Returning Slowly

It's been a long time, so let me try to get back into this slowly (which is better than not at all).

I saw a Long John Silvers commercial last night advertising "Pacific Shrimp." Is this in reaction to the Deepwater Horizon oil spill? (That is, we don't serve shrimp from the Gulf.) Or, is it just a coincidence?

I guess I just don't follow shrimp ads much -- so maybe "Pacific Shrimp" is a delicacy or something (found only at fastfood restaurants?).

Shirley Sherrod, the Media, and Racism and the USDA

Okay, it's been a long time as usual. But, recent politics are calling to me to make a post of some kind. The media has quite thoroughly covered the Shirley Sherrod affair. So, I won't spend much time on it. I do think that it's worthwhile to put a few links up regarding Sherrod, the media coverage, and especially the links between racism and the USDA.

This is a very good synopsis of the Sherrod affair and media coverage:
Rachel Maddow.

And, this is interesting look at some of the right-leaning media response:
Beck.

Most importantly, though, this link shares some insights about the (recent) history of racism and the USDA:
Facing South.

More posts coming soon.

Listen to the Interview

If you weren't able to hear my interview on KSPC radio in southern California but want to, then you can listen to it here.

A Radio Interview

I had an phone interview today with Tony Abraham for "Uproot," which is a program that airs on KSPC radio in southern California. The interview is suppose to air this Sunday (May 16) evening. The website lists the program in the 5-7pm time-slot, Pacific time.

The interview is about 20-25 minutes long, and focuses on my book. It's only the second radio interview I've ever given, so you'll have to forgive any errors or irritating speech habits. (The first interview I did was about 10 years ago, and I think I really stunk that one up... I think I did better this time, but we'll see.)

New Health Care Law and Taxes

I had an exchange with someone about health care the other day, and I think it is somewhat informative on the issue of taxes (increases and decreases) and the new health care law. It began when this person said that under the new law, her sister’s family would have to pay $4,000 more in taxes each year and would consequently be unable to afford their health insurance and then would be fined for not having insurance.

This, of course, would be an alarming occurrence since the new law is suppose to increase access to health care, not take away insurance. So, I asked this person why her sister’s family would have to pay more in taxes. Instead of giving an answer that spoke directly to this case, she directed me to two articles about taxes and the new health care law: one in the Washington Times, and a second in Kiplinger’s magazine. I found a third with the same information in the Christian Science Monitor.

After reading each of these articles closely, here’s what I learned about taxes in the new law. From these articles, there are five likely sources of that $4,000.

First, this family might make excessive visits to an indoor tanning bed each year adding up to the additional tax. That's probably not the source, but if it is then I'm won't be that sympathetic. (It would take a whole lot of trips to the tanning salon to add up to $4,000 in taxes. This is a 10% tax on indoor tanning services. To pay $4,000 in this tax in a given year, a person would have to spend at least $40,000 in that one year for indoor tanning bed services.)

Second, these articles note that before the law passed, people could deduct medical expenses beyond 7.5% of their income, but the new law makes it 10% of their income. For this to be the source of the additional $4,000, this family's annual income would have to be at least $160,000. (This is actually a very low estimate because I really just calculated $4,000 less in tax deductions. To make it $4,000 less in taxes would mean a larger deduction and, hence, a larger annual income -- probably around $190-200K if not higher.) The problem here is that it doesn’t really make sense that they would have to go without insurance because of the $4,000 tax. Their household income would be more than 3-times the national average and should allow enough of a cushion to avoid any truly painful financial decisions, such as whether to keep or forgo health insurance.

Third, the articles note that the new law includes a Medicare tax increase for households with incomes $250,000 or higher. Any household with less than $250K (or individual earning less than $200K) will pay no more in Medicare taxes than they currently do. I did not estimate the exact income to get the $4,000 because at this income level, I can’t see how that tax increase would force someone to drop their health insurance.

Fourth, the article states that Medicare taxes will now apply to capital gains over $250,000 for a household. To earn this much in capital gains, a family must have several hundred thousand dollars in stocks, bonds, etc. (Average household wealth in the US is about $80K, and most of that is in home equity not liquid assets.) Again, a $4,000 tax increase should not lead such a family to drop their health insurance.

Fifth, the article notes that very expensive health insurance programs will be taxed pretty heavily. These are health plans that cost more than $27K for a family. (My family’s health plan costs about $11K including employer contributions. This is a fairly average plan.) Most of these plans seem to be held by two groups: executives and professionals with fairly high incomes, or industrial workers represented by strong unions (e.g., autoworkers). In the case of the former, their incomes are generally high enough that going without insurance should not be a serious option. In the case of the latter, the cost of health insurance is arrived at through collective bargaining; when the next contract negotiations occur, the cost of the health plan will be addressed. In any event, this tax does not begin until 2018. So, this cannot really be the source of the $4,000 in additional taxes.

After reading the articles suggested by this person, I shared these scenarios with her to see which most closely matched the situation she described. Her response was that she couldn't say anything more about the situation. It was too personal, too secret.

Given the evidence that she presented and her subsequent response, I can only assume that the claim of a $4,000 tax increase leading to a loss of insurance (1) is an unfounded claim (the tax increase won't happen), (2) is an exaggerated claim (the health insurance won't actually be lost), or (3) involves some other personal calamity (e.g., crisis regarding someone’s job, family, or health) that has really created the financial despair rather than the tax increase.

(Had I been given evidence of how this situation would come to pass, I would have accepted it. That's why I asked about the specific context to begin with. But, the evidence I was given just did not seem to support the claim.)

It is a serious charge that the health care law will take health care away from people because that's the opposite of what the law should do. I hope that would not happen, and I would be upset if it did. But after looking at the different tax increases and decreases associated with the law, I sincerely doubt that loss of insurance will happen in this case -- unless there is some crucial information that hasn't been shared.

This new law obviously has positive and negative elements to it, and some people will pay more taxes. But the scenario described here (a $4,000 tax increase leading to loss of insurance and a fine) does not strike me as a legitimate complaint about the health care law.

In sum, I think this is informative for a couple of reasons. First, it highlights the situations under which taxes will increase. Second, it is one more reminder to be cautious about the dire warnings regarding this new law. There may be plenty to critique about the new law, but there also seems to be much misinformation swirling about.

Making a Profit on Health Care -- AT&T Style

AT&T and a few other companies (AK Steel Corporation, Caterpillar, Deere and Co., and Valero Energy) have recently said that the new health care law "would raise their expenses," and AT&T said they might have cut back on health benefits for workers.

http://www.nytimes.com/2010/03/27/technology/companies/27phone.html?ref=business

Here's the crux of the problem for the companies: Previously, the federal government would provide subsidies to cover 28% of what the companies paid on medicare prescriptions (for their retired workers) and the companies could deduct the total of their expenditures on these prescriptions from their taxable income -- including what they already got reimbursed for. Essentially, they got to double-dip in this regard.

The new health care law closes this loop hole and states that companies will still receive subsidies to cover 28% of what they spend on prescriptions, but they will be allowed to deduct only 72% of what they spend from their taxable income. In other words, they won't get the subsidy and get to deduct it from their taxable income.

Sorry, but I don't think the corporations are going to gain my sympathy on this one -- especially AT&T, which earned more than $120 billion in consolated revenue in 2009.

Capitalists against free-marketeers: Restaurants vs. Free Enterprise Groups

I was reading the New York Times and came across this article that epitomizes the issue that I have tried to highlight in this blog: capitalists favoring government intervention even when free market adherents oppose it.

Check out this article: http://www.nytimes.com/2010/03/24/business/24menu.html

The article discusses a little noticed measure in the new health care bill that requires restaurant chains to provide calorie information on their menu boards, including drive-through menus.

Take a look. The 8th and 9th paragraphs (which begins "The measure was approved by Congress. . .") explain that the restaurant industry likes the new measure, while two paragraphs later we read that "some free enterprise groups" opposed the measure.

Health Care Reform: Clinton's failure, Obama's success

On the day after the passage of historic health care policy in the US House, let me try to wrap up this discussion of recent health care reform in the US.

So, why did Clinton’s health care reform fail in 1994? Throughout most of the 1990s – even in the fall of 1993 – public opinion polls showed that the majority of Americans favored some kind of significant government role in health care. Leading up to the 1992 presidential election, even Republican candidates expressed support of health care reform that included an increased government role (though a smaller role than envisioned by most Democrats).

And, as we have seen, a cross-class coalition that included workers, unions, and many businesses and trade organizations supported an expansion of government activity in health care. Again, large businesses who had long offered their employees health insurance saw their costs (i.e., premiums) rise alarmingly during the 1980s. They turned to the federal government to regulate health insurance, create cost controls, and spread the costs of providing health care.

Remember, the U.S. Chamber of Commerce supported government-mandated employer health benefits, as did many large corporations, including Bethlehem Steel, Lockheed, Chrysler, Xerox, and Westinghouse. Not only did these businesses want to control premiums, but many of them also wanted to correct what they saw as an unfair situation: most small businesses did not provide health insurance for employees; these employees were often married (or otherwise related) to someone who worked for a medium- or large-business that provided health insurance for that employee’s family. Many medium- and large-businesses saw this as a subsidy that reduced the labor costs of small businesses (and put some large businesses at a competitive disadvantage in the global market).

So we return to the question at hand: Why did the Clinton health care proposal fail? There were obviously many immediate political factors: intense partisan opposition, a strong effort by the insurance lobby, and a “combative and secretive strategy” by the Clinton administration, among others. Such factors, no doubt, contributed to problems.

But these answers overlook a key factor: the expansion of HMOs began to effectively rein in rising health care costs. The annual growth in private health insurance premiums (i.e., the cost to employers) fell from 17% in 1990 to 10% in 1992, 8% in 1993, and -1% in 1994. This sent a signal to many businesses that had favored – and even advocated for – health care reform that the insurance industry was reforming itself and controlling costs through managed care.

Consequently, these businesses backed off from their previous advocacy for reform. This loss of strong support was very significant and affected the political debate, resources behind the political battle, and ultimately affected public opinion because some of the voices in favor of an expanded government role (including an employer mandate to provide employees with health insurance) weakened or disappeared.

What does all of this mean for the passage of health care reform under Obama? Obviously, there were notable partisan battles, parliamentary strategies, resistance from the insurance lobby, questions about the administration’s strategy, and so forth. There are always these kinds of issues.

But beneath this level of partisan politics are more fundamental dynamics. I have not researched the recent battle over health care reform and therefore can’t point to the underlying coalitions. Nevertheless, they are there.

For example, here is one telling link between Clinton’s failed attempt and Obama’s success. HMOs controlled health costs from the 1994 thru 1997, when the cost of insurance premiums did not rise more than 2.5% in any year. A few years later, however, health care costs were rising rapidly once again. In 2000, the growth in health insurance premiums was at 10%. The ability of HMOs to contain costs began to falter. In that context, what groups had been hit hardest by rising premiums? Maybe some businesses once again had an interest in containing health care costs.

One thing is for sure: The Obama health care reform is not about socialism. But it is very likely about capitalism. And in capitalism – in a market economy – based as it is on competition and the drive for profit, some segments of capital will seek national policies that protect them from competition or even from the market, itself, in an effort to secure “adequate” profits (which is always relative, of course).

This can be seen in Clinton’s effort at health care reform, in the history of US agricultural policy, as well as in labor policy, social security, and many other policy arenas.

A full understanding of recent efforts at health care reform requires us to move beyond much of the current political debate.

Health Care Reform: Is it actually "socialism"?

Okay, I'm way behind in posting this. I actually had most of this written last November, but life took me on a detour. I have a little energy tonight (surprisingly, my three-year-old son didn't sap all of it), so I'm posting.

With the U.S. Congress (and public) still embroiled over the health care bill, it’s time that I finally get around to posting about this perspective on national policies accused of being socialist.

Here’s the tie-in with agricultural policy, as I see it: Supply management policy – with its regulation of production and prices – was not about socialism. Instead, that policy was the outcome of competing political-economic interests trying to ensure profitable production.

In particular, southern planters growing cotton were hardly socialists. They were simply large landowners trying to cope with a chronic problem of overproduction and low prices. They saw supply management policy as protection against vagaries of the market economy. They were “Capitalists Against Markets.” (That is the title of Peter Swenson’s book comparing national policy formation in the US and Sweden.)

This same kind of analysis is useful in exploring health care reform. Take, for example, Clinton’s attempted health care reform in 1993-94. Two health care issues became central in the early 1990s: universal coverage and cost containment. (Sound familiar?) Health care costs were rising, and tens of millions of people were uninsured. But, these conditions had existed to a greater or lesser extent for decades. Something else put health care reform at the forefront of US politics in the early 1990s.

An important coalition emerged to support an increased government role in health care: a cross-class coalition between workers and industry. Labor unions and many large businesses (such as Bethlehem Steel, Lockheed, Chrysler, Xerox, and Westinghouse) formed the National Leadership Coalition for Health Care Reform (NLCHCR), which was a leading advocate for health care reform at the time. This organization advocated for government-mandated employer-provided health insurance. (That’s right: many businesses were in favor of some kind of national health care system.)

In addition, more than half of CEO’s for Fortune 500 companies favored a government mandate for all employers to provide health benefits. And, the U.S. Chamber of Commerce supported government-mandated employer health benefits.

Why did some business advocate expanded government action in health care?

First, rising health costs fell heavily on business, especially large employers. In 1988, for example, Chrysler famously spent more on health care than on steel: $600 million per year on health care; $600 per car.

Second, there were an increasing number of strikes and labor conflicts over health care.

Third, international competition likewise encouraged some US companies to favor an expanded role for the government in health care, because other nations – Germany, Japan, France, etc. – provide health care for all workers.

In the early 1990s, then, health care reform was not really about socialists pushing for government control of the market economy. Instead, there were large companies whose economic interest in controlling health care costs – especially insurance premiums – prompted them to favor a greater role for government in health care.

Why, then, did Clinton’s health care reform proposal fail? See my next post, which I hope will not take another three or four months...

By the way, much of the information for this post came from an article written by Peter Swenson and Scott Greer, "Foul Weather Friends: Big Business and Health Care Reform in the 1990s in Historical Perspective," in Journal of Health Politics, Policy and Law, Vol. 27, No. 4, August 2002, pages 605-638.