Click here to read the original Cautious Optimism Facebook post with comments
3 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff strays slightly from pure economics to analyze fuel consumption rates for boats and planes used by certain Hollywood celebrities… with plenty of reference links.
The CO Economics Correspondent randomly happened upon this story last night spotlighting actor Leonardo DiCaprio’s recent yacht vacation.
https://socialgazette.com/stories/inside-look-leonardo-dicaprios-luxurious-superyacht/
The movie star has been one of Hollywood’s most vocal proponents of climate change action, funding and starring in apocalyptic documentaries and even speaking before the United Nations:
https://www.leonardodicaprio.org/leonardo-delivers-landmark-speech-at-the-united-nations-climate-summit/
....while never wasting a chance to lecture the hoi polloi that they need to give up their carbon-burning lifestyles and eat expensive green energy alternatives that send their standards of living a step backwards.
Meanwhile his yacht is powered by two 1,200 horsepower Cummins KTA38M2 diesel engines and the boat holds over 31,000 gallons of carbon-spewing, polar bear-exterminating, icecap-melting diesel fuel.
https://www.cummins.com/engines/kta38
But hey, he poses for the press with his Fisker electric sports car so how could he not care about the planet with such eloquent virtue signaling?
https://i.pinimg.com/originals/27/ee/61/27ee61b9da2fed7e1a3e3f5a1991c26d.jpg
Aside from the obvious hypocrisy of cruising around on a super-sized diesel-guzzling yacht while demanding the average working American's household budget be pared by expensive green electricity, electric cars, and higher taxes to subsidize it all, the equally important question comes to mind:
Does DiCaprio really think the earth is in the balance teetering towards destruction?
If DiCaprio and his ilk really believed climate change was such an ominous threat to civilization, to humankind itself... I mean really, really believed the scare stories he preaches... one would think he would retreat into a spartan lifestyle that used virtually zero carbon-based energy. After all, each mile he moves under carbon-based power edges the human race that much closer to permanent extinction, not to mention the total, irreversible destruction of entire ecosystems and countless species.
So if he really believes his own interviews, his owns speeches, his own rally sermons, and his own documentaries, why does he constantly fly around the world and spend his holidays on a 52-meter, 600+ ton yacht?
The answer is pretty obvious: DiCaprio can't possibly believe the climate change existential-threat hype. Despite all he says, his actions are totally consistent with someone who either doesn't believe it or wants to deliberately destroy the world (by his science) with mass greenhouse emissions.
But none of that has stopped the adoring media for heaping huge praise on his efforts to save the planet (sarcasm):
https://ccacoalition.org/en/content/leonardo-dicaprio
https://www.fastcompany.com/90296468/leonardo-dicaprios-foundation-just-announced-a-bold-new-plan-to-curb-climate-change
https://www.huffpost.com/entry/leonardo-dicaprio-tackles-climate-change_n_5dc986f1e4b0fb4360d825b9
https://www.livekindly.co/how-leonardo-dicaprio-saving-planet/
https://www.theguardian.com/environment/2019/nov/02/leonardo-dicaprio-calls-greta-thunberg-a-leader-of-our-time
https://www.globalcitizen.org/en/content/leonardo-dicaprio-quotes-on-climate-change-environ/
https://www.foxnews.com/entertainment/leonardo-dicaprio-climate-change-deniers-alternate-reality
https://www.leonardodicaprio.org/projects/climate-change/
Incidentally in DiCaprio's defense, once enough outrage had been generated by his use of private jets, including flying 8,000 miles on one to accept an environmentalism award...
https://www.independent.co.uk/news/people/leonardo-dicaprio-flies-8000-miles-in-private-jet-to-accept-green-award-a7042326.html
... he vowed in 2019 to fly commercial instead. But he's still burning an enormous amount of CO2 with his business class carbon footprint for vacations or to lecture others on climate change. Shouldn't he stop flying altogether if something as important as the survival of the human species is at stake?
John Travolta
Not to be left out, another notable Hollywood hypocrite (from countless numbers) is John Travolta whose backyard is a practical airport of private planes... including his own personal Boeing 737.
https://finance.yahoo.com/video/john-travolta-shows-off-ultra-072141355.html
http://compareflighttraining.com/5-places-to-fly-over-in-florida/ad-john-travoltas-house-is-a-functional-airport-with-runways-05/
Granted, Travolta used to have an even less fuel-efficient Boeing 707, but his newer 737 only holds 15 passengers. With a fuel capacity of 10,470 gallons and a range of 6,640 nautical miles, his new plane burns 0.10 gallons per passenger every nautical mile carried. By contrast a commercial Boeing 737-900 burns 0.01 gallons per passenger-mile so Travolta's jet is ten times more fuel-thirsty on a per-passenger basis than flying commercial—assuming of course that he fills his plane with 15 passengers each time which he doesn't (he's on record saying he flies to destinations alone or just with wife Kelly Preston).
(the 737-MAX is even more fuel efficient than the 737-900 but given its safety problems and grounding I opted not to use it for comparison purposes).
However Travolta is at least becoming greener since his last plane, a four-engine Boeing 707-120, was an even bigger gas guzzler than his new 737. Although it seated more passengers (25), its fuel efficiency was so poor that it burned 0.19 gallons per passenger-mile, nearly twice the rate of consumption as his 737, and nearly 20 times as much as a commercial 737-900.
Of course when he flew just himself and Kelly Preston he literally burned 200 times more fuel per passenger-mile than commercial. A one-way flight from his Florida home to Washington, DC would burn about 3,200 gallons of jet fuel whereas he and his wife could fly a United 737-900 that burns 1,700 gallons on the same route (carrying over 200 passengers along the way), or they could simply drive a BMW 528 and burn 25 gallons from the service station pump.
Yet Travolta still orders fans to "do their bit" tackling climate change while contributing to environmental and climate change activist groups.
https://www.standard.co.uk/showbiz/with-five-private-jets-travolta-still-lectures-on-global-warming-7244988.html
https://www.dailymail.co.uk/tvshowbiz/article-445490/With-private-jets-Travolta-lectures-global-warming.html
But after a barrage of outrage regarding his climate hypocrisy Travolta has been smart enough to quiet down the last few years. Shortly after the outrage he was quoted saying "I'm probably not the best candidate to ask about global warming because I fly jets. I use them as a business tool though, as others do. I think it's part of this industry – otherwise I couldn't be here doing this and I wouldn't be here now."
Yes, well as far as we know tens of millions of commercial flyers use it as a business tool too, so you and Hollywood aren't unique other than the fact that you're the ones telling everyone else to stop producing CO2.
There's no shortage of climate hypocrites beyond DiCaprio and Travolta, but for a short list just click here:
https://www.mrctv.org/blog/12-most-hypocritical-environmentalists-hollywood
Archived articles from the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff
Friday, December 27, 2019
Thursday, December 12, 2019
Paul Krugman gets Ireland as Perfectly Wrong as Humanly Possible
Click here to read the original Cautious Optimism Facebook post with comments
2 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff unearths Paul Krugman flubs, errors, and gaffes even when he’s not looking for them.
CO readers may recall last month the Cautious Optimism Economics Correspondent ran a column about the spectacular economic recovery in Ireland. It’s worth repeating that Ireland was one of the original PIIGS countries (which also included Portugal, Italy, Greece, and Spain), all of which endured double-digit unemployment after major financial and fiscal crises.
Today the other PIIGS are still suffering from 14% (Spain), 17% (Greece), and 9.5% (Italy) unemployment more than a decade after the global financial crisis, yet Ireland has achieved full employment; i.e. joblessness under 5%. And the Irish economy, ranked the freest in the Eurozone with the lowest taxes in Europe, has nearly doubled in size over the last eight years (+91%) all while slashing government spending, overall an incredible achievement.
Meanwhile over the same interval the heavily taxed and regulated Italian economy has contracted by 1%, and Greece—rated less free than even the Marxist-Leninist Communist Party governed Nepal—has shrunk by 12%.
So while searching for economic statistics for his column the Economics Correspondent stumbled across New York Times columnist and Nobel Prize-winning economist Paul Krugman’s multiple opinion pieces on Ireland from 2013. Needless to say Krugman was dead wrong (yet again) as he wrote at least three scathing columns over five months mocking Ireland’s budget austerity and economic performance:
1) “The repeated invocation of Ireland as a role model has gotten to be a sick joke.”
-“Ireland is the Success Story of the Future, and Always Will Be” (August, 2013)
https://krugman.blogs.nytimes.com/2013/08/16/ireland-is-the-success-story-of-the-future-and-always-will-be/
2) “This is a ‘bright spot’? …True, [European economist Jean] Pisani-Ferry doesn’t actually say that Ireland is recovering, only that it is ‘set to recover’. But we’ve heard that before, and before, and before.”
-“The Neverending Irish Success Story” (May 2013)
https://krugman.blogs.nytimes.com/2013/05/29/the-neverending-irish-success-story
3) “…according to the austerians, it [Ireland] should be a success story. And they keep on seizing on any bit of good news as proof that austerity is working. Now, sooner or later Ireland will recover. But guys, we’re already four years into this story.”
-“Ireland Recovers, and Recovers, and Recovers” (March 2013)
(for the record, Ireland’s austerity “story” was not four years old when Krugman wrote his column as Irish federal spending was cut from €109.2B in FY2010 to €79.7B in FY2011, and FY2011 ended in December 2011 or just fifteen months prior to his March 2013 column)
https://krugman.blogs.nytimes.com/2013/03/22/ireland-recovers-and-recovers-and-recovers/
Still, Krugman's timing couldn’t have been more perfect, and he went dead silent on Ireland after 2013.
No wonder. Since Krugman’s barrage of critical articles the Irish economy has grown 91% in real terms (yes, nearly doubled) or 11.4% per year. And unemployment has fallen from 14.4% to 4.9%... ie. full employment, down nearly 10 points in six years (source: St. Louis Federal Reserve Electronic Database).
https://fred.stlouisfed.org/graph/fredgraph.png?g=pIsE
https://fred.stlouisfed.org/graph/fredgraph.png?g=pIsF
Which raises the question: can Krugman ever get anything right? I’m asking seriously.
At nearly the exact moment he decided to ridicule Ireland its economy turned straight up and grew at double-digit rates for six years. The magnitude of such a fail rivals his “stock market will never recover” call on Trump’s election night victory. It seems Krugman could do better letting a cereal box Magic 8-Ball predict the directions of national economies than applying his economics training.
However the bright spot for him is he may soon win a second Nobel Prize—this time for disproving the broken clock theory.
To read the Economics Correspondent’s original story on Ireland’s dizzying success go to:
http://www.cautiouseconomics.com/2019/11/monetary-policy-07.html
2 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff unearths Paul Krugman flubs, errors, and gaffes even when he’s not looking for them.
CO readers may recall last month the Cautious Optimism Economics Correspondent ran a column about the spectacular economic recovery in Ireland. It’s worth repeating that Ireland was one of the original PIIGS countries (which also included Portugal, Italy, Greece, and Spain), all of which endured double-digit unemployment after major financial and fiscal crises.
Today the other PIIGS are still suffering from 14% (Spain), 17% (Greece), and 9.5% (Italy) unemployment more than a decade after the global financial crisis, yet Ireland has achieved full employment; i.e. joblessness under 5%. And the Irish economy, ranked the freest in the Eurozone with the lowest taxes in Europe, has nearly doubled in size over the last eight years (+91%) all while slashing government spending, overall an incredible achievement.
Meanwhile over the same interval the heavily taxed and regulated Italian economy has contracted by 1%, and Greece—rated less free than even the Marxist-Leninist Communist Party governed Nepal—has shrunk by 12%.
So while searching for economic statistics for his column the Economics Correspondent stumbled across New York Times columnist and Nobel Prize-winning economist Paul Krugman’s multiple opinion pieces on Ireland from 2013. Needless to say Krugman was dead wrong (yet again) as he wrote at least three scathing columns over five months mocking Ireland’s budget austerity and economic performance:
1) “The repeated invocation of Ireland as a role model has gotten to be a sick joke.”
-“Ireland is the Success Story of the Future, and Always Will Be” (August, 2013)
https://krugman.blogs.nytimes.com/2013/08/16/ireland-is-the-success-story-of-the-future-and-always-will-be/
2) “This is a ‘bright spot’? …True, [European economist Jean] Pisani-Ferry doesn’t actually say that Ireland is recovering, only that it is ‘set to recover’. But we’ve heard that before, and before, and before.”
-“The Neverending Irish Success Story” (May 2013)
https://krugman.blogs.nytimes.com/2013/05/29/the-neverending-irish-success-story
3) “…according to the austerians, it [Ireland] should be a success story. And they keep on seizing on any bit of good news as proof that austerity is working. Now, sooner or later Ireland will recover. But guys, we’re already four years into this story.”
-“Ireland Recovers, and Recovers, and Recovers” (March 2013)
(for the record, Ireland’s austerity “story” was not four years old when Krugman wrote his column as Irish federal spending was cut from €109.2B in FY2010 to €79.7B in FY2011, and FY2011 ended in December 2011 or just fifteen months prior to his March 2013 column)
https://krugman.blogs.nytimes.com/2013/03/22/ireland-recovers-and-recovers-and-recovers/
Still, Krugman's timing couldn’t have been more perfect, and he went dead silent on Ireland after 2013.
No wonder. Since Krugman’s barrage of critical articles the Irish economy has grown 91% in real terms (yes, nearly doubled) or 11.4% per year. And unemployment has fallen from 14.4% to 4.9%... ie. full employment, down nearly 10 points in six years (source: St. Louis Federal Reserve Electronic Database).
https://fred.stlouisfed.org/graph/fredgraph.png?g=pIsE
https://fred.stlouisfed.org/graph/fredgraph.png?g=pIsF
Which raises the question: can Krugman ever get anything right? I’m asking seriously.
At nearly the exact moment he decided to ridicule Ireland its economy turned straight up and grew at double-digit rates for six years. The magnitude of such a fail rivals his “stock market will never recover” call on Trump’s election night victory. It seems Krugman could do better letting a cereal box Magic 8-Ball predict the directions of national economies than applying his economics training.
However the bright spot for him is he may soon win a second Nobel Prize—this time for disproving the broken clock theory.
To read the Economics Correspondent’s original story on Ireland’s dizzying success go to:
http://www.cautiouseconomics.com/2019/11/monetary-policy-07.html
Saturday, December 7, 2019
‘It’s ridiculous’: Gas prices spike above $4 in SF and California. $2.09 in Houston.
Click here to read the original Cautious Optimism Facebook post with comments
The Cautious Optimism Correspondent for Economic Affairs and Other Egghead stuff recently filled the tank on his vacation rental car in Houston for $2.09/gallon en route to the airport. Upon arriving in San Francisco his Uber ride passed by several gas stations selling unleaded for well over $4.00.
Given that crude oil trades for virtually the same price across the United States—with negligible differences for oil delivered via pipeline versus rail and tankers—the correspondent challenges California progressives to explain how the nearly $2 difference per gallon can be explained by the “greed” of oil companies (if you don’t believe they’re blaming Big Oil just check out state official and reader comments in the attached story).
The sharply higher price of fuel is particularly puzzling given that both California and San Francisco are filled with selfless, caring liberals who profess to transcend and reject capitalist greed in pursuit of the altruistic common good. Plus the Golden State is rife with endless regulations that protect its consumers from price gouging by the Dark Sith Lords of the petroleum industry.
Meanwhile Texas, being the epitome of red state evil, is overrun with cold-hearted businessmen who, absent progressive regulations to rein in their lust for profit, take sadistic pleasure daily in exploiting helpless commuters in their pursuit of wanton greed and avarice.
So why does California gasoline, which should be far cheaper due to progressive pro-consumer policies, run double the price of Texas gasoline which should cost one-hundred price-gouging dollars a gallon?
https://www.sfchronicle.com/business/article/Gas-prices-spike-above-4-in-San-Francisco-and-14498403.php
The Cautious Optimism Correspondent for Economic Affairs and Other Egghead stuff recently filled the tank on his vacation rental car in Houston for $2.09/gallon en route to the airport. Upon arriving in San Francisco his Uber ride passed by several gas stations selling unleaded for well over $4.00.
Given that crude oil trades for virtually the same price across the United States—with negligible differences for oil delivered via pipeline versus rail and tankers—the correspondent challenges California progressives to explain how the nearly $2 difference per gallon can be explained by the “greed” of oil companies (if you don’t believe they’re blaming Big Oil just check out state official and reader comments in the attached story).
The sharply higher price of fuel is particularly puzzling given that both California and San Francisco are filled with selfless, caring liberals who profess to transcend and reject capitalist greed in pursuit of the altruistic common good. Plus the Golden State is rife with endless regulations that protect its consumers from price gouging by the Dark Sith Lords of the petroleum industry.
Meanwhile Texas, being the epitome of red state evil, is overrun with cold-hearted businessmen who, absent progressive regulations to rein in their lust for profit, take sadistic pleasure daily in exploiting helpless commuters in their pursuit of wanton greed and avarice.
So why does California gasoline, which should be far cheaper due to progressive pro-consumer policies, run double the price of Texas gasoline which should cost one-hundred price-gouging dollars a gallon?
https://www.sfchronicle.com/business/article/Gas-prices-spike-above-4-in-San-Francisco-and-14498403.php
Tuesday, December 3, 2019
The Economics of Healthcare in America #3: Why Are Pre-Existing Conditions Even a Problem? (Part 2 of 4)
Click here to read the original Cautious Optimism Facebook post with comments
4 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff looks at tax policy proposals to end the pre-existing conditions insurance coverage problem— starting with two noble but faulty plans that have little chance of either working or passing through Congress.
“The tax deduction should go to the individual, not the employer… Until the government removes the double tax deduction that encourages employers to provide insurance—not to mention the mandates forcing them to do so—corporations will retain the real leverage in healthcare finance. Only when the individual wields the power of the purse will his needs come first.”
-Myron Magnet,
“The Original Mistake That Distorted the Health Insurance System in America”
(Los Angeles Times op-ed)
https://www.latimes.com/opinion/op-ed/la-oe-magnet-health-insurance-reforms-20170328-story.html
If you aren’t familiar with the history and economics of the health insurance tax deduction, the Economics Correspondent strongly recommends reading Part 1 of this installment via the following URL. (it’s impossible to understand the needlessness or cause of the pre-existing conditions crisis without it)
http://www.cautiouseconomics.com/2019/11/healthcare04.html
In 1943 the federal government made employer-paid health insurance a tax-deductible business expense, and in doing so instantly created the pre-existing conditions problem that still plagues us today.
This is no secret to economists and health policy wonks. It’s been acknowledged as a decision fraught with bad consequences for decades. America’s government-constructed dependence on employers for health insurance has been referred to as “insane” by many policy analysts and for good reason. Even some politicians who publicly browbeat about the evils of greedy health insurers and drug companies privately know that the pre-existing conditions problem has been largely created by perverse government-engineered incentives.
(Hillary Clinton is an example of an intelligent politician who understands the core problem yet chooses instead to publicly blame big insurance companies for not covering pre-existing conditions)
Subsequently, a great deal of discussion in academia, think tanks, and Washington has focused on how to undo the “job dependency” problem, but most can be quickly deemed unworkable with just a little analysis.
III. POLICY PROPOSALS THAT ARE UNLIKELY TO PASS OR EVEN WORK: GIVE INDIVIDUAL INSURANCE PLANS SAME TAX-CREDIT STATUS
One proposal, offered mostly by Congressional Republicans, has been to simply give individual health insurance premiums the same tax-deductible status as employer-sponsored health insurance. “Why not level the playing field and put both individual and employer health insurance at the same level?” they ask. And in fact Obamacare has allowed very low income households to write off a fraction of their healthcare premiums but only for plans purchased within the lousy government exchanges (the so-called Premium Tax Credit or PTC).
Unfortunately neither the PTC nor the proposed wider tax break for individual insurance premiums will solve the pre-existing conditions problem.
Why? Because even with the tax break, the moment a business offers a job with free or, in the 21st century, heavily subsidized and hence still cheaper health insurance, workers will still drop their “at cost” individual plans to hop on board with their employer-based plan. Why wouldn’t they? It’s a perfectly rational decision that saves them a lot of money.
Of course the moment they make the switch to save money, they instantly subject themselves to the vulnerability of losing their insurance if they lose their job, and if they’re sick at the same time no other insurer will pick them up.
(note: The COCEA acknowledges the existence of COBRA legislation that requires employers to offer continuous health benefits for several months after employment ends, but COBRA is extremely expensive and has a short shelf-life, thus falling far short of a real solution and even then still had to be forced through by law).
IV. TAKE AWAY THE EMPLOYER HEALTH INSURANCE TAX CREDIT
Another proposal, suggested by Milton Friedman near the end of his life, was to simply repeal the tax credit that caused the problem in the first place. In other words, just take away the tax credit for employer-sponsored health insurance. The theory was that without the enticement of free or near-free medical coverage at work, people would naturally move back towards buying their insurance on the individual market where they would be covered continuously regardless of employment status.
While this outcome is quite probable, in fact nearly certain, it’s unworkable in reality because it underestimates the political consequences that make it a nonstarter.
Health insurance remains extremely expensive in America. If any politician stood up and told Americans “we’re ending your free/near-free employer health insurance and you now have to pay for it all yourself” there would be proverbial riots in the streets regardless of the long-term continuity benefits.
Consider a working parent paying $400 a month for an employer-subsidized policy that covers a family of four. With the repeal of the tax credit that worker loses their coverage at work and “goes it alone” on the open market finding a plan that costs $1,500 without employer subsidies. Even with a nice tax credit, the cost increase would squeeze households so badly that many would simply have to go without.
Americans have become so used to getting their health insurance cheaper at work that trying to get them off it is political suicide. Any doubts can be dispelled by imagining any Republican candidate for office making such a proposal and being slammed by his/her Democratic challenger (with plenty of help from the press) that “my opponent wants to take away your workplace healthcare and force you to pay tens of thousands of dollars a year more… all to line the pockets of big business and greedy insurance companies.”
Much to the frustration of knowledgeable policy wonks, the employer insurance tax credit is a problem much like a fishing hook: easy to dig into the public but extremely painful to remove.
However in Part 3 we’ll discuss the innovative proposal that actually can solve the pre-existing conditions problem and find acceptance with enough politicians to have a chance, at least in a Republican controlled Congress.
4 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff looks at tax policy proposals to end the pre-existing conditions insurance coverage problem— starting with two noble but faulty plans that have little chance of either working or passing through Congress.
“The tax deduction should go to the individual, not the employer… Until the government removes the double tax deduction that encourages employers to provide insurance—not to mention the mandates forcing them to do so—corporations will retain the real leverage in healthcare finance. Only when the individual wields the power of the purse will his needs come first.”
-Myron Magnet,
“The Original Mistake That Distorted the Health Insurance System in America”
(Los Angeles Times op-ed)
https://www.latimes.com/opinion/op-ed/la-oe-magnet-health-insurance-reforms-20170328-story.html
If you aren’t familiar with the history and economics of the health insurance tax deduction, the Economics Correspondent strongly recommends reading Part 1 of this installment via the following URL. (it’s impossible to understand the needlessness or cause of the pre-existing conditions crisis without it)
http://www.cautiouseconomics.com/2019/11/healthcare04.html
In 1943 the federal government made employer-paid health insurance a tax-deductible business expense, and in doing so instantly created the pre-existing conditions problem that still plagues us today.
This is no secret to economists and health policy wonks. It’s been acknowledged as a decision fraught with bad consequences for decades. America’s government-constructed dependence on employers for health insurance has been referred to as “insane” by many policy analysts and for good reason. Even some politicians who publicly browbeat about the evils of greedy health insurers and drug companies privately know that the pre-existing conditions problem has been largely created by perverse government-engineered incentives.
(Hillary Clinton is an example of an intelligent politician who understands the core problem yet chooses instead to publicly blame big insurance companies for not covering pre-existing conditions)
Subsequently, a great deal of discussion in academia, think tanks, and Washington has focused on how to undo the “job dependency” problem, but most can be quickly deemed unworkable with just a little analysis.
III. POLICY PROPOSALS THAT ARE UNLIKELY TO PASS OR EVEN WORK: GIVE INDIVIDUAL INSURANCE PLANS SAME TAX-CREDIT STATUS
One proposal, offered mostly by Congressional Republicans, has been to simply give individual health insurance premiums the same tax-deductible status as employer-sponsored health insurance. “Why not level the playing field and put both individual and employer health insurance at the same level?” they ask. And in fact Obamacare has allowed very low income households to write off a fraction of their healthcare premiums but only for plans purchased within the lousy government exchanges (the so-called Premium Tax Credit or PTC).
Unfortunately neither the PTC nor the proposed wider tax break for individual insurance premiums will solve the pre-existing conditions problem.
Why? Because even with the tax break, the moment a business offers a job with free or, in the 21st century, heavily subsidized and hence still cheaper health insurance, workers will still drop their “at cost” individual plans to hop on board with their employer-based plan. Why wouldn’t they? It’s a perfectly rational decision that saves them a lot of money.
Of course the moment they make the switch to save money, they instantly subject themselves to the vulnerability of losing their insurance if they lose their job, and if they’re sick at the same time no other insurer will pick them up.
(note: The COCEA acknowledges the existence of COBRA legislation that requires employers to offer continuous health benefits for several months after employment ends, but COBRA is extremely expensive and has a short shelf-life, thus falling far short of a real solution and even then still had to be forced through by law).
IV. TAKE AWAY THE EMPLOYER HEALTH INSURANCE TAX CREDIT
Another proposal, suggested by Milton Friedman near the end of his life, was to simply repeal the tax credit that caused the problem in the first place. In other words, just take away the tax credit for employer-sponsored health insurance. The theory was that without the enticement of free or near-free medical coverage at work, people would naturally move back towards buying their insurance on the individual market where they would be covered continuously regardless of employment status.
While this outcome is quite probable, in fact nearly certain, it’s unworkable in reality because it underestimates the political consequences that make it a nonstarter.
Health insurance remains extremely expensive in America. If any politician stood up and told Americans “we’re ending your free/near-free employer health insurance and you now have to pay for it all yourself” there would be proverbial riots in the streets regardless of the long-term continuity benefits.
Consider a working parent paying $400 a month for an employer-subsidized policy that covers a family of four. With the repeal of the tax credit that worker loses their coverage at work and “goes it alone” on the open market finding a plan that costs $1,500 without employer subsidies. Even with a nice tax credit, the cost increase would squeeze households so badly that many would simply have to go without.
Americans have become so used to getting their health insurance cheaper at work that trying to get them off it is political suicide. Any doubts can be dispelled by imagining any Republican candidate for office making such a proposal and being slammed by his/her Democratic challenger (with plenty of help from the press) that “my opponent wants to take away your workplace healthcare and force you to pay tens of thousands of dollars a year more… all to line the pockets of big business and greedy insurance companies.”
Much to the frustration of knowledgeable policy wonks, the employer insurance tax credit is a problem much like a fishing hook: easy to dig into the public but extremely painful to remove.
However in Part 3 we’ll discuss the innovative proposal that actually can solve the pre-existing conditions problem and find acceptance with enough politicians to have a chance, at least in a Republican controlled Congress.
Subscribe to:
Posts (Atom)