Back Attcha: Answering Some Questions from the Comments

May 29th, 2011 at 10:13 am

On occasion, I hope to answer a few questions posed in the comments section.  I won’t get to all of them, of course, and I’ll avoid the rhetorical ones (“How can you be so wrong about everything all the time?!?”).  I may change the wording a bit for clarity.

Q: Is in fact a form of Medicare for all (with supplemental insurance policies to cover elective procedures) fiscally and socially responsible?

A: I think so, though I note you didn’t include “politically viable.”

This is really a question about whether it would be viable to have a single-payer, run by the gov’t, for national health insurance.  It’s important to note that under Medicare for All, the insurance part of system would be public, but the services themselves would remain private, as they are today (outside of the VA system, that is).  In other words, we’d be more like Canada, which has something close to Medicare for All, than the UK, which has a public delivery system as well.

With its lower overhead, non-profit status, less need for advertising, strong bargaining clout, Medicare for All has had a lot of supporters over the years.  The late, great Senator Ted Kennedy was a long-time advocate.  I also supported the idea in one of my books on this stuff.  But at least during the health care debate, even including an optional single-payer plan within the current system was too much for the political market to bear.

Q: What gives you confidence that the subsidies and exchanges will be of any more use to the uninsured young in being able to afford health insurance than the vouchers would be for seniors under the Republican plan?

A: First of all, remember that “subsidies and exchanges” are not the relevant comparison to the Republican’s plan to privatize Medicare.  Under the Affordable Care Act, Medicare retains the guarantee that makes it such a valuable program in terms of health care security for seniors.

But instead, let’s ask the question will the exchanges lower health costs throughout the health care system?  First of all, we’ll have to see if any of this stuff works, including the much more important cost saving mechanism, the independent board (IPAB).  Smart people without a vested interest think it will, like the folks at CBO, but we won’t know until we try.

But the exchanges are more about coverage than cost savings.  The fact that they provide a pooling mechanism for folks who would otherwise have to shop for coverage on the more expensive individual market should help a bit.  But if there are real savings here, the kind we need to avoid the continued attack of the health care spending monster, it will be because IPAB identifies cost-effectiveness savings that move from the Medicare side of service provision to the private side as well.

Q: OK, so IPAB *is* allowed to “deny certain types of care.”  It is *not* allowed to “ration health care, raise costs to beneficiaries, restrict benefits.”

Is it just me, or does this look like a contradiction? Who is defining the meaning of words here? Does anybody know what the law actually says?

A: Look, every insurer already denies “certain types of care” and always will– it is a non-economic fantasy to think otherwise.  You can call any denial of anything you want “rationing” but you then have to admit that there’s tons of rationing going on all the time.  And btw, the current system is of course fraught with rationing by price, as about 50 million uninsured would be happy to explain to you.

Q: Why does nobody mention raising wages, thereby helping to close the growing productivity/wages gap? Have we all simply bought into the Republican cant that higher wages cost jobs, so we can’t go there? When did raising the minimum wage in the past result in massive unemployment? Wages increased most during the Clinton Administration, which also brought about the biggest increase in jobs, and an elimination of the budget deficit to boot. Don’t put all the burden on putting more money in people’s pockets on tax cuts. Some of those record profits could be shared with the workers who helped create them. Raise the minimum wage. Strengthen labor laws.

A: Ok, maybe I’ll tackle some rhetorical questions.

Raising wages in the private sector is not typically the purview of government, with the exception of the minimum wage, as you suggest.  I’ve actually started to hear a little bit of buzzing around that idea and I agree that it should be in the mix.

But to really get sustained wage gains across the board, you need much lower unemployment, so that instead of an excess supply of workers chasing too few jobs, you create more of a situation where the job market is tight enough that employers must share their productivity and profit gains more broadly in order to get and keep the workers they need.  Especially at a time like now, when there’s still considerable excess capacity in the economy, there is a role for government (and the Fed) to help create the conditions for stronger job growth.

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12 comments in reply to "Back Attcha: Answering Some Questions from the Comments"

  1. Russ Abbott says:

    Thanks for responding to some of the comments. I think it’s very informative for you to do that. I realize that you can’t respond to everyone — and won’t respond to off-the-wall comments, but I would very much like to know what you think about a comment I left on a previous post. (http://jaredbernsteinblog.com/just-because-rep-paul-ryan-keeps-saying-it%E2%80%A6/#comment-407)

    The post was about the debt ceiling. I suggested that the way to deal with it was for the Federal Reserve to print money, i.e., to credit the Treasury with the money to pay its bills. The Fed could mitigate the effect of that on the money supply by selling items on its balance sheet, which at this point is large enough to support this approach for quite a while. Why wouldn’t that work? Or if it will work, why it is a bad idea?

    Thanks.


    • Jared Bernstein says:

      I don’t think so.

      It’s true that when your debt is denominated in your currency, you can monetize it, which is what you’re asking about. That’s why the US can’t really default like Argentina, eg, whose debt was in other countries’ currencies.

      But it wouldn’t work. The inflation and high interest rates that would result would be just as disastrous. If we took this approach, who’d buy our T-bills or even sign procurement contracts with the US gov’t? We’d have to offer super high rates, and even then, it’d be risky.

      Your idea re the Fed counteracting the money supply could help, but even with their larger balance sheet, the magnitudes don’t match up at all…remember, they’re not going to sell all those bonds they’re holding at once, but over time.


      • Russ Abbott says:

        I just looked it up. The Fed has a balance sheet of $2.76 trillion. If it prints that much money (as the government needs it) while simultaneously selling items from its balance sheet that would keep the government in business without affecting the money supply for quite a long time. The Republicans would see that it is fruitless for them to refuse to raise the debt ceiling.

        In addition, even in the unlikely chance that the Fed exhausts it balance sheet before the debt ceiling issue is settled, the President could assure the world that once the debt ceiling is raised, the Treasury would borrow back the excess money and return it to the Fed. I think such a promise could be made believable. Then the Republicans would be in a position of either forcing the Fed to continue printing money–exactly what they complain about now–or finally realize that the debt ceiling is the wrong way to deal with spending issues.

        Consider it seriously. It sounds like a real if unusual approach to the problem. But it’s an approach that would work.

        Here’s a further thought. I’m not clear whether it can be said that the government “owns” the Fed’s balance sheet. If so, or if a reasonably good case could be made along those lines, then selling items on the balance sheet would be comparable to selling any other Federal property. That’s exactly what the Republicans are suggesting. So let’s do it!


        • Russ Abbott says:

          Yet another thought. The Fed regularly returns to the Treasury most of the interest payments it receives on US Govt bonds that it owns. Thus there is a real precedent for having the Fed give money to the Treasury. It can refer to that precedent when it sells assets and gives that money to the Treasury.


      • beowulf says:

        But it wouldn’t work. The inflation and high interest rates that would result would be just as disastrous. If we took this approach, who’d buy our T-bills or even sign procurement contracts with the US gov’t? We’d have to offer super high rates

        Except that during World War II, the US overclocked the economy (deficits of 20% to 30% of GDP, equivalent today of $3 trillion to $4.5 trillion, year after year) with interest rates capped at .375% short term, 2.5% long term. The secret was the Fed’s “market tap” operations. Inflation was controlled by a mix of credit controls, incomes policy, taxes and a de facto mandatory savings plan (i.e. the 8 war bond drives).

        Besides, the Fed can’t really monetize the debt with a positive Fed Funds rate target. If it doesn’t sell Treasuries, it must pay interest on excess reserves to keep FFR from dropping to 0.


  2. Paul J says:

    Thanks, Jared, for responding to my question about raising wages.

    To what extent is the ever-widening gap between increases in productivity and (lack of) increases in wages due to the continuing, and successful, assault on unions? And if enforcement and strengthening of labor laws is helpful, isn’t THAT within the purview of the government?

    And to the commenter who pointed out that we’re constrained by Republicans holding the House and filibuster ability in Senate, no doubt that’s the case now, but shouldn’t Democrats at least be saying, “This is one the policies that we definitely intend to pursue should you voters elect more of us”?


  3. Kevin Rica says:

    Jared,

    You said (and I agree):

    “But to really get sustained wage gains across the board, you need much lower unemployment, so that instead of an excess supply of workers chasing too few jobs, you create more of a situation where the job market is tight enough that employers must share their productivity and profit gains more broadly in order to get and keep the workers they need.”

    But if that is true, isn’t the Administration’s position on immigration doing great harm? Shouldn’t the Administration change it’s position on E-verify and crack down on illegal immigrants getting jobs with phony or stolen ID?


    • Jared Bernstein says:

      I’m giving a talk on this in the next week or so and I’ll have more to say then. For now, a few points.

      First, check this out re admins position. May need to amend your comment!

      Second, you’ve got to look at the rate of immigrant flows, which have slowed considerably.

      Third, very important, you’ve got to look at the jobs (occupations) where immigrants are working to figure out with whom they’re competing. Some research finds they tend to compete more with earlier groups of immigrants than with domestic workers.


      • Kevin Rica says:

        Jared,

        First, check this out re admins position. May need to amend your comment!

        Jared, check out my comment (#3) to the NYT article that you cite.

        To make a long story short, this Administration only uses enforcement strategies that it knows are ineffective.

        Second, you’ve got to look at the rate of immigrant flows, which have slowed considerably.

        Jared, that is just because the job market is in the tank — not because of better enforcement. The fact that they continue to come when unemployment is so high makes it worse. And the rate of entry is still waaaay beyond acceptable.

        Third, very important, you’ve got to look at the jobs (occupations) where immigrants are working to figure out with whom they’re competing. Some research finds they tend to compete more with earlier groups of immigrants than with domestic workers.

        Jared, I don’t care if they are only impoverishing non-white people! But even if you are correct, that just means that the time lag to depressing the wages of all lower-paid workers is just a little longer.

        The Obama Administration is on the same side of this issue as the Chamber of Commerce.

        I will NEVER accept the idea that employers have a right to an unlimited supply of poor, desperate people willing to accept the minimum wage and no health benefits.

        Cut off the unrestricted supply of immigrant labor and let the Law of Supply and Demand raise wages!

        Jared, I know you agree. Now that you have left your old job, you are free to pick your issues and assert your independence when you disagree with the Administration. This is the issue.


  4. Southern Beale says:

    Speaking of wages, I don’t know why we aren’t talking more about living wage laws, which already exist in some places. Sure, conservatives and big business will howl in protest but then that will just reveal them for the cheap labor conservatives we know they are.

    And if we had a national living wage law, wouldn’t that be an economic deterrent to immigrant labor, illegal and otherwise? If we level the wage playing field, wouldn’t that allow American workers to compete for jobs alongside immigrants? I’ve never bought into the conservative mantra that Americans “won’t do” certain jobs — that’s ludicrous. They just can’t do them for the cheap wages companies are willing to pay.


  5. Andrew says:

    I appreciate that you responded to my question about the Exchanges. Given what you wrote, I strongly suspect that you agree with the premise of my question, but won’t say so for political reasons.


  6. Main Street Muse says:

    Can you explain HOW the exchanges work? I’m self-insured, THE audience for this program – yet I’ve read nothing that makes me think these aren’t just another layer of bureaucracy for someone like me to wade through. My specific questions include:

    1) How are they funded? How much is being budgeted for their operations? (How many people to staff these, office costs, etc.)

    2) How exactly do they cut costs? And will the costs saved be more than the costs to implement these exchanges? I.e. – how are they more than just one more layer of bureaucracy?

    3) How is an exchange different from an insurance broker (someone who pulls through all the plans and helps people like me figure out the right one)?

    4) I thought insurance companies already pooled groups of small businesses together to lower costs? Not true? How will the exchange pool be different? How will this difference help consumers?

    I keep hearing that the exchanges are the answer to all that ails our system, yet there is very little discussion on the details of how they work. Your thoughts on this would be very much appreciated.


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