To Accompany the June 26, 2012 edition of Tidbits
Bob Jensen at Trinity Universit
(MSNBC Host) Melissa Harris-Perry made some
startling accusations. Harris-Perry told her audience that 9-11 gave America
PTSD. She added that Muslim terrorists were an imagined racial enemy for “white
America.” It’s whitey’s fault.
Playing up to the racial divide is becoming a daily event on MSNBC.
How to Lie With Statistics ---
Bill Mahar --- http://en.wikipedia.org/wiki/Bill_Maher
How to lie with statistics
"Dunce Bill Maher: U.S. Is Fifth Worst in the World in Income Inequality," by Noel Sheppard, Newsbusters, June 9, 2012 ---
In this week's "How Dumb Is Bill Maher" segment, the Obama-supporting comedian actually said on HBO's Real Time Friday that the United States ranks fifth worst in the world in income inequality.
Actually, we rank 43rd (video follows with transcribed highlights and commentary):
Shortly after the panel segment began Friday, Maher asked his guests, “How bad is income inequality going to get when unions disappear altogether?”
Michael Brendan Dougherty, the politics editor at Business Insider, replied, “It’s going to get much worse.”
“How could it get much worse?” asked Maher. “I mean, right now we’re fifth in the world, fifth worst in income inequality.”
Where did Maher get this figure?
Well, that's anybody's guess for according to the CIA's World Factbook, America currently ranks 43rd.
That puts us better at this statistic than over 30 percent of the nations ranked by the CIA.
Some notables with far worse income inequality include Thailand, Hong Kong, Chile, Brazil, Mexico, China, Peru, and Argentina.
So, once again, as he does virtually every time he's on television, Maher was not only wrong about something he arrogantly claimed as fact - he was dead wrong.
Keep up the bad work, Bill!
Read more: http://newsbusters.org/blogs/noel-sheppard/2012/06/09/dunce-bill-maher-us-fifth-worst-world-income-inequality#ixzz1xOdEFnDN
I think a better title for this would be "Bill Mahar's Dreams of Gini." Actual Gini Coefficients vary by raters, but the U.S. is in nowhere near the worst third of 207 sovereign states by anybody's dreams of Gini ---
When comparing nations as to inequality there's a huge problem with defining "unequal" in terms of what? For example, when Bulgaria and Norway both have similar Gini Coefficients, we have to question what this really tells us in terms of where the living is good. Similarly, when the United States and China have similar Gini Coefficients we have to ask the same question.
Measurement Problems of the Gini Coefficient ---
Comparing income distributions among countries may be difficult because benefits systems may differ. For example, some countries give benefits in the form of money while others give food stamps, which might not be counted by some economists and researchers as income in the Lorenz curve and therefore not taken into account in the Gini coefficient. The Soviet Union was measured to have relatively high income inequality: by some estimates, in the late 1970s, Gini coefficient of its urban population was as high as 0.38, which is higher than many Western countries today. This number would not reflect those benefits received by Soviet citizens that were not monetized for measurement, which may include child care for children as young as two months, elementary, secondary and higher education, cradle-to-grave medical care, and heavily subsidized or provided housing. In this example, a more accurate comparison between the 1970s Soviet Union and Western countries may require one to assign monetary values to all benefits – a difficult task in the absence of free markets. Similar problems arise whenever a comparison between more liberalized economies and partially socialist economies is attempted. Benefits may take various and unexpected forms: for example, major oil producers such as Venezuela and Iran provide indirect benefits to its citizens by subsidizing the retail price of gasoline. Similarly, in some societies people may have significant income in other forms than money, for example through subsistence farming or bartering. Like non-monetary benefits, the value of these incomes is difficult to quantify. Different quantifications of these incomes will yield different Gini coefficients. The measure will give different results when applied to individuals instead of households. When different populations are not measured with consistent definitions, comparison is not meaningful. As for all statistics, there may be systematic and random errors in the data. The meaning of the Gini coefficient decreases as the data become less accurate. Also, countries may collect data differently, making it difficult to compare statistics between countries.
As one result of this criticism, in addition to or in competition with the Gini coefficient entropy measures are frequently used (e.g. the Theil Index and the Atkinson index). These measures attempt to compare the distribution of resources by intelligent agents in the market with a maximum entropy random distribution, which would occur if these agents acted like non-intelligent particles in a closed system following the laws of statistical physics. Credit risk
The Gini coefficient is also commonly used for the measurement of the discriminatory power of rating systems in credit risk management.
The discriminatory power refers to a credit risk model's ability to differentiate between defaulting and non-defaulting clients. The above formula G_1 may be used for the final model and also at individual model factor level, to quantify the discriminatory power of individual factors. This is as a result of too many non defaulting clients falling into the lower points scale e.g. factor has a 10 point scale and 30% of non defaulting clients are being assigned the lowest points available e.g. 0 or negative points. This indicates that the factor is behaving in a counter-intuitive manner and would require further investigation at the model development stage.
How to Lie With Statistics ---
Here is an audio of Krugman's all-time hero
John Maynard Keynes Explains Cure to High Unemployment in His Own Voice. (1939) --- Click Here
The Hall of Fame Accountant Versus the Famous Keynesian Economist
U.S. National Debt Clock ---
Also see http://www.brillig.com/debt_clock/
Accounting Hall of Fame Citation for David Walker ---
"Walker Warns of Ballooning Government Debt," by Michael Cohn,
Accounting Today, May 16, 2012 ---
Former U.S. Comptroller General David Walker has been actively spreading the word for years about the dangers of the nation’s out-of-control budget deficit and national debt.
Those views are finally getting taken seriously in Washington, with Republicans and Democrats in Congress and the Obama administration issuing their own plans for cutting the deficit, building on the proposals of various deficit commissions and think tanks. Walker delivered a speech Thursday at the American Institute of CPAs’ Spring Meeting of Council in Washington, a day after former Senator Alan Simpson, who co-chaired the Simpson-Bowles Commission, gave a humorous talk to AICPA Council members at an evening reception.
Walker’s speech was far more serious in tone. “I’m still an active CPA and I’m proud to be a CPA,” he said. “How you keep score matters. We have a responsibility to lead the fight for truth.”
He urged CPAs in the audience to take up the struggle to persuade the government to control the deficit. “The decisions that fail to be made by elected officials within the next three to five years will largely determine whether our collective future is better than our past,” he said. “We are approaching a tipping point. Some states and localities have passed the tipping point.”
Walker is leading what he calls the Comeback America Initiative at www.keepingamericagreat.org. “In the last few years we have strayed from some of our values that made us great in the past: limited and effective government, personal responsibility and accountability, fiscal responsibility and equity, stewardship.”
He worries about the integrity of the Social Security Trust Funds, quipping, “By the way you can’t trust them, they’re not funded.” He said the country has a progressive tax system, even though the progressivity is subject to debate. Warren Buffett’s effective tax rate is less than his, but over 40 percent of taxpayers pay no federal income taxes.
Continued in the article
Nobel Laureate Paul Krugman ---
"Debt Is (Mostly) Money We Owe to Ourselves," by Paul Krugman, The New York
Times, December 28, 2012 ---
. . .
¶People think of debt’s role in the economy as if it were the same as what debt means for an individual: there’s a lot of money you have to pay to someone else. But that’s all wrong; the debt we create is basically money we owe to ourselves, and the burden it imposes does not involve a real transfer of resources.
¶That’s not to say that high debt can’t cause problems — it certainly can. But these are problems of distribution and incentives, not the burden of debt as is commonly understood. And as Dean says, talking about leaving a burden to our children is especially nonsensical; what we are leaving behind is promises that some of our children will pay money to other children, which is a very different kettle of fish.
Comment of Larry L on the above Krugman OpEd on December 28, 2012
generally agree with the economic observations of Krugman and I understand what he is saying about internal-external transfers of wealth/debt.
But, I have to disagree with him on the inter-generational argument. People focus on the size of the debt but they do NOT focus on HOW the money has been spent (the money we borrowed over the past generation).
The reality is that Boomers borrowed to spend and NOT build. The lower taxes of the previous 30 years was a subsidy for personal spending (especially for the top 1%). The national debt is a representation of the money borrowed (but not earned) to pay for all sort of personal spending (and destructive wars). If you look at the sort of spendthrift nonsense at the top of the pyramid, this has been an incredibly wasteful use of our country's resources and infrastructure.
So, while other countries may have a high debt level internally, most of that debt is being used to upgrade their physical infrastructure and intellectual property, increasing their productivity and therefore raise their incomes and standards of living. For them, the debt was well spent and will result in passing a better life to the next generation.
The U.S. has done the exact opposite.
Of course there are some nations that behaved more like the U.S., including Portugual, Ireland, Greece, and Spain and not Italy.
Increasingly the U.S. National Debt is owed to other nations, especially those in Asia and the Middle East. Hence, it's becoming much more than just something we owe to ourselves. And to keep those amounts we owe to outsiders, Krugman and the Head of the Federal Reserve (Bernanke) are leaning more and more on the Zimbabwe School of Economics that cuts down on the rate of increase in the National Debt by simply increasing the money supply (tantamount to printing more greenbacks not arising from taxes or borrowing). To date Bernanke has flooded our economy with over $2 trillion in this "free money."
The problem of course is at some point free money spending policies of the government come home to roost with a sudden increase in prices. To combat inflation, the Fed will be forced to raise interest rates on the existing National Debt (fueled by annual trillion-dollar government spending deficits) to a point where interest on that debt may become an unsustainable chuck of the Federal budget.
At that point the only way to meet some future entitlements obligations such as Social Security, Medicare, and other entitlements will either be to print more money and become increasingly like Zimbabwe or cut back drastically on promised paid to earlier generations.
I think we in the United States should listen more to the accountant (David Walker) than the Economist who preaches very nearly unrestrained borrowing and printing. A quotation from http://en.wikipedia.org/wiki/Krugman#Economics_and_policy_recommendations
Krugman was one of the most prominent advocates of the 2008–2009 Keynesian resurgence , so much so that economics commentator Noah Smith referred to it as the "Krugman insurgency."
. . .
Economist and former United States Secretary of the Treasury Larry Summers has stated Krugman has a tendency to favor more extreme policy recommendations because "it’s much more interesting than agreement when you’re involved in commenting on rather than making policy."
According to Harvard professor of economics Robert Barro, Krugman "has never done any work in Keynesian macroeconomics" and makes arguments that are politically convenient for him. Nobel laureate Edward Prescott charged that Krugman "doesn't command respect in the profession", as "no respectable macroeconomist" believes that economic stimulus works.
Krugman himself cleverly made tens of millions of dollars writing books and making high-priced speeches to the 99% while he himself basks in the 1%. Nice work if you can get it, and his fortune in no small way came from one time winning a Nobel Prize.
Bob Jensen's threads on entitlements are at
Government Accountability Office (GAO) Podcast [iTunes] http://www.gao.gov/podcast/watchdog.xml
Video: Fora.Tv on Institutional Corruption & The Economy Of Influence
Video from the AICPA
What's at Stake? A CPA's Insights into the Federal Government's Finances ---
Bob Jensen's threads on the sad state of governmental accounting ---
When it Comes to the Topic of Immigration, Paul Krugman is a Little Less
"Notes on Immigration," by Paul Krugman, The New York Times, March 27, 2006 ---
Immigration is an intensely painful topic for a liberal like myself, because it places basic principles in conflict. Should migration from Mexico to the United States be celebrated, because it helps very poor people find a better life? Or should it be condemned, because it drives down the wages of working Americans and threatens to undermine the welfare state? I suspect that my March 27 column will anger people on all sides; I wish the economic research on immigration were more favorable than it is.
In writing this piece I drew mainly on three sources, research papers by economists I know and trust. First is a paper, “Immigration Policy,” by Gordon H. Hanson (pdf) of the University of California at San Diego, . Mr. Hanson is one of my former students, and a leading expert on all matters having to do with U.S.-Mexican economic relations, especially issues having to do with income distribution. This paper gives a good overview of the (small) gains from immigration and the fiscal impacts.
Second is a paper by George Borjas and Lawrence Katz of Harvard, “The Evolution of the Mexican-Born Workforce in the United States.” (pdf). Mr. Borjas is a leading expert on immigration issues; Mr. Katz is one of America’s leading labor economists.
Third is a paper by Mr. Hanson, Matthew Slaughter of Dartmouth (another former student) and Kenneth Scheve (pdf) of the University of Michigan. This paper alerted me to the way immigration penalizes more generous states.
Like all research results, the conclusions of these papers may have to be revised in the light of future research. But I’m afraid that the three negative conclusions I stressed in the column are fairly robust.
First, the benefits of immigration to the population already here are small. The reason is that immigrant workers are, at least roughly speaking, paid their “marginal product”: an immigrant worker is paid roughly the value of the additional goods and services he or she enables the U.S. economy to produce. That means that there isn’t anything left over to increase the income of the people already here.
You might ask why, in that case, there are any gains from immigration. The answer is that when a country receives a lot of immigrants, the wage paid to immigrants reflects the marginal product of the last immigrant, which is less than that of earlier immigrants. So there is some gain. But as Mr. Hanson explains in his paper, reasonable calculations suggest that we’re talking about very small numbers, perhaps as little as 0.1 percent of GDP.
There is, by the way, a possible out from this argument in the case of high-skill immigrants. You could argue that, say, South Asian engineers who move to Silicon Valley add to the dynamism of the region, generating benefits much larger than their wages. (Economists know that I’m talking about “positive externalities.”) But that’s not an argument you can easily make about Mexican migrants who haven’t completed high school.
My second negative point is that immigration reduces the wages of domestic workers who compete with immigrants. That’s just supply and demand: we’re talking about large increases in the number of low-skill workers relative to other inputs into production, so it’s inevitable that this means a fall in wages. Mr. Borjas and Mr. Katz have to go through a lot of number-crunching to turn that general proposition into specific estimates of the wage impact, but the general point seems impossible to deny.
Continued in article
The Unresolved Debate on Why Inequality of Income is Increasing in the United States
The Gini Coefficient for increasing inequality in the United States economy
points to dramatic increases in inequality between the wealthy people and the
non-wealthy citizens of the U.S. See the third graph at
Note that there are huge limitations in interpreting the Gini Coefficient that over decades that has equated North Korea with Canada and Bulgaria with Norway in terms of income equality. The Gini Coefficient points to equality without giving regard to differences in the amount wealth/income being shared among citizens. Hence people in North Korea may be equal in their starvation existence to the same degree that Canadians may be equal in sharing a much more bounteous bag of goods and services.
There's a huge difference when comparing nations as to poverty versus
comparing nations in terms of Gini Coefficients ---
http://en.wikipedia.org/wiki/Poverty versus http://en.wikipedia.org/wiki/Gini_coefficient
It is almost impossible to avoid poverty in the most lawless nations (like Somalia) , whereas some of the nations with the worst Gini Coefficients (like Brazil) have laws and tough law enforcement.
Thus is it virtually meaningless to compare the Gini Coefficients of
different nations. It is, however, a different story when comparing the trend
lines across time for any given nation. In doing so, huge problems in
measurement must still be taken into account ---
Two of the best known books on the subject of inequiality are as follows:
I find them lacking in making recommendations on how best to a increase bounteous bag of goods to be divided in a nation. These are not books on capitalism versus socialism. Rather they are books about unjust economic inequality.
- Amartya Sen (1992). Inequality Reexamined. Harvard University Press. ISBN 0-674-45255-0. - First Hardcover
- Amartya Sen (1995). Inequality Reexamined. Harvard University Press. ISBN 0-674-45256-9. - Paperback Reprint
Capitalism is given credit in the dramatic reduction of poverty in Chile ---
Also see http://en.wikipedia.org/wiki/Miracle_of_Chile
But capitalism is not given credit for the relatively high inequality in Chile.
Socialism is given credit for the dramatic increase in equality in Cuba. But it is not given credit for reducing poverty.
In the 21st Century Some Scholars (notably Nobel Laureate
Joseph Stiglitz) Blame the Wealthy for the Increased Inequality in
the United States
This leads to various proposals of increasing the marginal tax rates on the wealthy (at a time when most other nations have reduced such rates)
"Morning Advantage: The Rich Are Making It Harder for the Rest to Get Ahead," by Paul Michelman, Harvard Review Blog, June 13, 2012 --- "
"The Price of Inequality," by Nobel Laureate George E. Stiglitz, Project Syndicate ---
In the 21st Century Other Scholars Are Asserting That the Rise in Inequality is Much More Complicated Than Pinning the Blame of the Wealthy
Some blame the F grade of K-12 education for failing to prepare our young people for the demands of working and earning in the 21st Century ---
On television I watched a middle school teacher complaining that they raised her "full-time" working hours from three to six hours each school day. My own daughter gets 16 weeks away from teaching each year while earning more than she made from her previous medial lab technician job that only had two weeks per year vacation (and lab techs have lots of on-call time on nights and weekends).
Some like me claim the biggest disgrace in education is nearly universal grade inflation K-20 ---
Our graduates are given false hopes about their abilities to enter the working world. And many of them eventually become discouraged from even trying to get skills needed for prosperity in work and future study. Meanwhile we export jobs or import better educated graduates from outside the United States.
Some blame the curse of drug addiction and an explosion of crime infested buying and selling illegal drugs. Most certainly this has led to a rise in family instability, failing parental responsibility, mental disabilities, prostitution, and falling motivation to learn and work rather than join drug gangs. This has added greatly to inequality.
Some blame government interference with mortgage markets (such as forcing Fannie and Freddie to buy mortgages way in excess of property values) caused the housing bubble which in turn had ripple effects on destroying the poor and middle class savings in their homes, their job opportunities, and business opportunities ---
Some blame millions of local, state, and Federal government regulations, especially EPA, OSHA, ADA, and FDA regulations, for inhibiting business firms from investing and hiring.
Some blame business firms, local governments, state governments, and the federal government in good times for agreeing to long-term wage contracts (e.g., those union wages at GM in the 1980s) and underfunded pension and disability plans (e.g., unfunded Medicare benefits to disabled citizens) for creating and unsustainable economy in terms of wages and entitlements ---
Most noteworthy here is the Social Security drug benefits championed by President Bush that added enormously to our trillion dollar deficits. This may seem like a huge move to greater equality except that many of those retirees like me receiving thousands of dollars of annual benefits can afford our own medications such that it made us more wealthy when many of us really did not need the benefits.
It's popular these days to blame our troubles on the sinking economies outside the United States --- notably those of the European Union
The list goes on and on in the blame game that mostly leads to nowhere and a gridlocked Congress.
It's clear that economists and politicians are mostly clueless about how to attack both the inequality, unfunded entitlements, and monumental spending deficits at all levels of government. It's also clear that just blaming the wealthy for our rising inequality is a cop out. Inequality will probably get worse even if we tax away all the wealth of the wealthy, because the fundamental problems in our society cannot be overcome with mere distribution of wealth.
Everybody claims we need one kind of tax reform or another, but the tax
reform proposals themselves are superficial and may be dysfunctional in solving
any of our inequality problems:
Case Studies in Gaming the Income Tax Laws ---
Many claim we need to make a high equality nation like Denmark our ideal
rather than cling to The American Dream. I disagree ---
The American Dream ---
The time has come for virtually all citizens of the United States from the
richest to the poorest to be willing to make the sacrifices that our ancestors
made while seeking The American Dream. We must take responsibility for our
children and be willing to make huge sacrifices on their behalf, including
working longer hours, learning more to improve knowledge and skills, starting
our own ventures, paying more taxes, refusing to let criminals take over our
streets, searching for innovations, etc. The good life will not come from the
Denmark Dream. It will come from The American Dream.
TED Video by Richard Wilkinson: The Situation of Inequality
Jensen Preliminary Comment
I'm always in favor in academic settings in trying to show all sides of an issue, the issue in this case being equality of income, opportunity, health care, diet, etc.
Firstly, I should state my biases. I'm rooted in The American Dream that people of all ages should have all-important opportunities for training and education, which is why I strongly favor tax supported schools, colleges, and free open sharing of knowledge. In the U.S. we've seen a decline in opportunity with great variations safety and education in schools say in South Chicago versus those in South Dakota. Inequality in opportunity in education is appalling to me.
Secondly, I'm in favor of universal health care (much like the Canadian Model
and not at all like the Obamacare Model) ---
I note, however, that America's vast investments in health have not all been wasted. The entire world has benefited from the U.S. advances in pharmacology, medical technology, and other discoveries. More people come to the U.S. for complicated medical treatments than vice versa. But there are gaps in terms of access where the poorest and the richest people have better access than some of the people caught in the middle who cannot afford good health insurance.
I could go on about my liberal (progressive) biases in many areas, but it may be better for you to watch the following very moving video about inequality around the world.
TED Video by Richard Wilkinson: The Situation of Inequality ---
Some might conclude that this video is just the opposite of what I've been urging about The American Dream ---
I agree with much (actually most) of this video.
There are some comments in the video that I most certainly must register
For example, Wilkinson at one point asserts: "If you want The American Dream go to Denmark."
In the context of universal educational opportunity in the 21st Century this sadly correct.
However, in other contexts this is not correct. The Denmark Dream of free education, health care, retirement pensions, etc. has in retrospect had impacts that run counter to the American Dream. The American Dream inspires ambition, whereas the Denmark Dream destroys ambition --- Danes are provided for cradle-to-grave with equality no matter how hard you work. Studies show that Danes usually aren't interested in overtime work opportunities. They don't have to save for their children or their old age.
Danes have less incentive to invent and innovate since the tax structure
takes most of the rewards for success to the government. They are less likely to
do such things as go heavily into mortgage debt and invest their savings in a
risky investment that takes 16 or more hours a day of hard labor to bring to
long-term fruition when the mortgages are paid off ---
What is the most misleading to me in Wilconsin's video is that simply redistributing the wealth in America to make us more like Denmark would bring about dramatic improvements in all the problems of inequality that he addresses. However, he simply avoids more complicated questions. For example, Denmark does not have millions of very poor and uneducated people from other parts of the world sneaking into and squatting for the long-term in Denmark. Denmark does not have anywhere near the crime issues with drugs and gangs that are raising havoc in U.S. schools, medical clinics, families, neighborhoods, and prisons. For example, putting the highest paid and best teachers in urban schools in our largest schools is not going to solve the problem of neighborhood gangs, fear, intimidation, extortion, rape, prostitution, and murder that interferes with equal opportunity education in America. I think Wilkinson knows all these problems but selectively does not want to poison his conclusion that redistribution of wealth is the magic bullet of society.
The Scandinavian countries, Japan, and South Korea all are countries of low
diversity and minimal immigration. They do not experience many of the problems
(as well as benefits) that comes from diversity. Where they've experimented with
slight amounts of immigration they've encountered huge problems such as a spike
in rapes in Norway attributed to immigration. The "happiest nations" if the
world have the least legal and illegal immigration ---
The underlying theme of the Wilconson video is that increasing the top marginal tax rates to achieve inequality will have nothing but good outcomes for developed countries (he makes an exception for undeveloped countries). But this does not explain why even his most favored equality-bent countries like Scandinavia and Japan discovered that very high marginal tax rates were dysfunctional to their economies:
Data that Wilconson does not show is that nations benefitting (in his eyes)
from high top marginal tax rates have actually been lowering this rates and
creating greater inequality in their nations. Wilconson makes no attempt to
explain why all these nations are lowering their top marginal tax rates ---
Marginal Tax Rate Declines in the Rest of the World ---
|*. Hong Kong’s maximum tax (the “standard rate”) has normally been 15 percent, effectively capping the marginal rate at high income levels (in exchange for no personal exemptions).|
|**. The highest U.S. tax rate of 39.6 percent after 1993 was reduced to 38.6 percent in 2002 and to 35 percent in 2003.|
|Trinidad and Tobago||70||35||35|
|Source: PricewaterhouseCoopers; International Bureau of Fiscal Documentation.|
My conclusion is that Wilconson's TED video is very thought provoking and has changed my thinking on a lot of things. But as a magic bullet for issues threatening sustainability of the United States his implied solutions are superficial and misleading. The U.S. is an immensely more complicated than Denmark. Denmark solutions in the U.S. might very well indeed spell complete disaster by destroying ambition, savings, risk taking (business loans), and innovations.
All the sophomores of the world will buy into Wilconson's TED video hook, line, and sinker. Hopefully, their teachers and professors have more good sense. We need more ambition and innovation in the world rather than the complacency of the Denmark Dream not suited for mass immigrations and cultural diversity conflicts. We need to face the reality that most of the people of the world are still greedy and tribal and conflicted with differing religions. For them the answers are so simple.
"As Income Inequality Grows, Some Movement at the Top and Bottom," by
Bruce Bartlett, The New York Times, June 19, 2012 ---
On June 11, the Federal Reserve published the latest results of its triennial survey of consumer finances. News reports focused on the decline in the median net worth of all families to $77,300 in 2010 from $126,400 in 2007, reflecting the devastating impact of the financial crisis. The data also demonstrates that there is some fluidity in income mobility at both the top and the bottom of the income tables.
The table below is from the Fed report. It examines the income of families in 2007 and the same families in 2009, distributed in 20 percent brackets. The numbers in bold show the percentage of each group in the same bracket in both 2007 and 2009. Thus, 69.4 percent of those in the lowest income bracket in 2007 were also in the lowest bracket two years later; 19.1 percent rose to the second quintile, 6.7 to the middle, 3 percent to the fourth and 1.9 percent went from the bottom bracket all the way to the top bracket.
Conversely, 75.1 percent of those in the top quintile remained in the top quintile, but 17.8 percent fell one bracket, 4 percent fell two brackets, 2 percent fell three brackets and 1.1 percent went from the top quintile to the bottom quintile in just two years.
¶ In a footnote, the Fed study breaks out the top 10 percent of families in 2007 and 2009. It says that 71.4 percent were in that bracket in both years; 17.2 percent fell to the 80th to 90th percentile from the 90th to 100th percentile – that is, from the top half of the top quintile to the bottom half. Only 11.4 percent of those in the top 10 percent fell into the bottom 80 percent of families. This suggests that income mobility at the top end may not be quite as high as the table implies.
¶On June 15, the conservative Tax Foundation published data on the mobility of millionaires, that is, those reporting at least $1 million of adjusted gross income. Note that using adjusted gross income understates the true number of millionaires because things like tax-exempt interest on municipal bonds and unrealized capital gains are excluded.
¶The table below from the Tax Foundation study shows that half of those who reported $1 million or more of income did so only once between 1999 and 2007, 15 percent did so twice and only 6 percent did so every year.
Continued in article
"Taxing Gender: The Deductibility of
Gender-Specific Medical Expenses and Proposals for Reform," by
Anne K. Leung
(J.D. 2011, Rutgers-Newark), Note,
Westlaw, 32 Women's Rts. L. Rep. 224 (2011)
Thank you Paul Caron for the heads up.
In this note, I will examine several types of medical expenses that are distinctly incurred by individuals of different genders, and their respective treatment under the federal system of taxation. I will study a recent Treasury determination declaring the non-deductibility of infant formula for mastectomy patient-taxpayers, as well as the implications of current social policy on the Code and past Tax Court rulings. Further, I will discuss the tax treatment of assisted reproductive technologies, including in vitro fertilization, egg and sperm donors, and surrogacy, and the effect of such treatment on taxpayers who do not fit the traditional nuclear family structure. Despite a recent Tax Court decision that denied a deduction for the cost of such procedures by an unmarried individual, various theories suggest that adherence to the Code may still be possible for non-traditional families. Such theories include a return to longstanding constructions of the Code, as well as a redefinition of fertility. Ultimately, arguments in favor of expanding deductibility for those outside of the traditional nuclear family structure will also, in turn, support and inform the struggle to allow deductions for those physically unable to breastfeed.
In light of ongoing change in social norms and behaviors, it has become clear that the Code alone no longer provides adequate guidance in several important areas. Treasury determinations, which include Revenue Rulings and Private Letter Rulings, as well as Tax Court and Board of Tax Appeals decisions, give supplementary but limited directive. Ultimately, the IRS must introduce change on a larger scale to address the needs of diverse taxpayers.
IRS Publication 502 ---
Bob Jensen's taxation helpers ---
Tax Reform: France Versus the United States Versus Greece
"Tax Expenditure Theory and the Reform of French Loopholes," by Eric Pichet, SSRN, April 18, 2012 ---
Thank you Paul Caron for the heads up.
This study has a dual ambition. One is to develop, for the first time ever, a complete Theory of tax expenditures and, therefore, a proposal for reforming the French tax loophole system. Having noted the proliferation of such loopholes in France and elsewhere over the past 20 years or so, we provide a succinct analysis of their political origins and highlight the absolute necessity of stopping a deviation that risks undermining the very foundations of efficient and fair taxation, the only possible basis for a social consensus and citizens’ ongoing willingness to pay tax. The first section, from a theoretical point of view, offers our Theory of tax expenditures as well as a new and more complete definition of this construct, thereby tracing an idealized border between tax determination modalities, the elements that are inherent to any benchmark tax system and actual tax expenditures. The second section, from a pragmatical point of view, recalls three possible methodologies for assessing tax expenditures, evaluating the many different analysts that work in France (all deeply rooted in an initial spending paradigm) before offering our own methodology, one based on the double criteria of effectiveness and fairness. On this basis, we analyze France’s 17 main tax expenditures today in 2012 and invite the next Parliament to keep any legitimate tax expenditures (after modifying them, if need be) while eliminating many costly, ineffective and inadapted loopholes, along with any that generate windfall effects (what we might call illegitimate tax expenditures). Lastly, we suggest a new global architecture for tax expenditures, one relying on clear and coherent foundations.
"Tax Reform Holds Promise, But if Not Done Carefully, Could Increase the Deficit and Inequality and Harm the Economy Policymakers Must Not Let Tax Reform Become 'Trap' That Produces Harmful Policies," by Chuck Marr and Chye-Ching Huang, Center for Budget and Policy Priorities, June 8, 2012 ---
Policymakers are increasingly discussing the need for tax reform, with a number of them calling for large cuts in tax rates — to levels well below the Bush tax rates — as a core element of reform. They contend that sweeping but unspecified cuts in tax expenditures (credits, deductions, and other tax preferences) will offset the cost of deep cuts in tax rates and, depending on the proposal, possibly generate some revenue to reduce deficits. Many who favor this approach go a step further and call for policymakers to commit to specific cuts in tax rates before they agree on any specific tax expenditures to reduce.
Such approaches pose big risks. They could produce tax “reform” that increases both deficits and inequality because while cutting “tax expenditures” sounds appealing in the abstract, cutting specific tax expenditures enough to offset the costs of substantial new rate cuts and contribute meaningfully to deficit reduction would likely prove difficult, if not impossible, to achieve. Indeed, the difficulty of cutting popular tax expenditures — from the mortgage interest deduction to 401(k) tax preferences to the deduction for charitable contributions to the exclusion for employer-sponsored health insurance — is why those who urge policymakers to commit upfront to specific, large rate cuts rarely specify any tax expenditures to cut. In fact, they often highlight tax expenditures that they would refuse to touch, such as the preferential tax rate for capital gains.
Continued in article
Tax Reform in Greece is Probably a Hopeless Cause ---
Reply from Apostolos A. Ballas
The comments on tax reform in Greece are a bit dated. Since some of the reforms are discussed in France and the USA, let me give you my view on the issue:
a) A number of tax expenditures / loopholes have been eliminated or substantially reduced. For example, only 10% of the interest element in mortgage payments is treated as income reduction. Similarly, medical expenses and payments for (private) pension plans.
b) The system now relies on income indicators. That is, if you can afford a house in Kolonaki, Athens (equivalent to 5th Av, New York) then most probably you are rich and you have to prove that you are not earning a substantial income. I consider this very rough justice, but justice at last. Indeed, I am very happy that a number of such individuals are enjoying the “hospitality” of the Greek prison system.
c) Last year, a new law on property taxes was enacted. To give you an indication on the rates, I had to pay 1,5% on the market value of my flat. This proved to be highly controversial and will likely be scrapped. Personally, I found the law dumb because (in its initial form) it was asking people on unemployment benefits to pay X euros while there was no variation of the rates depending on the number / accumulated value of properties owned.
d) Tax evasion is both an ethical / legal issue and an economic one. We should not confuse the two, however. If the rich and famous do not pay their taxes, then no one will. Nevertheless, the situation in Greece is that tax evasion is a widely accepted practice because it is to the advantage of all individuals to evade taxes. Let me give you an example. Medical expenses were a tax deductible item. Thus, my incentive was to ask the doctor to give me a receipt. He / she would record the revenue and be taxed (marginal rate 40%) and I would be getting a (marginal rate) 20% tax deduction. Now, I am not getting the deduction. If the doctor offers a 20% discount for not issuing a receipt, what are the incentives? Another issue is that a large proportion of the untaxed income comes from people close to the taxable income threshold who simple do not file a tax return. If they are not in the system, how can they be caught? Last, but not least, does anyone know of a good study of the level of tax evasion AFTER TAKING INTO ACCOUNT 2ND ORDER EFFECTS. I mean by this: some of the tax not paid goes into consumption which is taxed (VAT). Thus, state revenue losses are actually less that they initially seem.
e) Finally, a point about the situation in Greece which most do not understand. The current situation is that we live in an environment where there is wealth, but no liquidity. Thus, even the best intentioned citizens if they cannot pay taxes, they will not pay taxes. Your family, not your taxes, is your priority in the Greek environment.
And one accounting issue for you Bob: how can a country mislead about its financial statistics before it issues its financial statistics? Another comment: A country’s debt (most of it at least – mainly excluding NATO financial transactions) is a matter of public record. It is approved by parliament (at least in Greece), you can read about it in Bloomberg screens. In Greece we have made many mistakes but let us all behave us adults. No one fooled anyone who did not want to be fooled. And since I am Greek a comment about the European siuation: Creon in Antigone was absolutely right in his own terms, but Gods still punished him very, very harshly.
I was sad to see the role Goldman Sachs and other U.S. banks played in the filing of phony economic performance reports ---
. . .
To keep within the monetary union guidelines, the government of Greece had also for many years misreported the country's official economic statistics. At the beginning of 2010, it was discovered that Greece had paid Goldman Sachs and other banks hundreds of millions of dollars in fees since 2001, for arranging transactions that hid the actual level of borrowing. The purpose of these deals made by several successive Greek governments, was to enable them to continue spending, while hiding the actual deficit from the EU. As reported in the table below, the revised statistics revealed that Greece at all years from 2000-2010 had exceeded the Euros stability criteria, with the yearly deficits exceeding the recommended maximum limit at 3.0% of GDP, and also the debt level clearly exceeding the recommended limit at 60% of GDP.
Continued in article
"A New Theory of the State Corporate Income Tax: The State Corporate
Income Tax as Retail Sales Tax Complement," by Darien Shanske, SSRN,
June 5, 2012 ---
Tax Law Review, Forthcoming
The state corporate income tax has been and remains a vital source of income for the states. The theoretical justifications for this tax, however, are weak and, as reasonably predicted based on its poor design, the state corporate income tax has been in decline as a source of state revenue for decades. Nevertheless, states have taken important steps to shore up their corporate income taxes. At least one of these major reforms, apportioning the state corporate income tax base on the basis of in-state corporate sales, was probably undertaken on the basis of implausible policy arguments. Despite the ad hoc (at best) nature of these reforms, they have changed the state corporate income tax for the better. An initial goal of this Article is to collect this positive news at a time when most fiscal news remains bleak.
The argument at the heart of this Article starts from the analytical observation (first made by Charles McLure) that these changes to the state corporate income tax have made the tax into an odd type of sales (consumption) tax. This Article then argues that this observation is important because this new corporate income tax is reaching sales on which no retail sales tax is due (e.g., most services) and sales on which no retail sales tax is generally remitted (e.g., sales made by certain internet retailers). This means that the new corporate income tax is acting not only like a sales tax, but as a complement to poorly designed state sales taxes. This Article argues that, assuming that states will not act directly to broaden their sales tax base, they can act to broaden their consumption tax base indirectly through their corporate income taxes.
Bob Jensen's threads on taxation are at
Going Global With Laws and Regulations is Often a Disaster
"The Absurd International Criminal Court: After 10 years and
hundreds of millions of dollars, it has completed precisely one trial," by
Eric Posner, The Wall Street Journal, June 10, 2012 ---
Ten years ago, on July 1, 2002, the International Criminal Court (ICC) opened its doors. The treaty that created this new body gave it jurisdiction over genocide, crimes against humanity, and other international offenses committed anywhere in the world, by anyone against anyone. Supporters argued that it would put an end to impunity for dictators and their henchmen, and usher in a new era of international justice.
The court has been a failure. Although it has a staff of more than 700 and an annual budget in excess of $100 million, the ICC has so far completed precisely one trial—that of Thomas Lubanga, a commander in the civil war in Congo. It took three years and ended with a conviction on March 14, 2012. The appeals have not begun. A few other trials are ongoing or set to begin.
Even by the low standards of international tribunals, this performance should raise an eyebrow. What went wrong?
As with any international organization, the court's ability to operate rests on the consent of states. One hundred and twenty-one nations have agreed to the treaty, a number that sounds impressive. But the 121 include few authoritarian countries that employ repression or conduct military operations. Mostly democracies with some semblance of the rule of law have joined. Since the ICC gains jurisdiction over a defendant only if domestic legal institutions fail to investigate international crimes in good faith, most member countries are those least likely to be subject to its jurisdiction.
Yet where the ICC has exercised its authority, its actions have been controversial. Uganda, the Democratic Republic of Congo and the Central African Republic have asked the court to investigate crimes committed by various rebel groups. In all these cases, the court has been careful not to offend governments willing to cooperate with it—but the upshot has been that it has pursued rebels only and not government officials who might be responsible for atrocities committed by the military.
Even when the court has acted with more independence, it has caused more harm than good. The court's involvement in Uganda's civil war in 2004 may well have helped persuade rebels to temporarily lay down their arms. But the refusal to withdraw its indictments has so far interfered with attempts to make peace with the rebels, who demand amnesty.
The ICC has also intervened in Kenya, on its own initiative, in the wake of violence that accompanied elections in 2007. Criminal investigations of top-level Kenyan politicians, conducted at a snail's pace, have inflamed tensions in that country but without producing a resolution.
The ICC indictment of Sudanese President Omar al-Bashir in 2009 did nothing to bring peace to that country. Other African countries continue to welcome him to their capitals in violation of their treaty obligations.
The court also indicted Moammar Gadhafi, whom Libyan forces murdered, and his son Saif Gadhafi, who is being held by one of the many rebel factions in that unhappy country. An impasse has arisen because Libyans have no desire to yield Saif Gadhafi to the comforts of a Dutch jail and would much prefer to execute him. (The ICC cannot impose the death penalty.)
Meanwhile, African countries accuse the ICC of bias against Africans, as it has never indicted people from any other continent. And few countries have shown much inclination to capture indicted suspects and hand them over to the court.
Why does the International Criminal Court have such difficulty? Unlike a national court, the ICC must constantly convince governments to support it while at the same time avoiding the impression that it is a tool of governments. For all the talk of the "global rule of law," this is an intensely political process and essentially contradictory.
The court focuses on Africa because African countries are weak. It operates with incredible slowness because it needs to give the impression to suspicious audiences that it is fair. But because it moves so slowly, it cannot react in a timely manner to fast-changing international events—and it does little to deter dictators, whose life expectancies tend to be short in any event. The upshot is that the court is both distrusted and ineffectual.
Continued in article
As Unethical as it Gets in the Whitehouse
"Axelrod's ObamaCare Dollars Emails suggest the White House pushed business to the presidential adviser's former firm to sell the health-care law," by Kimberly A. Strassel, The Wall Street Journal, June 21, 2012 ---
Rewind to 2009. The fight over ObamaCare is raging, and a few news outlets report that something looks ethically rotten in the White House. An outside group funded by industry is paying the former firm of senior presidential adviser David Axelrod to run ads in favor of the bill. That firm, AKPD Message and Media, still owes Mr. Axelrod money and employs his son.
The story quickly died, but emails recently released by the House Energy and Commerce Committee ought to resurrect it. The emails suggest the White House was intimately involved both in creating this lobby and hiring Mr. Axelrod's firm—which is as big an ethical no-no as it gets.
Mr. Axelrod—who left the White House last year—started AKPD in 1985. The firm earned millions helping run Barack Obama's 2008 campaign. Mr. Axelrod moved to the White House in 2009 and agreed to have AKPD buy him out for $2 million. But AKPD chose to pay Mr. Axelrod in annual installments—even as he worked in the West Wing. This agreement somehow passed muster with the Office of Government Ethics, though the situation at the very least should have walled off AKPD from working on White-House priorities.
It didn't. The White House and industry were working hand-in-glove to pass ObamaCare in 2009, and among the vehicles supplying ad support was an outfit named Healthy Economy Now (HEN). News stories at the time described this as a "coalition" that included the Pharmaceutical Research and Manufacturers of America (PhRMA), the American Medical Association, and labor groups—suggesting these entities had started and controlled it.
House emails show HEN was in fact born at an April 15, 2009 meeting arranged by then-White House aide Jim Messina and a chief of staff for Democratic Sen. Max Baucus. The two politicos met at the Democratic Senatorial Campaign Committee (DSCC) and invited representatives of business and labor.
A Service Employees International Union attendee sent an email to colleagues noting she'd been invited by the Baucus staffer, explaining: "Also present was Jim Messina. . . . They basically want to see adds linking HC reform to the economy. . . . there were not a lot of details, but we were told that we wd be getting a phone call. well that call came today."
The call was from Nick Baldick, a Democratic consultant who had worked on the Obama campaign and for the DSCC. Mr. Baldick started HEN. The only job of PhRMA and others was to fund it.
Meanwhile, Mr. Axelrod's old firm was hired to run the ads promoting ObamaCare. At the time, a HEN spokesman said HEN had done the hiring. But the emails suggest otherwise. In email after email, the contributors to HEN refer to four men as the "White House" team running health care. They included John Del Cecato and Larry Grisolano (partners at AKPD), as well as Andy Grossman (who once ran the DSCC) and Erik Smith, who had been a paid adviser to the Obama presidential campaign.
In one email, PhRMA consultant Steve McMahon calls these four the "WH-designated folks." He explains to colleagues that Messrs. Grossman, Grisolano and Del Cecato "are very close to Axelrod," and that "they have been put in charge of the campaign to pass health reform." Ron Pollack, whose Families USA was part of the HEN coalition, explained to colleagues that "the team that is working with the White House on health-care reform. . . . [Grossman, Smith, Del Cecato, Grisolano] . . . would like to get together with us." This would provide "guidance from the White House about their messaging."
According to White House visitor logs, Mr. Smith had 28 appointments scheduled between May and August—17 made through Mr. Messina or his assistant. Mr. Grossman appears in the logs at least 19 times. Messrs. Del Cecato and Grisolano of AKPD also visited in the spring and summer, at least twice with Mr. Axelrod, who was deep in the health-care fight.
A 2009 PhRMA memo also makes clear that AKPD had been chosen before PhRMA joined HEN. It's also clear that some contributors didn't like the conflict of interest. When, in July 2009, a media outlet prepared to report AKPD's hiring, a PhRMA participant said: "This is a big problem." Mr. Baldick advises: "just say, AKPD is not working for PhRMA." AKPD and another firm, GMMB, would handle $12 million in ad business from HEN and work for a successor 501(c)4.
A basic rule of White House ethics is to avoid even the appearance of self-dealing or nepotism. If Mr. Axelrod or his West Wing chums pushed political business toward Mr. Axelrod's former firm, they contributed to his son's salary as well as to the ability of the firm to pay Mr. Axelrod what it still owed him. Could you imagine the press frenzy if Karl Rove had dome the same after he joined the White House?
Continued in article
"ObamaCare's Secret History: How a Pfizer CEO and Big
Pharma colluded with the White House at the public's expense," The Wall
Street Journal, June 11, 2012 ---
On Friday House Republicans released more documents that expose the collusion between the health-care industry and the White House that produced ObamaCare, and what a story of crony capitalism it is. If the trove of emails proves anything, it's that the Tea Party isn't angry enough.
Over the last year, the Energy and Commerce Committee has taken Nancy Pelosi's advice to see what's in the Affordable Care Act and how it passed. The White House refused to cooperate beyond printing out old press releases, but a dozen trade groups turned over thousands of emails and other files. A particular focus is the drug lobby, President Obama's most loyal corporate ally in 2009 and 2010.
The business refrain in those days was that if you're not at the table, you're on the menu. But it turns out Big Pharma was also serving as head chef, maître d'hotel and dishwasher. Though some parts of the story have been reported before, the emails make clear that ObamaCare might never have passed without the drug companies. Thank you, Pfizer. ***
The joint venture was forged in secret in spring 2009 amid an uneasy mix of menace and opportunism. The drug makers worried that health-care reform would revert to the liberal default of price controls and drug re-importation that Mr. Obama campaigned on, but they also understood that a new entitlement could be a windfall as taxpayers bought more of their products. The White House wanted industry financial help and knew that determined business opposition could tank the bill.
Initially, the Obamateers and Senate Finance Chairman Max Baucus asked for $100 billion, 90% of it from mandatory "rebates" through the Medicare prescription drug benefit like those that are imposed in Medicaid. The drug makers wheedled them down to $80 billion by offsetting cost-sharing for seniors on Medicare, in an explicit quid pro quo for protection against such rebates and re-importation. As Pfizer's then-CEO Jeff Kindler put it, "our key deal points . . . are, to some extent, as important as the total dollars." Mr. Kindler played a more influential role than we understood before, as the emails show.
Thus began a close if sometimes dysfunctional relationship with the Pharmaceutical Research and Manufacturers of America, or PhRMA, as led by Billy Tauzin, the Louisiana Democrat turned Republican turned lobbyist. As a White House staffer put it in May 2009, "Rahm's calling Nancy-Ann and knows Billy is going to talk to Nancy-Ann tonight. Rahm will make it clear that PhRMA needs a direct line of communication, separate and apart from any coalition." Nancy-Ann is Nancy-Ann DeParle, the White House health reform director, and Rahm is, of course, Rahm.
Terms were reached in June. Mr. Kindler's chief of staff wrote a memo to her industry colleagues explaining that "Jeff would object to me telling you that his communication skills and breadth of knowledge on the issues was very helpful in keeping the meeting productive." Soon the White House leaked the details to show that reform was making health-care progress, and lead PhRMA negotiator Bryant Hall wrote on June 12 that Mr. Obama "knows personally about our deal and is pushing no agenda."
But Energy and Commerce Chairman Henry Waxman then announced that he was pocketing PhRMA's concessions and demanding more, including re-importation. We wrote about the double-cross in a July 16, 2009 editorial called "Big Pharma Gets Played," noting that Mr. Tauzin's "corporate clients and their shareholders may soon pay for his attempt to get cozy with ObamaCare."
Mr. Hall forwarded the piece to Ms. DeParle with the subject line, "This sucks." The duo commiserated about how unreasonable House Democrats are, unlike Mr. Baucus and the Senators. The full exchange is among the excerpts from the emails printed nearby.
Then New York Times reporter Duff Wilson wrote to a PhRMA spokesman, "Tony, you see the WSJ editorial, 'Big Pharma Gets Played"? I'm doing a story along that line for Monday." The drug dealers had a problem.
The White House rode to the rescue. In September Mr. Hall informed Mr. Kindler that deputy White House chief of staff Jim Messina "is working on some very explicit language on importation to kill it in health care reform. This has to stay quiet."
PhRMA more than repaid the favor, with a $150 million advertising campaign coordinated with the White House political shop. As one of Mr. Hall's deputies put it earlier in the minutes of a meeting when the deal was being negotiated, "The WH-designated folks . . . would like us to start to define what 'consensus health care reform' means, and what it might include. . . . They definitely want us in the game and on the same side."
In particular, the drug lobby would spend $70 million on two 501(c)(4) front groups called Healthy Economy Now and Americans for Stable Quality Care. In July, Mr. Hall wrote that "Rahm asked for Harry and Louise ads thru third party. We've already contacted the agent."
Mr. Messina—known as "the fixer" in the West Wing—asked on December 15, 2009, "Can we get immediate robo calls in Nebraska urging nelson to vote for cloture?" Ben Nelson was the last Democratic holdout toward the Senate's 60-vote threshold, and, as Mr. Messina wrote, "We are at 59, we have to have him." They got him.
At least PhRMA deserves backhanded credit for the competence of its political operatives—unlike, say, the American Medical Association. A thread running through the emails is a hapless AMA lobbyist importuning Ms. DeParle and Mr. Messina for face-to-face meetings to discuss reforming the Medicare physician payment formula. The AMA supported ObamaCare in return for this "doc fix," which it never got.
"We are running out of time," this lobbyist, Richard Deem, writes in October 2009. How can he "tell my colleagues at AMA headquarters to proceed with $2m TV buy" without a permanent fix? The question answers itself: It was only $2 million. ***
Mr. Waxman recently put out a rebuttal memo dismissing these email revelations as routine, "exactly what Presidents have always done to enact major legislation." Which is precisely the point—the normality is the scandal. In 2003 PhRMA took a similar road trip with the Bush Republicans to create the Medicare drug benefit. That effort included building public support by heavily funding a shell outfit called Citizens for a Better Medicare.
Of course Democrats claim to be above this kind of merger of private profits and political power, as Mr. Obama did as a candidate. "The pharmaceutical industry wrote into the prescription drug plan that Medicare could not negotiate with drug companies," he said in 2008. "And you know what? The chairman of the committee who pushed the law through"—that would be Mr. Tauzin— "went to work for the pharmaceutical industry making $2 million a year."
Continued in article
Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm
"Why I No Longer Support the Health Insurance Mandate:
Should ObamaCare be overturned by the Supreme Court, insurers have solutions
ready to go," by Former Aetna CEO Ron Williams, The Wall Street Journal,
June 17, 2012 ---
Soon the U.S. Supreme Court will rule on the constitutionality of the Affordable Care Act. I am not a lawyer, or an expert on the Constitution. But as the chairman and CEO of a major health plan, I had a ringside seat to the entire health-care reform process. After much reflection, I have concluded that the federal individual mandate, which requires all Americans to purchase health insurance starting in 2014, will not be upheld.
I don't say this lightly, as I have long been a vocal advocate of getting and keeping every American covered. As a society, we have a moral obligation to ensure everyone has access to affordable health care. We must find a way to cover those who are no longer healthy but need care.
A workable solution used by many states is a high-risk insurance pool funded by broad-based taxes. But Congress and the president chose to require health-insurance companies to guarantee issue—that is, to insure anyone at anytime.
This approach encourages people to only purchase insurance when care is needed. Insurance does not work if you only pay two months of premiums and receive hundreds of thousands of dollars of health care. This is the equivalent of getting a free ride. Under such a system, consumers would end up paying more to offset the added costs of free riders. Insurance would soon become unaffordable.
Once the government mandates guaranteed issue, then a second mandate is required for individuals to purchase and maintain insurance. My early support for an individual mandate had always been grounded in this companion solution, supported by broadly funded subsidies for lower-income Americans.
Yet, as I studied the arguments for and against the individual mandate, it became clear to me that the legislation raises serious constitutional concerns.
For starters, the legislative process that produced the Act was driven by partisan politics, and traditional oversight mechanisms that would have facilitated bipartisan and reasoned policy development were discarded in favor of rapid enactment. Several structural flaws emerged as a result. For example, the mandate should have been framed as a traditional tax—a move that could have bolstered the Act's constitutionality.
Most seriously, Congress insisted on describing personal inactivity—in this case, the failure to purchase insurance—as interstate commerce within its regulatory reach. Americans were alarmed, rightly, that this could empower future legislatures to mandate that citizens engage in activities none of us would think reasonable today.
Should the Act or part of it be overturned by the high court, I believe many of the consumer-friendly aspects already implemented will be adopted by the industry or quickly find their way into new legislation.
The federal government should encourage rather than micromanage market reform in all 50 states. Since health care is local, private-sector innovation in conjunction with state-level reform of the individual and small-group markets is a better approach.
But no matter how the Supreme Court rules, we still need bipartisan solutions that work for all Americans. One benefit of the past two years has been the vigorous public policy discussion that we should have had prior to passing the legislation—and a recognition that the core problems are health-care cost and value. Simply put, we must create more value for consumers by improving the quality and long-term affordability of health care.
The private sector is hard at work creating new ways to deliver health care. Health plans are collaborating with hospital systems to develop innovative accountable care organizations that provide physicians with incentives to cooperate and enhance patient outcomes. Hospitals are encouraging physicians to improve the accuracy and quality of patient data, enhancing clinical decision-making to improve the quality of care.
Health plans and employers are cooperating on decision-support tools to help employees better understand their conditions and choices. These tools are making quality and costs more transparent, encouraging employees to make better decisions. Finally, employers are implementing condition-management programs to help employees manage chronic illnesses such as diabetes and hypertension. They are also investing in on-site clinics, value-based health plans to increase medication adherence and incentive-based wellness programs.
As the law continues to evolve, we must not let politics impede our collective efforts to reinvent American health care.
Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm
Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm
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Current and past editions of my
newsletter called Fraud Updates ---
Enron --- http://www.trinity.edu/rjensen/FraudEnron.htm
Rotten to the Core --- http://www.trinity.edu/rjensen/FraudRotten.htm
American History of Fraud --- http://www.trinity.edu/rjensen/FraudAmericanHistory.htm
Bob Jensen's fraud
Bob Jensen's threads on
auditor professionalism and independence are at
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Against Validity Challenges in Plato's Cave ---
· With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier
· With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams
· With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR
· With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses
Against Validity Challenges in Plato's Cave ---
By Bob Jensen
wrong in accounting/accountics research? ---
The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most
AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW:
Bob Jensen's threads on accounting theory
Tom Lehrer on Mathematical Models and Statistics
Systemic problems of accountancy (especially the vegetable nutrition paradox)
that probably will never be solved
Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm
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