A Healthy Dose of Reality

Suddenly, the press, fresh from a near-consensus that the Supremes would find Obamacare constitutional, is abuzz with the news that Justice Kennedy frowned, or something. As Jeffrey Toobin writes, "All of the predictions including mine that the justices would not have a problem with this law were wrong."

So be it. Having read a big chunk of the 2,000-plus pages of this law, I won't be able to muster much grief at its demise.

Besides, there is an obvious solution for the President, should he wish to avail himself of it. A couple of simple rules would suffice.

First, reduce Medicare support for hospitals providing charity care. Cover only palliative care --the relief of pain and the mitigation of damage that would prevent discharge of a patient: fix broken legs, provide antibiotics. No heart operations, no cancer treatment, no dialysis.

Second, allow insurers to impose a two-year waiting period on anyone applying for new coverage.

Both these rules would probably require nothing more than executive orders. And I can promise that the free market that everyone loves so much --the big insurance companies-- would be only too happy to abide by the two-year rule, given the requirement that they accept all comers.

Assuming the Supreme Court leaves the law intact, except for the hated individual mandate (not necessarily a safe assumption, given the ideological underpinnings and political motivations of this Court), the government could still provide subsidies for the low-income newly-insured.

Cutting the hospital subsidies for charity care would remove a major incentive for tax-exempt hospitals to retain their tax exemptions, with all those odious anti-inurement rules; so there may even be an upside to states and municipalities who could begin putting these huge organizations with their enormous physical plants onto the real estate tax rolls.

Now, many people, seeing the impossibility of enrolling later if they did not enroll now, would probably sign up for insurance; even healthy twenty-somethings who are sensible would do that. But inevitably lots of people would remain without coverage. It would take a few years of horror stories for the message to get across: no, we won't let you die in the street. You can die at home, with morphine, but not with Avastin, or dialysis, or a bypass operation that you cannot pay for yourself. So you might want to think about getting coverage before you need it --because by the time you need it, you won't be able to get it. And no more Emergency Room admission when you're feelin' poorly.

Sorry. It's a tough world. But it's the one you voted for.

Of course, an awful lot of people might flock to Massachusetts.
.

Am I Nuts?

Or is half the country? I mean, okay, let's assume you are dissatisfied with the direction Obama has taken things during the past 3 years. You don't think universal health care should be a concern of government. you think that the big banks should have been allowed to fail (that was a Bush thing, but never mind). You opposed the stimulus, even though roughly half of the dollars went to individuals in the form of tax cuts and rebates.

In short, let's assume you are a principled conservative: government ought to run the post office, the military, and maybe some ports and public safety; otherwise it should just get out of the way. Now, on the Republican side you have Romney the business guy, with a demonstrated ability to manage things (the Olympics), with success in governing one of the most liberal states in the union, and so on. An obviously intelligent, stable, reasonable man. Then you have Santorum, who famously compared gay marriage to marriage between a man and an orangutan (or whatever); who clearly opposes contraception, let alone abortion --nemmine the fact that he has fewer kids than one might expect from a good Catholic. And he's been at the public (and government-aligned nonprofit) trough for a long time, and his policy recommendations include bombing Iran.

Why is this a close choice? I'm not even going to talk about Gingrich, who I think even Republicans sense is dangerously unstable, self-aggrandizing, grandiose, and deluded. Why would you seriously entertain voting for Santorum? I mean, where's the substance? Even his own constituents tossed him out of the US Senate by an embarrassing margin. Is it really true that all we care about is how nice someone is?

Recall the Hillary Clinton/Barack Obama primaries. Wasn't there some honest substance there, never mind who you favored? Didn't both of them come across as serious people? And can you really say as much about the Republican alternatives, this time?

Am I crazy? Or is a significant plurality of the American electorate?

Oh.

So Shall you Reap

The Republican establishment, it is everywhere reported, is upset at the prospect (which seems to be fading a bit) of a Gingrich nomination. Of course, he'd be a disaster; Obama would virtually be guaranteed a landslide if they were stupid enough to nominate Newt. but it's nice to see them squirm.

The Republican Party, for almost all of my adult life, has been the party of racism, of cynical manipulation of the basest fears and prejudices of the least-educated portions of our population, even as it has also curried favor with the wealthiest and most privileged. The Republican strategy of division has sold a lot of books --both in its promulgation and in analysis of it-- and done a huge amount of damage to our polity.

But they have only themselves to blame for Gingrich. What did they expect, when they stood silently by, or even actively encouraged, ceaseless ad hominem attacks on President Obama, from thinly-veiled racist comments and arguments to Senator DeMint's "You lie!" called out during the State of the Union address.

When the Republican Senate Minority Leader, at the start of Obama's term, announced in all sincerity that his primary legislative objective would be to see that Obama would be a one-term president, he was in effect saying, to hell with the duties of governing; we will be about naked political advantage, gained no matter the cost. And when the Republican establishment stands silently by when Obama is attacked as a racist, as one who hates his country and wants to subvert it?

Well, then, they deserve Gingrich and worse (of which they have seen, and continue to see, plenty in their own primaries). They are despicable people, and they get what they sought. Unfortunately, their comeuppance threatens to be the punishment of all of us.

So Much Nonsense, So Little Inquiry

Listening to Republican Debate XVII: When a dabbler in policy-think such as I am can spot the inaccuracy, the inconsistency, the enormous and questionable assumption in the statements of a candidate, you wonder why there is never a follow-up question that points it out.

Examples, from flipping on the tv for 3 minutes tonight:

Gingrich: Every American will be an investor when he goes to work (I missed the question, but he was obviously talking about privatizing Social Security), and will have an estate to leave his children, which he doesn't get now. Q: What causes this Everyman investor to make intelligent investment decisions? And what happens when, the year he retires or the year after, the market loses half its value, which has happened twice in the past 25 years?

Santorum: We'll cut the corporate income tax in half. It'll become like a Net Profits Tax (what does he think it is now?). But we'll only do it for manufacturers who keep their jobs in the U.S. They are the jobs that are leaving. Q: Has he never heard of call centers in India, or service bureaus in China or Taiwan?

What a waste of time; these guys are pathetic. Romney included. Huntsman, the only sensible guy in the field, dropped out today. I heard someone on the radio explain it this way: He's not charismatic, he's not exciting.

How about his policies?

Tales of Hoffman. Estates.

The states should be abolished.

Well, OK, maybe not abolished per se. But they are detrimental to the proper functioning of the economy, as they currently exist.

What raises this issue, not for the first time, in my mind is the worry, in Hoffman Estates, Illinois, about what may happen if the suburb's biggest employer, Sears, should pick up and leave.

Why should Sears do this? Because Hoffman Estates, and Illinois, dares to apply to Sears the tax rates that apply to everyone else. In Illinois, I mean. Other states will bid for the privilege of having Sears move its headquarters to their locales; and the primary thing they have to offer is tax breaks.

That's why Sears went from downtown Chicago to the boondocks in the first place, of course: the town of Hoffman Estates gave Sears zillions of dollars worth of tax breaks in return for Sears's relocating to their village, back in 1989. The deal expires next year, and so Sears is now seeking another tax exemption, from another state. Of course, it would also be willing to consider a suitable extension of its current tax exemption, in return for staying where it is.

States want companies like Sears; they employ large numbers of people (about 6,000, in the case of Sears), and this brings prosperity in the form of all the money that is spent locally by those thousands of employees.

Trouble is, those thousands of employees have multiple thousands of kids, who need schools. And the thousands of families need parks, and streets, fire departments, and infrastructure of diverse and complex nature. The employer, in the normal circumstance, pays property taxes on its facilities to help build those schools and hire those firemen.

When localities or counties trade long-term tax "holidays" to specific companies in return for the gift of a headquarters facility, or a big plant, to be located within their boundaries, they essentially render themselves hostage to the company.

So now, Hoffman Estates has a gun to its head: if Sears leaves, people will leave. Housing prices will fall; a big facility will become idle; schools will empty; and so forth. Sure, they need the tax receipts, but the village also needs the company's presence. And suddenly, the company has suitors from all over the country.

So states and municipalities enter into a bidding war for the prize of the company's presence on their soil. The states engage in a race where the winner impoverishes himself.

More on this later. But it seems obvious that, when you have dozens of different administrative districts (our states) racing to the bottom in this way, everyone is worse off.

Oh yeah: except for the big corporation.

Afghanistan

This is old news, what with the current obsession with constitutional amendments mandating balanced budgets --a stupid idea if there ever was one; is it superfluous to mention it's a Republican brainchild?-- and sundry other posturing by our political class, which has come to resemble nothing so much as the characters in a play by ... oh, maybe Oscar Wilde. Or a skit by Ernie Kovacs, like the immortal (and faintly racist) "Nairobi Trio." But precisely because the situation in Afghanistan is, however temporarily, off the front page, I thought it would be a good time to review the bidding, as it were. And so I've chosen two articles that address different aspects of that war and that country.

The first, from the July 9, 2009 issue of the London Review of Books, is an historical review of Afghanistan's position in international conflicts. Rory Stewart focuses on the "Great Game" of the 19th century between the Russian and British Empires and Afghanistan's role. Here is that piece. Next is David Bromwich's article, "The Fastidious President," in the November 18, 2010 issue of that same publication.

Tax Rates for 2014

Many of the problems vexing our country could be addressed fairly, expeditiously, and effectively by returning to the individual tax rate structure we had in 1954, the first term of President Eisenhower.

Here are the MFJ brackets for that year (there are actually many more brackets, approximately 25 in all; the missing ones are interspersed between these break points):

Income Range                Marginal Rate                    $0      -            $4,000               20%             $6,000      -            $8,000               22%           $16,000      -          $18,000               34%           $38,000      -          $44,000               56%           $70,000      -          $80,000               69%         $100,000      -        $150,000               75%         $400,000      -                                     91%

Too steep? OK, let’s index these rates for inflation since 1954. Roughly speaking, the consumer price index (1982 = 100) was 25 in 1954, and is about 200 today, so prices have increased eight-fold in the past 55 years. So let’s leave the rates the same, and multiply the brackets by 8. For simplicity, let’s say the rate shown begins to apply when income reaches the amount indicated:

Income           Marginal Rate

         $32,000                     20%

         $64,000                     22%

       $144,000                     34%

       $352,000                     56%

       $640,000                     69%

    $1,200,000                     75%

    $3,200,000                     91%

Let’s compare these rates with those actually in place in 2010:

         Income Range                         2010                Indexed 1954 

                                                   Marginal Rate      Marginal Rate

                  $0     -          $16,750                    10%                          0%

         $16,750     -          $32,000                    15%                          0%

         $32,000     -          $64,000                    15%                        20%

         $64,000     -          $68,000                    15%                        22%

         $68,000     -        $137,300                    25%                        22%

       $137,300     -        $144,000                    28%                        22%

       $144,000     -        $209,250                    28%                        34%

       $209,250     -        $352,000                    33%                        34%           

       $352,000     -        $373,650                    33%                        56%

       $373,650     -        $640,000                    35%                        56%

       $640,000     -     $1,200,000                    35%                        69%

    $1,200,000     -     $3,200,000                    35%                        75%

    $3,200,000     -                                          35%                        91%

Notice that people in the lowest brackets would see their tax rates vanish. From a public policy standpoint this is probably undesirable; so let’s insert a 5% and a 10% bracket at these low levels of income. Let’s also provide a personal exemption of, say, $10,000 for the first two people listed on a return –husband and wife, husband and husband, whatever—and reduce it to $5,000 for all dependents after that. That way, a family of 4 with an income of $32,000 would pay a 10% tax on the last $2,000. Nominal, sure; but it forces them to pay attention. And we should all be taxpayers, even if nominally so.

And let’s not be accused of being punitive on the middle class: keep the rates where they are now, up to an income of $144,000; and split the difference for the next bracket. Say, a 30% rate for incomes between $144,000 and $209,250.

It’s only when you get above $350,000 that taxes really start taking off. This is the area where, over the past 50 years, the brackets have simply disappeared. That is, those at the top are currently being taxed at rates far, far below what they would be had the 1954 rates been left in place and only adjusted for inflation. In other words, someone who earns $1 million today pays only 35% on his next dollar of income; had the tax rate schedule been maintained at historical levels he would be paying more than double that –75%.

Even in 1980, there was a 70% bracket, applicable to dividends, interest, and other unearned income; capital gains were taxed at 35%, and earnings at 50%. Note that these are the top rates in each case. Few people actually paid them; but the rates were there for the very wealthy.

No wonder the rich get richer, now more than at any time since the Gilded Age. And if you consider individual cases, why does it make sense that a physician, who earns a handsome but not egregious $300,000 per year, should pay the same rate on his next dollar of earnings as the CEO of a Fortune 100 company who makes $10 million?

Our tax structure has lost what is probably the most important feature of a voluntary system, namely equity. It is simply unfair, as it stands today. That lack of basic fairness has been obfuscated as we have had hammered into us all the notion that “taxes” are too high, by those at the top who have reaped substantially all the benefits of the tax restructuring of the past generation, and suffered essentially none of the ill effects of the tightening of the safety net and the rape of the economy by the economic elite (with the active collusion of the Congress).

Let’s get concrete. Say I’m a surgeon with a prospering practice, and my taxable income is $750,000 per year after all exemptions and deductions. What do I pay today, and what would I pay under this proposed alternative?

The 2011 tax rates compute a tax for our surgeon (assuming a joint return) of $232,808. Under the proposed scheme above, he would pay $331,900, an increase of $100,000. This is a big increase; on the other hand, it leaves him with “only” $418,100 after tax. This is about $1,145 per day. Most Americans don’t spend anything like that even when on vacation and paying for hotels, airplane tickets, and so forth.

Yes, I know that there are other taxes, like property taxes and payroll taxes and so forth. We all have expenses. But there are a lot of unmet needs in this society; and we did not achieve the prosperity of the 20th century –prosperity that has declined significantly for a large minority, if not an actual majority, of Americans since 1980—by failing to meet our needs as a society. Quite the contrary, it was only after we introduced steeply progressive income taxation, and social welfare programs, that our middle class grew and our society began to realize its potential. We have given up middling prosperity for the great majority in exchange for lives of unimaginable wealth and privilege for a thin slice of our population. In the process, we’ve distorted our economy and our polity, our overall standard of living has declined, we’ve come close to ruining our social contract, and we’ve steadily lost ground when comparing ourselves to other countries on almost any metric you choose: healthcare cost and outcomes, life expectancy, income inequality, educational achievement –even literacy--, social and economic mobility, and so on.

It’s time to try something old.