage of U.S. companies.”
This seems the main point of the trade agreement. In this sense it is misleading to tout an “opening for the U.S.” as the Post does in the headline. This appears to be a deal designed to increase the profits of U.S. corporations. There is likely to be little, if any, gain for ordinary people in the United States.
In fact, if U.S. corporations increase their profits from patents, royalties and other items in Japan and elsewhere, it could lead to job loss in the United States. If the U.S. companies get more money from abroad from these payments then it will lead to a rise in the dollar. That would reduce other exports from the United States and increase imports, thereby reducing employment in the manufacturing sector.
This piece also repeatedly refers to the deal as a “free-trade” agreement. This is wrong. An agreement that increases patent and copyright protection, which this pact would, is going in the opposite direction of free-trade, which would reduce such protectionist barriers. The Post could have saved space and increased the accuracy of the article by leaving out the word “free.”
The Washington Post ran a major PR piece for the Trans-Pacific Partnership, headlining an article with the possibility that Japan might join the pact, “Japan’s economic turmoil may provide an opening for the U.S.” As the article points out, Japan’s trade barriers to U.S. exports are already very low. It is unlikely that the Trans-Pacific Partnership will increase U.S. exports to any substantial extent.
Towards the end of the article the Post tells readers;
“With similar talks underway between the United States and the European Union, the administration hopes it can shape global intellectual property, Internet commerce and other policies in ways that work to the advantage of U.S. companies.”
This seems the main point of the trade agreement. In this sense it is misleading to tout an “opening for the U.S.” as the Post does in the headline. This appears to be a deal designed to increase the profits of U.S. corporations. There is likely to be little, if any, gain for ordinary people in the United States.
In fact, if U.S. corporations increase their profits from patents, royalties and other items in Japan and elsewhere, it could lead to job loss in the United States. If the U.S. companies get more money from abroad from these payments then it will lead to a rise in the dollar. That would reduce other exports from the United States and increase imports, thereby reducing employment in the manufacturing sector.
This piece also repeatedly refers to the deal as a “free-trade” agreement. This is wrong. An agreement that increases patent and copyright protection, which this pact would, is going in the opposite direction of free-trade, which would reduce such protectionist barriers. The Post could have saved space and increased the accuracy of the article by leaving out the word “free.”
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In an article on the impact of the sequester on the Defense Department the Post told readers:
“The $46 billion dent to the Pentagon’s fiscal 2013 budget, long considered by the brass as nothing more than a political pawn, has taken on an air of inevitability, forcing commanders across the military to plan for painful reductions and argue that American lives and livelihoods are hanging in the balance” [emphasis added].
A real newspaper would of course reserve the adjective “painful” for the opinion pages. Any budget cut will lead to job loss and displacement. However the Post is not in the habit of applying the term “painful” when budget cuts take place outside of the military.
In an article on the impact of the sequester on the Defense Department the Post told readers:
“The $46 billion dent to the Pentagon’s fiscal 2013 budget, long considered by the brass as nothing more than a political pawn, has taken on an air of inevitability, forcing commanders across the military to plan for painful reductions and argue that American lives and livelihoods are hanging in the balance” [emphasis added].
A real newspaper would of course reserve the adjective “painful” for the opinion pages. Any budget cut will lead to job loss and displacement. However the Post is not in the habit of applying the term “painful” when budget cuts take place outside of the military.
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This is the question that will be asked by readers of his column complaining that no one is listening to Morgan Stanley director Erskine Bowles and former Senator Alan Simpson. Milbank complains that Obama is only willing to cut Medicare by the $400 billion amount advocated in Bowles-Simpson’s initial plan. (Milbank mistakenly calls this the commission’s plan. The commission did not issue a plan since no plan received the necessary majority vote.) Milbank attacks Obama on these points:
“But that proposal was made in 2010, and the nation’s finances have since deteriorated.”
If Milbank had access to budget documents he would know that the nation’s finances have deteriorated because the economy has performed worse than the Congressional Budget Office had expected. In 2010, it expected that unemployment rate would average just 6.5 percent for the years 2012-2014 (Table 2-3). The country did not have a lavish spending spree or tax cutting orgy, it ran larger deficits because the economy has been weaker and needed and needs more support.
Milbank condemns the failure of Obama to support more budget cuts, and specifically more cuts in Medicare, in the face of economic weakness as being unserious. (He also condemns Republicans for being unwilling to raise taxes. Milbank’s attachment to Medicare cuts is striking since CBO’s projections for Medicare costs have actually fallen by more than the cuts originally advocated by Bowles and Simpson.
Anyhow, for Milbank it is clear that the goal is to inflict pain on ordinary people, throwing them out of work and taking away Medicare and Social Security. In the Washington Post this is the criterion for being serious.
This is the question that will be asked by readers of his column complaining that no one is listening to Morgan Stanley director Erskine Bowles and former Senator Alan Simpson. Milbank complains that Obama is only willing to cut Medicare by the $400 billion amount advocated in Bowles-Simpson’s initial plan. (Milbank mistakenly calls this the commission’s plan. The commission did not issue a plan since no plan received the necessary majority vote.) Milbank attacks Obama on these points:
“But that proposal was made in 2010, and the nation’s finances have since deteriorated.”
If Milbank had access to budget documents he would know that the nation’s finances have deteriorated because the economy has performed worse than the Congressional Budget Office had expected. In 2010, it expected that unemployment rate would average just 6.5 percent for the years 2012-2014 (Table 2-3). The country did not have a lavish spending spree or tax cutting orgy, it ran larger deficits because the economy has been weaker and needed and needs more support.
Milbank condemns the failure of Obama to support more budget cuts, and specifically more cuts in Medicare, in the face of economic weakness as being unserious. (He also condemns Republicans for being unwilling to raise taxes. Milbank’s attachment to Medicare cuts is striking since CBO’s projections for Medicare costs have actually fallen by more than the cuts originally advocated by Bowles and Simpson.
Anyhow, for Milbank it is clear that the goal is to inflict pain on ordinary people, throwing them out of work and taking away Medicare and Social Security. In the Washington Post this is the criterion for being serious.
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Most economists have names, but the NYT managed to find some without names to give critical comments on the stimulus plans of Japan’s prime minister, Shinzo Abe. An article on Mr. Abe’s plans told readers:
“Economists say Mr. Abe’s policies so far contain few of the deeper-reaching structural reforms that they say are needed to produce sustainable growth by encouraging competition in Japan’s sclerotic economy. They say the most symbolic step would be joining a Pacific-wide free trade pact that would force Japan to open sheltered domestic markets, like farm products.”
It would be interesting to know which economists have this view, because some economists, like Paul Krugman, have argued that the main obstacle to Japan’s growth is a lack of demand. They have advocated exactly the sort of expansionary fiscal and monetary policy that Abe is now advocating.
It is also worth noting that the Pacific trade agreement mentioned in this piece cannot properly be described as a “free-trade” agreement. Most of its provisions have nothing to do with trade and some involve increased protectionism, like stronger patent and copyright protections.
The piece also referred to “Japan’s already stifling national debt.” It’s not clear how it has determined that Japan’s debt is “stifling.” The interest burden of Japan’s debt is roughly 1.0 percent of GDP, roughly two-thirds the current size of the U.S. interest burden and one-third of the burden the U.S. government faced in the early 1990s. The interest rate on long-term Japanese debt is just 1.0 percent. And, it is facing deflation, not inflation.
If the debt is stifling Japan’s economy, it is not showing up in the data. If the economists cited in this article had names perhaps people could try to figure out what they meant.
Most economists have names, but the NYT managed to find some without names to give critical comments on the stimulus plans of Japan’s prime minister, Shinzo Abe. An article on Mr. Abe’s plans told readers:
“Economists say Mr. Abe’s policies so far contain few of the deeper-reaching structural reforms that they say are needed to produce sustainable growth by encouraging competition in Japan’s sclerotic economy. They say the most symbolic step would be joining a Pacific-wide free trade pact that would force Japan to open sheltered domestic markets, like farm products.”
It would be interesting to know which economists have this view, because some economists, like Paul Krugman, have argued that the main obstacle to Japan’s growth is a lack of demand. They have advocated exactly the sort of expansionary fiscal and monetary policy that Abe is now advocating.
It is also worth noting that the Pacific trade agreement mentioned in this piece cannot properly be described as a “free-trade” agreement. Most of its provisions have nothing to do with trade and some involve increased protectionism, like stronger patent and copyright protections.
The piece also referred to “Japan’s already stifling national debt.” It’s not clear how it has determined that Japan’s debt is “stifling.” The interest burden of Japan’s debt is roughly 1.0 percent of GDP, roughly two-thirds the current size of the U.S. interest burden and one-third of the burden the U.S. government faced in the early 1990s. The interest rate on long-term Japanese debt is just 1.0 percent. And, it is facing deflation, not inflation.
If the debt is stifling Japan’s economy, it is not showing up in the data. If the economists cited in this article had names perhaps people could try to figure out what they meant.
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That’s what he told us in his column today, because he sure didn’t make much of an argument. Lane cites several recent papers showing that the minimum wage has no negative effect on employment (including my colleague, John Schmitt’s paper). He then notes that these studies could be right, but he also refers to research by David Neumark of the University of California at Irvine and William Wascher of the Federal Reserve that shows the last minimum wage hike (from $5.15 an hour in 2007 to $7.25 in 2009) lowered employment of young people by 300,000.
He then warns that if their research is right, and we push the minimum wage too high, then we could be hurting the people we are trying to help. He also points out that even if the research showing no employment effect is right, then we would still be hurting other workers by pushing up prices or wage compression. He then proposes spending more money on the earned-income tax credit (EITC) as an alternative to a higher minimum wage.
Okay, let’s have some fun here. Lane’s bad story is that 300,000 fewer workers would be employed. That sounds really awful, after all these are the people we are trying to help. But let’s think about this one for a moment. The jobs we are talking about tend to be high turnover jobs that workers only hold for relatively short periods of time. The research that Lane is depending on shows that at any point in time 300,000 fewer workers will be employed as a result of a minimum wage hike of more than 40 percent. In effect, this means that workers will on average have to spend more time between jobs looking for work.
More than 3 million workers were in the affected wage band between the old and new minimum wage. If we assume that on average they worked 10 percent less (the 300,000 job loss) and that their average hourly wage gain was 20 percent (half of the wage increase) then on average these workers will net roughly 8 percent more in pay each year (120 percent * 90 percent), while working 10 percent fewer hours. Pretty awful story, huh? And that’s based on the research that finds a negative effect on employment.
As far as the rest Lane’s story, yes, the higher pay for minimum wage workers comes mostly out of other workers’ pockets. (Some comes from profits and some comes from increased productivity.) This is true of everyone’s pay. If protectionists did not dominate national policy we could import more doctors and bring our doctors’ pay in line with pay in other wealthy countries and save other workers close to $100 billion a year in health care costs. But the money that goes out of workers’ pockets to support the excess pay of doctors, Wall Street bankers or CEOs doesn’t concern Lane, only the money that goes to pay custodians, retail clerks, and dishwashers.
But the best part is the idea that the EITC is somehow free. In fact we need government revenue to pay the EITC, which requires taxes. Taxes will also come out of workers’ pockets and also have a distorting effect on the economy. In addition, there are also costs associated with administering the EITC. While it does not have nearly the level of fraud claimed by its critics, clearly some portion of the money is paid out improperly. And, low-wage workers often have difficulty dealing with tax returns. Many throw hundreds of dollars in the garbage paying tax preparation services in order to claim their EITC.
In short, Lane doesn’t really have much of a case against a higher minimum wage even if we accept his bad story about job loss. And, he seems to have imagined that there is an alternative costless way to get more money to low-paid workers.
There is one final point worth noting in the context of proposals to increase the minimum wage. From its inception in 1938 to 1969, the minimum wage rose in step with economy-wide productivity growth. If we had continued this policy over the last four decades the minimum wage would be $16.50 an hour. Even if the minimum wage is raised to 9.00 an hour, minimum wage workers would get none of the benefits of economic growth over the last four decades.
Addendum:
Charles Lane wrote to tell me that I had misrepresented the Neumark estimate of the employment impact of the last minimum wage hike. Neumark was only referring to the impact of the last phase of the increase (which was phased in over three years) from 6.55 to 7.25, a rise of 10.7 percent, not the increase from 5.15 that I had referred to in my initial note.
I should have looked at his reference in the column. I’ll admit that I have not taken Neumark’s work on the minimum wage seriously since he uncritically took data from the fast food industry lobby to try to argue the case that the minimum wage caused unemployment. It turned out that the industry had cooked the data. When Neumark used data that was independently collected he found the same result as everyone else, the minimum wage did not increase unemployment.
But, even if we take Neumark’s numbers at face value, we still don’t get much of a horror story. A rise of 10.7 percent means that the average gain would be around 8.9 percent. (To see the logic, imagine that hourly earnings were originally distributed evenly between the prior minimum wage of $5.15 an hour and the new minimum wage of $7.25 an hour. After two rounds of minimum wage hikes, two thirds of the workers are now sitting at $6.55 an hour or close to it. The remaining third are evenly distributed across the remaining band. This would mean that two-thirds of the affected workers would recieve the full 10.7 percent increase, while the remaining third would see an average hike of 5.4 percent. This gives an average increase of 8.9 percent.)
Neumark’s estimate would then imply workers are on average putting in 10 percent fewer hours and taking home 2 percent less money. This is based on the assessment of an economist who has devoted a career to trashing the minimum wage. Can’t say that sounds like a horror story.
That’s what he told us in his column today, because he sure didn’t make much of an argument. Lane cites several recent papers showing that the minimum wage has no negative effect on employment (including my colleague, John Schmitt’s paper). He then notes that these studies could be right, but he also refers to research by David Neumark of the University of California at Irvine and William Wascher of the Federal Reserve that shows the last minimum wage hike (from $5.15 an hour in 2007 to $7.25 in 2009) lowered employment of young people by 300,000.
He then warns that if their research is right, and we push the minimum wage too high, then we could be hurting the people we are trying to help. He also points out that even if the research showing no employment effect is right, then we would still be hurting other workers by pushing up prices or wage compression. He then proposes spending more money on the earned-income tax credit (EITC) as an alternative to a higher minimum wage.
Okay, let’s have some fun here. Lane’s bad story is that 300,000 fewer workers would be employed. That sounds really awful, after all these are the people we are trying to help. But let’s think about this one for a moment. The jobs we are talking about tend to be high turnover jobs that workers only hold for relatively short periods of time. The research that Lane is depending on shows that at any point in time 300,000 fewer workers will be employed as a result of a minimum wage hike of more than 40 percent. In effect, this means that workers will on average have to spend more time between jobs looking for work.
More than 3 million workers were in the affected wage band between the old and new minimum wage. If we assume that on average they worked 10 percent less (the 300,000 job loss) and that their average hourly wage gain was 20 percent (half of the wage increase) then on average these workers will net roughly 8 percent more in pay each year (120 percent * 90 percent), while working 10 percent fewer hours. Pretty awful story, huh? And that’s based on the research that finds a negative effect on employment.
As far as the rest Lane’s story, yes, the higher pay for minimum wage workers comes mostly out of other workers’ pockets. (Some comes from profits and some comes from increased productivity.) This is true of everyone’s pay. If protectionists did not dominate national policy we could import more doctors and bring our doctors’ pay in line with pay in other wealthy countries and save other workers close to $100 billion a year in health care costs. But the money that goes out of workers’ pockets to support the excess pay of doctors, Wall Street bankers or CEOs doesn’t concern Lane, only the money that goes to pay custodians, retail clerks, and dishwashers.
But the best part is the idea that the EITC is somehow free. In fact we need government revenue to pay the EITC, which requires taxes. Taxes will also come out of workers’ pockets and also have a distorting effect on the economy. In addition, there are also costs associated with administering the EITC. While it does not have nearly the level of fraud claimed by its critics, clearly some portion of the money is paid out improperly. And, low-wage workers often have difficulty dealing with tax returns. Many throw hundreds of dollars in the garbage paying tax preparation services in order to claim their EITC.
In short, Lane doesn’t really have much of a case against a higher minimum wage even if we accept his bad story about job loss. And, he seems to have imagined that there is an alternative costless way to get more money to low-paid workers.
There is one final point worth noting in the context of proposals to increase the minimum wage. From its inception in 1938 to 1969, the minimum wage rose in step with economy-wide productivity growth. If we had continued this policy over the last four decades the minimum wage would be $16.50 an hour. Even if the minimum wage is raised to 9.00 an hour, minimum wage workers would get none of the benefits of economic growth over the last four decades.
Addendum:
Charles Lane wrote to tell me that I had misrepresented the Neumark estimate of the employment impact of the last minimum wage hike. Neumark was only referring to the impact of the last phase of the increase (which was phased in over three years) from 6.55 to 7.25, a rise of 10.7 percent, not the increase from 5.15 that I had referred to in my initial note.
I should have looked at his reference in the column. I’ll admit that I have not taken Neumark’s work on the minimum wage seriously since he uncritically took data from the fast food industry lobby to try to argue the case that the minimum wage caused unemployment. It turned out that the industry had cooked the data. When Neumark used data that was independently collected he found the same result as everyone else, the minimum wage did not increase unemployment.
But, even if we take Neumark’s numbers at face value, we still don’t get much of a horror story. A rise of 10.7 percent means that the average gain would be around 8.9 percent. (To see the logic, imagine that hourly earnings were originally distributed evenly between the prior minimum wage of $5.15 an hour and the new minimum wage of $7.25 an hour. After two rounds of minimum wage hikes, two thirds of the workers are now sitting at $6.55 an hour or close to it. The remaining third are evenly distributed across the remaining band. This would mean that two-thirds of the affected workers would recieve the full 10.7 percent increase, while the remaining third would see an average hike of 5.4 percent. This gives an average increase of 8.9 percent.)
Neumark’s estimate would then imply workers are on average putting in 10 percent fewer hours and taking home 2 percent less money. This is based on the assessment of an economist who has devoted a career to trashing the minimum wage. Can’t say that sounds like a horror story.
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This one is well-deserved. The Post got the George W. Polk award for Medical Reporting for the series “Biased Research, Big Profits” by Peter Whoriskey. It was a well-researched and reported series. I take back 17 of the bad things I’ve said about the WAPO. I’m not commenting on how many that leaves.
This one is well-deserved. The Post got the George W. Polk award for Medical Reporting for the series “Biased Research, Big Profits” by Peter Whoriskey. It was a well-researched and reported series. I take back 17 of the bad things I’ve said about the WAPO. I’m not commenting on how many that leaves.
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It is really easy and apparently fun for some people to use scary numbers about health care costs. The trick is to take numbers over a long period of time that are not adjusted for inflation or income growth. Of course no normal person has any idea what their income will look like in nominal dollars 50-60 years out, so you can scare people to death with this sort of stupid trick.
That is what David Goldhill, the chief executive of GSN, did in an op-ed in the NYT. He told readers about a newly hired 23 year-old at his company who is earning $35,000 a year:
“I have estimated that our 23-year-old employee will bear at least $1.8 million in health care costs over her lifetime.”
Do any NYT readers have any idea what this $1.8 million figure means either in today’s dollars or as a share of this worker’s lifetime income? The answer is almost certainly no. It is unlikely that even 1 percent of NYT readers (I know they are highly educated) has any clue what $1.8 million means over this worker’s lifetime.
The question then is why did the NYT let Goldhill use the number? He surely could have used a standard discount rate and converted it into 2013 dollars. Alternatively he could have expressed the number as a share of the worker’s lifetime income. The NYT was incredibly irresponsible to let Goldhill just include this $1.8 million number with no context.
It is probably also worth noting that this recipe for curing health care costs would be quickly dismissed by anyone familiar with current expenses. He wants to restrict insurance to catastrophic care (will he arrest people for providing normal insurance?), but he seems to have missed the fact that the overwhelming majority of health care costs fall into this category. His plan may deter people from getting necessary check-ups and preventive care, but would have little impact on the costs that are driving up the country’s health care bill.
He apparently is also unfamiliar with the experience with health care costs in other countries, which pay an average of less than half as much per person as the United States, while getting comparable health outcomes. The U.S. would be looking at large budget surpluses rather than deficits if per person health care costs were comparable to those in other countries.
It is really easy and apparently fun for some people to use scary numbers about health care costs. The trick is to take numbers over a long period of time that are not adjusted for inflation or income growth. Of course no normal person has any idea what their income will look like in nominal dollars 50-60 years out, so you can scare people to death with this sort of stupid trick.
That is what David Goldhill, the chief executive of GSN, did in an op-ed in the NYT. He told readers about a newly hired 23 year-old at his company who is earning $35,000 a year:
“I have estimated that our 23-year-old employee will bear at least $1.8 million in health care costs over her lifetime.”
Do any NYT readers have any idea what this $1.8 million figure means either in today’s dollars or as a share of this worker’s lifetime income? The answer is almost certainly no. It is unlikely that even 1 percent of NYT readers (I know they are highly educated) has any clue what $1.8 million means over this worker’s lifetime.
The question then is why did the NYT let Goldhill use the number? He surely could have used a standard discount rate and converted it into 2013 dollars. Alternatively he could have expressed the number as a share of the worker’s lifetime income. The NYT was incredibly irresponsible to let Goldhill just include this $1.8 million number with no context.
It is probably also worth noting that this recipe for curing health care costs would be quickly dismissed by anyone familiar with current expenses. He wants to restrict insurance to catastrophic care (will he arrest people for providing normal insurance?), but he seems to have missed the fact that the overwhelming majority of health care costs fall into this category. His plan may deter people from getting necessary check-ups and preventive care, but would have little impact on the costs that are driving up the country’s health care bill.
He apparently is also unfamiliar with the experience with health care costs in other countries, which pay an average of less than half as much per person as the United States, while getting comparable health outcomes. The U.S. would be looking at large budget surpluses rather than deficits if per person health care costs were comparable to those in other countries.
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