The media waste far too much time reporting on various consumer confidence measures. These really are not a very good indicator of anything, they often just reflect the tone of reporting in recent weeks.
This is especially true of the future expectations index. This index is very volatile. Consumption is not. What does that tell us?
The current conditions measure is a bit better, but it is more a contemporaneous measure that a predictive one. In other words, if people are buying a lot this month, odds are that their confidence is high, but high confidence in June won’t tell us how much people will buy in July.
Anyhow, the June car sales numbers came out yesterday and, as the Post tells us, they were surprisingly strong given the weak confidence measures. If there was ever a category of consumption that should be driven by confidence it has to be car sales. After all, it is pretty rare that someone can’t put off the decision to buy a car for another six months. Also, people who are fearful about their economic prospects could always opt to buy a used car instead of a new one.
Anyhow, that does not seem to have been happening in June. People were buying cars at a pretty healthy rate even as they were telling the survey takers that they were worried about the economy. Remember this the next time you see a big story about consumer confidence rising or falling.
The media waste far too much time reporting on various consumer confidence measures. These really are not a very good indicator of anything, they often just reflect the tone of reporting in recent weeks.
This is especially true of the future expectations index. This index is very volatile. Consumption is not. What does that tell us?
The current conditions measure is a bit better, but it is more a contemporaneous measure that a predictive one. In other words, if people are buying a lot this month, odds are that their confidence is high, but high confidence in June won’t tell us how much people will buy in July.
Anyhow, the June car sales numbers came out yesterday and, as the Post tells us, they were surprisingly strong given the weak confidence measures. If there was ever a category of consumption that should be driven by confidence it has to be car sales. After all, it is pretty rare that someone can’t put off the decision to buy a car for another six months. Also, people who are fearful about their economic prospects could always opt to buy a used car instead of a new one.
Anyhow, that does not seem to have been happening in June. People were buying cars at a pretty healthy rate even as they were telling the survey takers that they were worried about the economy. Remember this the next time you see a big story about consumer confidence rising or falling.
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Today GlaxoSmithKline is offering up evidence, coughing up $3 billion as a fine for having lied about the safety and effectiveness of several of its big drugs. Yes, this is the incentive that we give to drug companies when the government grants patent monopolies that allow them to sell drugs for hundreds or even thousands of times the cost of production.
Economic theory predicts that this form of government intervention will lead to enormous economic distortions, including the sorts of misrepresentations about the quality of drugs that GlaxoSmithKline fessed up to yesterday. Why can’t the NYT or anyone else ever mention this fact. When there were shortages of milk and meat in the Soviet Union were they prohibited from mentioning that it might have something to do with central planning?
Today GlaxoSmithKline is offering up evidence, coughing up $3 billion as a fine for having lied about the safety and effectiveness of several of its big drugs. Yes, this is the incentive that we give to drug companies when the government grants patent monopolies that allow them to sell drugs for hundreds or even thousands of times the cost of production.
Economic theory predicts that this form of government intervention will lead to enormous economic distortions, including the sorts of misrepresentations about the quality of drugs that GlaxoSmithKline fessed up to yesterday. Why can’t the NYT or anyone else ever mention this fact. When there were shortages of milk and meat in the Soviet Union were they prohibited from mentioning that it might have something to do with central planning?
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Steven Pearlstein has a lengthy and somewhat confused discussion of offshoring in his Post column today. First of all, the discussion would be much more straightforward if it just referred to trade. There is no theoretical difference between the impact of imports through trade in general and the impact of outsourcing. It makes little difference to the U.S. economy whether a Chinese manufacturer sells computers to retail stores in the United States like Wal-Mart and Costco, or if Apple contracts with a Chinese manufacturer to produce computers that it will sell to Wal-Mart and Costco. By treating outsourcing as a special entity that is distinct from trade, Pearlstein creates unnecessary confusion.
This unnecessary confusion prevents the piece from getting any clear grip on the issues involved. At one point it tells readers:
“For economists, the theoretical argument in favor of offshoring is that, like all other forms of specialization and exchange, it is a win-win proposition for all the countries involved. But the theory is based on a number of assumptions, one of which is that trade is reasonably balanced — that once we started importing more goods and services from the rest of the world, the rest of the world will use that extra income to buy equal amounts of goods and services from us. Years of large and growing trade deficits have now called that assumption into question.
There is a vigorous debate among economists about how many jobs are forgone by running a persistent $500 billion annual trade deficit. There are some purists who would say none, but a lot of studies put the number at a couple of million.”
This is wrong. Economists would in principle say that the country is benefitting from trade even if it is very far from balanced if the economy is fully employed. Given economists standard assumptions about the efficiency of markets, the U.S. economy could benefit from trade even if it had a trade deficit of 6 percent of GDP ($900 billion in today’s economy) as it did in 2006. The argument would be that the country was taking advantage of low-priced goods and services from abroad in order to build up its domestic capital stock, both physical and human. Of course that is a hard argument to make about the housing bubble years, but that would be the standard economic argument about trade.
When the economy is below full employment, as most economists would concede today, then a trade deficit costs jobs. There is not much ambiguity about this fact.
More generally, the argument is that trade redistributes jobs. The current pattern of trade has cost the jobs of millions of manufacturing workers driving down the wages of large segments of the workforce.
This fact makes it difficult to understand Pearlstein’s concern that:
“But now that many categories of high tech have moved virtually all production offshore, companies are finding that they also need to move more and more of engineering and design work overseas as well.”
Moving engineering and design work overseas would imply savings to consumers in exactly the same way as moving manufacturing operations overseas provided savings to consumers. It is not clear why Pearlstein doesn’t want to see consumers save money. The lower cost of products due to cheaper engineering and design services would free up money to buy other goods thereby leading to more economic growth.
Unless the intent to redistribute income from manufacturing workers to more highly-educated workers, there is no more reason to oppose the offshoring of highly skilled jobs than there is to oppose the offshoring of manufacturing jobs.
Steven Pearlstein has a lengthy and somewhat confused discussion of offshoring in his Post column today. First of all, the discussion would be much more straightforward if it just referred to trade. There is no theoretical difference between the impact of imports through trade in general and the impact of outsourcing. It makes little difference to the U.S. economy whether a Chinese manufacturer sells computers to retail stores in the United States like Wal-Mart and Costco, or if Apple contracts with a Chinese manufacturer to produce computers that it will sell to Wal-Mart and Costco. By treating outsourcing as a special entity that is distinct from trade, Pearlstein creates unnecessary confusion.
This unnecessary confusion prevents the piece from getting any clear grip on the issues involved. At one point it tells readers:
“For economists, the theoretical argument in favor of offshoring is that, like all other forms of specialization and exchange, it is a win-win proposition for all the countries involved. But the theory is based on a number of assumptions, one of which is that trade is reasonably balanced — that once we started importing more goods and services from the rest of the world, the rest of the world will use that extra income to buy equal amounts of goods and services from us. Years of large and growing trade deficits have now called that assumption into question.
There is a vigorous debate among economists about how many jobs are forgone by running a persistent $500 billion annual trade deficit. There are some purists who would say none, but a lot of studies put the number at a couple of million.”
This is wrong. Economists would in principle say that the country is benefitting from trade even if it is very far from balanced if the economy is fully employed. Given economists standard assumptions about the efficiency of markets, the U.S. economy could benefit from trade even if it had a trade deficit of 6 percent of GDP ($900 billion in today’s economy) as it did in 2006. The argument would be that the country was taking advantage of low-priced goods and services from abroad in order to build up its domestic capital stock, both physical and human. Of course that is a hard argument to make about the housing bubble years, but that would be the standard economic argument about trade.
When the economy is below full employment, as most economists would concede today, then a trade deficit costs jobs. There is not much ambiguity about this fact.
More generally, the argument is that trade redistributes jobs. The current pattern of trade has cost the jobs of millions of manufacturing workers driving down the wages of large segments of the workforce.
This fact makes it difficult to understand Pearlstein’s concern that:
“But now that many categories of high tech have moved virtually all production offshore, companies are finding that they also need to move more and more of engineering and design work overseas as well.”
Moving engineering and design work overseas would imply savings to consumers in exactly the same way as moving manufacturing operations overseas provided savings to consumers. It is not clear why Pearlstein doesn’t want to see consumers save money. The lower cost of products due to cheaper engineering and design services would free up money to buy other goods thereby leading to more economic growth.
Unless the intent to redistribute income from manufacturing workers to more highly-educated workers, there is no more reason to oppose the offshoring of highly skilled jobs than there is to oppose the offshoring of manufacturing jobs.
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The Washington Post is heavily invested in NAFTA. At the time of the debate it abandoned any pretext of being an objective newspaper, allowing both its opinion and news pages to be overwhelmingly dominated by proponents of the agreement. Since its passage the Post has refused to acknowledge that the agreement has had the intended effect in the United States of lowering the wages of manufacturing workers. (This is textbook economics. By putting U.S. manufacturing workers into more direct competition with their low-paid counterparts in Mexico, the result is that wages of manufacturing workers in the United States fall.)
The Post also refuses to acknowledge that the deal has failed to improve Mexico’s growth. In fact, a lead Post editorial in December 2007 told readers that Mexico’s GDP had quadrupled since 1988, which it attributed to the benefits of NAFTA. The actual increase over this 19 year period was 83 percent, which put Mexico near the bottom in growth for Latin American countries.
The Post’s prohibition of honest discussion of Mexico’s economy is apparently continuing. In a piece on Mexico’s elections today, the Post told readers:
“But annual growth during Calderon’s six years has averaged a middling 2 percent.”
This statement gives a whole new meaning to word “middling.” If we turn to the IMF’s data and look at per capita GDP growth in the years 2006-2011, we find that on average Mexico’s per capital GDP shrank by 0.1 percent annually over this period. This is not middling; this performance places Mexico dead last among Latin American countries (several countries in the Caribbean did worse.)
For some reference points, per capita growth in Argentina averaged 5.8 percent, Bolivia 2.8 percent, Brazil 3.1 percent, Ecuador 2.6 percent, and Peru 5.6 percent. There is nothing middling about Mexico’s economic performance over this period; it was bad.
The Washington Post is heavily invested in NAFTA. At the time of the debate it abandoned any pretext of being an objective newspaper, allowing both its opinion and news pages to be overwhelmingly dominated by proponents of the agreement. Since its passage the Post has refused to acknowledge that the agreement has had the intended effect in the United States of lowering the wages of manufacturing workers. (This is textbook economics. By putting U.S. manufacturing workers into more direct competition with their low-paid counterparts in Mexico, the result is that wages of manufacturing workers in the United States fall.)
The Post also refuses to acknowledge that the deal has failed to improve Mexico’s growth. In fact, a lead Post editorial in December 2007 told readers that Mexico’s GDP had quadrupled since 1988, which it attributed to the benefits of NAFTA. The actual increase over this 19 year period was 83 percent, which put Mexico near the bottom in growth for Latin American countries.
The Post’s prohibition of honest discussion of Mexico’s economy is apparently continuing. In a piece on Mexico’s elections today, the Post told readers:
“But annual growth during Calderon’s six years has averaged a middling 2 percent.”
This statement gives a whole new meaning to word “middling.” If we turn to the IMF’s data and look at per capita GDP growth in the years 2006-2011, we find that on average Mexico’s per capital GDP shrank by 0.1 percent annually over this period. This is not middling; this performance places Mexico dead last among Latin American countries (several countries in the Caribbean did worse.)
For some reference points, per capita growth in Argentina averaged 5.8 percent, Bolivia 2.8 percent, Brazil 3.1 percent, Ecuador 2.6 percent, and Peru 5.6 percent. There is nothing middling about Mexico’s economic performance over this period; it was bad.
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There should be an automatic fine of $10,000 for anyone who claims that a dispute between politicians is about philosophy. It should double the second time they say it and go up to $100,000 the third time.
Come on folks, this political science 101. The people that we see in Congress, the White House and elsewhere on the political stage did not get there because of their great philosophical works. They got there by appealing to powerful interest groups. And they stay there by appealing to powerful interest groups. So why are people in the media continually telling us about philosophy.
Glenn Kessler is the most recent sinner in his otherwise fine Fact Check piece on Sarah Palin’s effort to bring back her “death panels” claims about ACA. Kessler notes that Palin now claims that her reference to death panels is the Medicare Independent Payments Advisory Board (IPAB), which she argues will be making life and death decisions about what payments to provide for various treatments.
Kessler comments that IPAB is an effort to contain the rate of cost growth within Medicare which is says is not very different from the system proposed by Republicans. The latter would provide beneficiaries with a voucher (which they like to call “premium support”) whose growth would be restricted to a pace well below the rate of medical cost inflation.
Kessler then tells us:
“the dispute really centers on a philosophical divide between the parties. Democrats would rely on independent experts … Republicans would rely on the insurance marketplace to control costs.”
What makes this is a question of philosophy? Let’s be more concrete. The system put in place under the ACA would put the government in a position where it could squeeze money out of providers. It could specify prices for services and procedures and tell providers take it or leave it. Given the enormous and rapidly growing size of the Medicare market, most would likely take it.
By contrast, the Republican approach surrenders this market power. In fact, it increases by costs by relying on a network of private insurers that we know is less efficient than Medicare. (The Congressional Budget Office and other independent experts have documented this fact numerous times. Like global warming, it is no longer a debatable point.)
Kessler and the Post don’t know anything about Republican’s philosophical beliefs. They do know that they have proposed a Medicare plan that is likely to leave a higher share of Medicare dollars in the hands of insurers and give providers more money for each dollar of services. The paper should just stick with the facts and leave speculation about philosophy to readers.
There should be an automatic fine of $10,000 for anyone who claims that a dispute between politicians is about philosophy. It should double the second time they say it and go up to $100,000 the third time.
Come on folks, this political science 101. The people that we see in Congress, the White House and elsewhere on the political stage did not get there because of their great philosophical works. They got there by appealing to powerful interest groups. And they stay there by appealing to powerful interest groups. So why are people in the media continually telling us about philosophy.
Glenn Kessler is the most recent sinner in his otherwise fine Fact Check piece on Sarah Palin’s effort to bring back her “death panels” claims about ACA. Kessler notes that Palin now claims that her reference to death panels is the Medicare Independent Payments Advisory Board (IPAB), which she argues will be making life and death decisions about what payments to provide for various treatments.
Kessler comments that IPAB is an effort to contain the rate of cost growth within Medicare which is says is not very different from the system proposed by Republicans. The latter would provide beneficiaries with a voucher (which they like to call “premium support”) whose growth would be restricted to a pace well below the rate of medical cost inflation.
Kessler then tells us:
“the dispute really centers on a philosophical divide between the parties. Democrats would rely on independent experts … Republicans would rely on the insurance marketplace to control costs.”
What makes this is a question of philosophy? Let’s be more concrete. The system put in place under the ACA would put the government in a position where it could squeeze money out of providers. It could specify prices for services and procedures and tell providers take it or leave it. Given the enormous and rapidly growing size of the Medicare market, most would likely take it.
By contrast, the Republican approach surrenders this market power. In fact, it increases by costs by relying on a network of private insurers that we know is less efficient than Medicare. (The Congressional Budget Office and other independent experts have documented this fact numerous times. Like global warming, it is no longer a debatable point.)
Kessler and the Post don’t know anything about Republican’s philosophical beliefs. They do know that they have proposed a Medicare plan that is likely to leave a higher share of Medicare dollars in the hands of insurers and give providers more money for each dollar of services. The paper should just stick with the facts and leave speculation about philosophy to readers.
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Thomas Friedman is once again pushing to cut back those lavish $1,100 a month Social Security benefits and to make seniors pay more for health care. That is the implication of his enthusiastic support for the proposal set forward by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson.
This plan calls for Social Security cuts of roughly 3 percent for near retirees by reducing the annual cost of living adjustment. It promises further cuts down the road by raising the retirement age and reducing benefits for middle income workers like school teachers and firefighters. It would also sharply reduce spending on Medicare, which could lead to seniors paying much more for their care.
Friedman argues that such cuts are necessary to allow the country to pay for health care. If he were not such an ardent protectionist he might instead consider more open trade in health care. He might also consider ending patent monopolies for prescription drugs, which could save the country $270 billion a year (5 times the size of the Bush tax cuts for the wealthy) on drug expenditures. He might also consider allowing people to buy into the Medicare system. These routes would provide enormous savings and efficiency gains, although the primary losers would be wealthy people instead of retired workers.
Friedman does usefully call for more immigration. If we had more open immigration for doctors and lawyers their pay could be cut around 50 percent, bringing it more in line with the pay of professionals in other wealthy countries, and saving ordinary workers hundreds of billions of dollars a year. This doesn’t seem to be what Friedman has in mind, but it would be an outcome of a policy that allowed qualified professionals from other countries to compete on an equal footing with highly paid professionals in the United States.
Thomas Friedman is once again pushing to cut back those lavish $1,100 a month Social Security benefits and to make seniors pay more for health care. That is the implication of his enthusiastic support for the proposal set forward by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson.
This plan calls for Social Security cuts of roughly 3 percent for near retirees by reducing the annual cost of living adjustment. It promises further cuts down the road by raising the retirement age and reducing benefits for middle income workers like school teachers and firefighters. It would also sharply reduce spending on Medicare, which could lead to seniors paying much more for their care.
Friedman argues that such cuts are necessary to allow the country to pay for health care. If he were not such an ardent protectionist he might instead consider more open trade in health care. He might also consider ending patent monopolies for prescription drugs, which could save the country $270 billion a year (5 times the size of the Bush tax cuts for the wealthy) on drug expenditures. He might also consider allowing people to buy into the Medicare system. These routes would provide enormous savings and efficiency gains, although the primary losers would be wealthy people instead of retired workers.
Friedman does usefully call for more immigration. If we had more open immigration for doctors and lawyers their pay could be cut around 50 percent, bringing it more in line with the pay of professionals in other wealthy countries, and saving ordinary workers hundreds of billions of dollars a year. This doesn’t seem to be what Friedman has in mind, but it would be an outcome of a policy that allowed qualified professionals from other countries to compete on an equal footing with highly paid professionals in the United States.
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The elites continually try to give us phony political frames to divert the public from the real issues in politics. We have an excellent example of such an effort in the NYT’s Economix blog where Uwe Reinhardt tells us that the health care debate is about “Solidarity vs. Rugged Individualism.”
Reinhardt’s story is that we have the solidaristic liberal types who think that everyone should be put in a single pool. If someone ends up getting really sick, then the healthy among us will pick up the tab. These are the supporters of Obamacare or other plans to extend health insurance coverage.
Then we have the rugged individualistic types who are willing to pay for their own care, but don’t want to be stuck with the tab for others. Their philosophy is that if someone gets sick, then they should just get out of the way. There is no reason to stick everyone else with the tab.
That’s a great way to frame the central issue in the debate, except of course that none of the leading opponents of Obamacare openly expouses anything like the rugged individualist view that Reinhardt wants to attribute to them. Instead they say things like they want to use market mechanisms to extend coverage. We can show that their approaches will not work, but that is not the same thing as espousing Reinhardt’s rugged individualistic view that people just should not get care.
And, there is good reason to believe that very few people actually hold anything like the rugged individualist view that Reinhardt has outlined here. There is a little program called “Medicare” which operates in a way that is 180 degrees at odds with the rugged individualist view that Reinhardt has described. Incredibly, 70-80 percent of Republicans strongly support Medicare. In fact, 70-80 percent of self-identified Tea Party supporters strongly approve of Medicare.
This suggests that these people are not opposed to Obamacare because of their commitment to rugged individualism. It suggests that their opposition is gounded in something else — perhaps confusion about the program, fear of a government mandate, perhaps dislike of the people who they see as the many beneficiaries — but not a committment to rugged individualism.
If that is the case, the discussion of rugged individualism is a distraction from the real issues in the health care debate, perhaps front and center why health care in the United States costs twice as much as everywhere else. If the United States paid the same amount per person for its health care as Germany or Canada we would not be having a debate like this. Everyone would already be covered for less than we are now spending on Medicare, Medicaid and other government health care programs.
The elites continually try to give us phony political frames to divert the public from the real issues in politics. We have an excellent example of such an effort in the NYT’s Economix blog where Uwe Reinhardt tells us that the health care debate is about “Solidarity vs. Rugged Individualism.”
Reinhardt’s story is that we have the solidaristic liberal types who think that everyone should be put in a single pool. If someone ends up getting really sick, then the healthy among us will pick up the tab. These are the supporters of Obamacare or other plans to extend health insurance coverage.
Then we have the rugged individualistic types who are willing to pay for their own care, but don’t want to be stuck with the tab for others. Their philosophy is that if someone gets sick, then they should just get out of the way. There is no reason to stick everyone else with the tab.
That’s a great way to frame the central issue in the debate, except of course that none of the leading opponents of Obamacare openly expouses anything like the rugged individualist view that Reinhardt wants to attribute to them. Instead they say things like they want to use market mechanisms to extend coverage. We can show that their approaches will not work, but that is not the same thing as espousing Reinhardt’s rugged individualistic view that people just should not get care.
And, there is good reason to believe that very few people actually hold anything like the rugged individualist view that Reinhardt has outlined here. There is a little program called “Medicare” which operates in a way that is 180 degrees at odds with the rugged individualist view that Reinhardt has described. Incredibly, 70-80 percent of Republicans strongly support Medicare. In fact, 70-80 percent of self-identified Tea Party supporters strongly approve of Medicare.
This suggests that these people are not opposed to Obamacare because of their commitment to rugged individualism. It suggests that their opposition is gounded in something else — perhaps confusion about the program, fear of a government mandate, perhaps dislike of the people who they see as the many beneficiaries — but not a committment to rugged individualism.
If that is the case, the discussion of rugged individualism is a distraction from the real issues in the health care debate, perhaps front and center why health care in the United States costs twice as much as everywhere else. If the United States paid the same amount per person for its health care as Germany or Canada we would not be having a debate like this. Everyone would already be covered for less than we are now spending on Medicare, Medicaid and other government health care programs.
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That is what readers of his column today on the Supreme Court’s health care ruling would learn. Brooks sort of praised the restraint the court exercised in not overturning the ACA. He then went on to list the inefficiencies in the health care system that the ACA did not fix. Brooks mentions the malpractice system, fee for service care, and the government subsidy for employer provided care.
Brooks probably does not know anything about the ACA, since it is likely to substantially reduce employer provided care over time according to most analyses. More importantly, Brooks somehow overlooks the inefficiencies in the system that have the effect of giving more money to rich people and leading to poorer quality care.
At the top of the list is patent protection for prescription drugs. These government granted monopolies raise the price of drugs by around $270 billion a year above their free market price. This is roughly five times the size of the cost of the Bush tax cuts to the rich. Patent monopolies also encourage drug companies to mislead doctors and patients about the merits of their drugs, leading to poorer quality care.
A second item that Brooks somehow missed is the inefficiency of the insurance industry, which is left in tack by the ACA. We waste between 10-15 percent of our health care spending ($250-$375 billion a year) on unnecessary administrative costs as a result of our system of private insurers, as opposed to a public Medicare type program. Of course top executives at the insurers do very well with this system.
The third obvious source of waste that Brooks failed to catch was the excess pay for our doctors, especially highly paid specialists. If the pay for our doctors was comparable to the pay of doctors in Germany or Canada it would save us around $100 billion a year, or roughly two Bush tax cuts for the rich.
It is striking that Brooks has such difficulties noticing inefficiencies in the health care system that redistribute income to the rich.
That is what readers of his column today on the Supreme Court’s health care ruling would learn. Brooks sort of praised the restraint the court exercised in not overturning the ACA. He then went on to list the inefficiencies in the health care system that the ACA did not fix. Brooks mentions the malpractice system, fee for service care, and the government subsidy for employer provided care.
Brooks probably does not know anything about the ACA, since it is likely to substantially reduce employer provided care over time according to most analyses. More importantly, Brooks somehow overlooks the inefficiencies in the system that have the effect of giving more money to rich people and leading to poorer quality care.
At the top of the list is patent protection for prescription drugs. These government granted monopolies raise the price of drugs by around $270 billion a year above their free market price. This is roughly five times the size of the cost of the Bush tax cuts to the rich. Patent monopolies also encourage drug companies to mislead doctors and patients about the merits of their drugs, leading to poorer quality care.
A second item that Brooks somehow missed is the inefficiency of the insurance industry, which is left in tack by the ACA. We waste between 10-15 percent of our health care spending ($250-$375 billion a year) on unnecessary administrative costs as a result of our system of private insurers, as opposed to a public Medicare type program. Of course top executives at the insurers do very well with this system.
The third obvious source of waste that Brooks failed to catch was the excess pay for our doctors, especially highly paid specialists. If the pay for our doctors was comparable to the pay of doctors in Germany or Canada it would save us around $100 billion a year, or roughly two Bush tax cuts for the rich.
It is striking that Brooks has such difficulties noticing inefficiencies in the health care system that redistribute income to the rich.
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Reporters at NPR have the time to look up the requirements of the Affordable Care Act and calculate their impact on employers. Its listeners do not. For that reason, it is incredibly irresponsible to simply report the views of one small business owner saying the bill will be a big burden and then another who says it will guarantee him and his wife insurance.
Morning Edition could have taken 30 second to give listeners an idea of the size of the burden that the ACA imposes. For firms that employ fewer than 50 workers, there are no requirements. Firms of 50 workers or more must either provide insurance or pay a penalty.
The size of penalty is $2,000 per worker, with the first 30 workers exempted. This means that if a company employs exactly 50 workers (as could be the case with the employer profiled), then the company would have to pay a $40,000 fine. If the average pay for a worker is $10 an hour (in other words, everyone gets close to the minimum wage), this fine would add 4 percent to the company’s wage bill. If the employer currently pays for some care (as the employer profiled claimed he did), he would be able to stop paying for the care, which would offset much or all of this cost.
By comparison, past minimum wage increases have been on the order of 15-20 percent. Extensive research has found that these increases in labor costs have had little or no impact on employment, meaning that firms have been able to absorb this additional expense without substantially changing their operations. This research suggests that the burden imposed by the ACA would have relatively little impact on business.
[Addendum: I apologize, this is much worse than I thought. Jonathan Lundell calls my attention to Balloon Juice, which reports that NPR’s small business owner, Joe Olivo, is apparently a regular on news shows and at congressional hearings, appearing most recently the prior night on NBC. Apparently he is a spokesperson for the National Federation of Independent Business (NFIB).
There is nothing wrong with presenting the views of the NFIB, but they should be identified as such. NPR misled its listeners when it presented Mr. Olivo as a random small business owner whom they happened to stumble upon.]
Reporters at NPR have the time to look up the requirements of the Affordable Care Act and calculate their impact on employers. Its listeners do not. For that reason, it is incredibly irresponsible to simply report the views of one small business owner saying the bill will be a big burden and then another who says it will guarantee him and his wife insurance.
Morning Edition could have taken 30 second to give listeners an idea of the size of the burden that the ACA imposes. For firms that employ fewer than 50 workers, there are no requirements. Firms of 50 workers or more must either provide insurance or pay a penalty.
The size of penalty is $2,000 per worker, with the first 30 workers exempted. This means that if a company employs exactly 50 workers (as could be the case with the employer profiled), then the company would have to pay a $40,000 fine. If the average pay for a worker is $10 an hour (in other words, everyone gets close to the minimum wage), this fine would add 4 percent to the company’s wage bill. If the employer currently pays for some care (as the employer profiled claimed he did), he would be able to stop paying for the care, which would offset much or all of this cost.
By comparison, past minimum wage increases have been on the order of 15-20 percent. Extensive research has found that these increases in labor costs have had little or no impact on employment, meaning that firms have been able to absorb this additional expense without substantially changing their operations. This research suggests that the burden imposed by the ACA would have relatively little impact on business.
[Addendum: I apologize, this is much worse than I thought. Jonathan Lundell calls my attention to Balloon Juice, which reports that NPR’s small business owner, Joe Olivo, is apparently a regular on news shows and at congressional hearings, appearing most recently the prior night on NBC. Apparently he is a spokesperson for the National Federation of Independent Business (NFIB).
There is nothing wrong with presenting the views of the NFIB, but they should be identified as such. NPR misled its listeners when it presented Mr. Olivo as a random small business owner whom they happened to stumble upon.]
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