April 12, 2012
An Historical Comment on Health Care Benefits

As discussion of the Obama health care law heats up again, now that the primary seems decided for the Republicans, I thought I’d throw out a piece of information that not a lot of people appear to know, but that seems relevant to the issue:

Have you ever wondered why you get health care benefits from your employer, rather than buying them on your own (like you do your house and your car) or getting them as part of a national package of benefits (like pretty much every industrial/postindustrial democracy other than the United States)? It turns out the answer is an accident of history.

Prior to WWII, basically no one had a health care benefit plan in America. If you got sick, you paid your bill out of your savings and earnings. In rural areas, doctors took barter—the infamous chicken, for example. After all, there wasn’t all that much doctors and hospitals could do for you in the days before penicillin, and you weren’t going to linger for weeks and months in a hospital before you died. Paying for care was “manageable,” to use that loaded term.

That changed during WWII. As men got drafted in their millions, vast labor shortages broke out across the nation—at exactly the time labor needs increased to produce the weapons of war. In part, the labor shortage was met by the infusion of women into the paid workforce, but regardless of women’s contributions to the labor pool, labor shortages were endemic throughout the war.

Elementary economic theory notes that anything scarce tends to go up in price; the same is true for labor. When labor is scarce, employers seeking workers raise their salary offerings to attract labor from other jobs.

However, in WWII wages were frozen. Employers couldn’t compete for labor with salaries. So they competed on benefits—including, notably, health care benefits. They couldn’t pay you more directly, so they gave you more indirectly.

The principle of employer-provided health care benefits stuck after WWII. Unions negotiated generous packages; white collar workers wanted at least as much; and the modern system of employer-provided health care benefits became the established norm—just a few decades after a time when no one would have had any health care benefits at all.

Note that this was never the case in the rest of the industrial/post-industrial democracies.They decided to make national health care benefits part of their national mission after WWII because just as they had borne the suffering of the war together, they believed it was right to provide care in a collective, state-centric way. Hence they built national, non-profit health care systems, not employer-derived, for-profit systems.

In the US, of course, we now live in a world where there is so much health care, and that health care is so expensive, that we are frightened of living as my grandparents basically did, and my great-grandparents certainly did: paying for our own medical care on an as-needed, fee-for-service basis. Instead, as an accident of history, we are all just a job loss or poor job opportunity away from being without good insurance for health care. Which ought to scare pretty much, well, everyone in the United States.

December 22, 2011
The Republicans’ Enlightenment Problem

Arguably the defining characteristic of so-called “Western” civilization (and don’t flame me for that one; I know the complications embedded in concept, so bear with me) is the Enlightenment: that period of history where reason and science and the notion of natural rights came to play significant—if imperfect—roles in how society operated. Disease, for example, went from being seen as the product of unbalanced bodily “humours” to being understood as the product of germs. Explanations of natural occurrences changed from abstract assertions of logic to empirically-grounded evidence derived from replicable science. Political authority came to be seen as derived from the consent of the governed, all of whom were endowed with inalienable rights, rather than as the beneficence of a divine being to a monarch.

Again, I really don’t want to overplay this: the same Founding Fathers who applied Enlightenment concepts to the creation of the new United States used their reason to rationalize slavery, and reason and science combined to make both Auschwitz and nuclear weapons. Our continuing struggle to recognize the core humanity of others is at the heart of the on-going fight for the recognition of gender, racial, ethnic and LGBT rights in our societies. The Enlightenment didn’t solve everything for everybody all at once—or even now.

On the other hand, whatever the flaws inherent in our realization of Enlightenment ideals in social life, the fact of the Enlightenment shapes the kind of evidence and arguments that we accept as meaningful in our daily lives. Few if any of us would accept “sacrifice a goat” as a cure for cancer; fewer still would likely accept the notion of fixed social classes with differing rights and freedoms as the foundation of a just political order. We are creatures of the Enlightenment, with all of the attendant flaws and opportunities that fact embodies.

Which brings me to my topic: the fact that some significant percentage of the Republican Party seems to be anti-Enlightenment. That is, rather than appealing to reason or science or shared notions of natural rights to advance their cause, they are rejecting such notions out of hand. Take, for example, climate change: almost everyone thinks its happening, and most of the people who study it seriously are certain that it is in part the result of human activity. However, if this is true then it follows that humans ought to change their behaviors such that global climate change might be abated: it’s only reasonable. Of course, change is hard, and in particular the kinds of changes needed to alter the path of global climate change are both disruptive of a particular way of life (consumer capitalism resting on high use of relatively inexpensive fossil fuels) and expensive. So lots of people don’t want to do them. But rather than argue against global climate science in scientific terms—the usual language of “proof”—most Republican opponents of changing our behavior to reduce the negative effects of global climate change simply reject science as such. Rick Perry, for example, has asserted that the whole science of climate change is nothing more than a conspiracy by scientists to get government grants.

Think about that one for a second. Rather than assess the evidence, perhaps by reproducing the results of the experiments and other research done by climate scientists, Perry simply asserted the findings were corrupt. And not even scientifically corrupt—e.g., the result of faked data or bad research design. Nope: a vast, cross-national cabal of climate scientists has banded together in some kind of secret society to dupe governments into giving them money.

It’d be quite a trick … if it were even vaguely true.

Examples of anti-Enlightenment thinking abound within the Republican Party. (Not all Republicans, of course—but this election cycle the Enlightenment-rejectionists do seem particularly prominent). Evolution? Maybe it should be taught in science class, but only if the patently-unscientific “Creation Science” is taught along side it. Rights for LGBT persons? Of course not: they’re deviant, dangerous and wrong and should either be fixed or banished so they don’t infect the rest of us. Prayer in school? A must, for otherwise how else will we prove our love of God through the practice of one specific religion (ours) and thus prove our love of the Constitution that explicitly forbids the anointing of one religion as the official US religion?

As it happens, I believe that—eventually—reality will get in the way, and whatever some Republicans think about things like climate change, for example, the climate will change and we will have to adapt whether we wish to or not. The choice, then, is whether we prepare for the changes to come, or just react to them: change comes in either package. Likewise, I am comforted by the fact that there have been other eras in American history when we have been wrapped up in anti-Enlightenment fever, and we’ve managed to get through these periods as well. Accordingly, I think the Republicans are in long-term trouble: the rejection of reality can carry you for a short time, but eventually reality has a way of smacking you in the face.

The question is just how much damage the hit does to you.

June 14, 2010
The Reagan Revolution … resurgent, or dying?

Two great political trends seem at odds today. One is the cool rationalism of the Obama administration, which seems to be comfortable with the notion that experts and professionals with good educations and lots of training are best able to handle the troubles of the day, whether these troubles are financial meltdown, auto industry implosion, or, now, the BP oil catastrophe.  The other is the tea party movement’s resentment of such elitist sentiments and the relative increase in government and other large institution power that inevitably accompany “expert” politics.  Much of the future of American politics will hang on the question: which approach will win?

The tea party movement is in some ways a logical—if certainly not an inevitable—extension of the Reagan Revolution. Reagan’s skill was in explaining complex issues in simple phrases that seemed to suggest policy conclusions. Reagan insisted that big problems and big challenges usually had straightforward, commonsense solutions that could be implemented if only the people who ran Washington, DC, would do it.  You do it at home, he implied (or said); why not do it in politics?

Of all of his sayings, it seems to me the most important one was: “Government is not the solution to our problems; government is the problem.” Reagan’s success in convincing people that this was true across the board was key to the Reagan Revolution. After all, why should you pay taxes to a government that not only can’t solve the problem, but will in fact only make the problem worse? And why should government provide social services like welfare and Medicaid when its operations will only exacerbate poverty, creating welfare dependency, instead of moving people into the workforce and into opportunity?  In taking taxes, then, government bureaucrats were wasting your money and either failing to provide services efficiently, or doing things government shouldn’t be doing at all.  In either case, if you believe Reagan’s statement the conclusion is obvious: cut taxes and reduce government’s scope and power in order to ensure better lives for “real” Americans.

Reagan’s victory set in motion two processes which are in fundamental tension with one another.  The first is the continuing and seeming reflexive political sensibility on the part of many Americans that taxes/government/social programs are bad. This belief brought the Republican takeover of Congress in 1994 and the tea party movement today.  The other is the massive borrowing that has followed from politicians’ unwillingness to cut programs to meet tax receipts, regardless of party—and that followed voters’ unwillingness to accept the logic of their demands for lower taxes and support politicians who cut programs, even the military, to meet tax receipts. These two processes have dominated domestic US politics for the last 30 years.

Now, of course, we are beset by a series of challengers and problems that are, in a word, hard.  The US financial system is staggeringly complex, and while I am a pretty well educated person, I cannot explain either the crisis or likely solutions for it to you with any real coherence.  The auto industry is at the heart of the American economy, and lord knows what the psi is of oil that is gushing from a hole 23,000 feet below sea level. And then there’s healthcare.  And climate change/global warming.  And gays in the military and gay marriage and abortion and Supreme Court nominations and a collapsing infrastructure … .

The Obama administration has taken the approach that difficult and complex questions require careful and thoughtful responses from experts who are backed up by the institutional capacity—whether governmental or private industry—to implement chosen solutions.  The tea party successors to the Reagan revolution have fallen back on the confidence that it is elites who make things complicated and stumble over themselves rather than do the kinds of simple, straightforward things that will actually work.

Much of the future of American politics will hang on who voters choose to send to power over the next few election cycles: those who think government is the problem, or those who think government is the solution—or the means by which the solution can be achieved.  Think Sarah Palin versus Barack Obama.  We shall see.

April 22, 2010
Taxation Whack-a-Mole

27.8% is the number.  The number that summarizes the average percentage of their earnings that Americans pay in total taxes each year—income, payroll, property, capital gains, sales, other.  It’s actually staggeringly low compared to other industrial/post-industrial democracies, and is not in fact high enough to pay for the services we ask for, which is why we borrow so much money each year. But it’s been fairly stable for many years: Americans pay about 27.8% of their earnings in the form of taxes to all levels of government.

(Note that your effective percentage is higher if you acknowledge expenses you incur because government isn’t providing services, such as when you need an alignment or new tires when yours are destroyed by potholed roads, or the huge amount of money people borrow today to go to college since states no longer subsidize public higher ed like they once did. In Illinois in 1970, for example, the state provided $1 for every $1 of tuition; today, it’s one dollar for every $13 of student tuition, a massive transfer of costs to students.)

This is an important number because we have now spent about 30 years playing a game of taxation whack-a-mole in which we “reduce” taxes in one area—usually income and capital gains—but end up raising other taxes—especially property, sales and sin taxes—to make up the difference.  That 27.8% number has barely changed in the 30 years since the Reagan Revolution began the process of cutting income and capital gains taxes.  Instead, what has changed is the distribution of the tax burden: while the average is 27.8%, people in the bottom 80% of earners pay a higher percentage of their earnings to various taxing bodies today than they did 30 years ago, while the top 20% of earners pay substantially less.

The whack-a-mole nature of this taxation game has now caught up to us.  As the federal government cut income taxes it pushed unfunded mandates to the states, requiring state governments to collect more revenues to pay for programs.  This is why so many states created lotteries and added much higher alcohol and cigarette taxes: these are “popular” forms of taxation since people don’t have to drink, or smoke, or play the lottery and can avoid taxation by not doing those things.  (This is also why hotel taxes are so high: they are paid by people who don’t vote in the community they pay the hotel tax in.)  Then, when these gimmicks didn’t solve the states’ budget messes, they cut support to local communities, especially for schools, thereby pressuring local communities to raise property taxes. In the end, the sources of revenues changed even as the relative burden on taxpayers stayed roughly the same.

Now, in the midst of the great meltdown of the last two years, there are no more moles to whack.  The federal government has borrowed so much money an incipient revolt is brewing in the form of the tea party movement, and state revenues have plummeted as people stop playing the lottery, get priced out of cigarettes and alcohol, and as people stop buying things in general as they lose their jobs.  Meanwhile, local communities face the prospect of promoting massive property and sales tax increases, or of firing large numbers of employees (including teachers, fire fighters and police)—or both. 

The simple fact is that we do not collect enough money to pay for the services government provides.  There are three ways to deal with this fact: cut services, raise taxes, or borrow.  (I guess there’s a fourth: some combination of them all.) Cutting services is hard: whatever conservatives claim, most Americans like the  services they receive.  Likewise, raising taxes is hard: while Americans like services, they don’t want to pay for them.  And borrowing is becoming harder: whether because of the tea party movement, or the fact that when one borrows too much financial markets stop loaning you money (or increase the costs of lending it to you), we’re unlikely to be able to borrow forever.

So here’s a thought.  Let’s actually have a conversation about the services we want.  Then let’s total up the amount of money it would cost to provide these services.  Then let’s figure what the average tax burden for all Americans should be—e.g., 33% of total earnings (which is still low by European standards).  And then let’s create a rational system of taxation that gets us to that number without the farce of cutting taxes in one area while raising them in another. There is, after all, no free lunch.  You’re going to pay one way or the other.  It’s time to see one big bill rather than lots of little ones. Then and only then will we able to talk about “cutting” or “raising” taxes.  Right now, it’s just a game of taxation whack-a-mole, and while whack-a-mole may be fun, the dirty secret of the game is, you just can’t win.

April 9, 2010
Who’s Out to Get You?: part 1

I’ve been struck by how much of our recent political debates has focused on the question of who, if anyone, is out to destroy American liberty.  Aside from the fact that I am not sure anyone is actually TRYING to destroy liberty, I have noticed that there are several arguments on this question going on at once.  In this post, I am going to comment on one: which is safer for liberty? The federal government, or the states?

The Framers of the U.S. Constitution were unquestionably most worried about the federal government.  They feared the establishment of a new American monarchy, and did not want the federal government to be able to abuse American rights and liberties. They limited the new government’s power, created the system of checks and balances, and quickly added the Bill of Rights in an effort to ensure that the federal government could not abuse its powers.

For most of the Framers, states were likely to be more representative than the federal government. Residents would likely know their state and local representatives in ways that they would not know federal ones, and could approach and address their concerns with state and local officials in church, in their businesses, and along their daily paths of life. The Framers felt, accordingly, that it would be harder for local leaders to abuse citizens’ rights and liberties since those leaders would have to see the effects of their actions in their everyday lives.  In addition, local control would reflect local biases, and while those biases might be profound, people in the area would likely share the same ideas, religion, cultural practices and social norms and so laws that reflected local bias would not be tyrannical—they would be democratic. The federal government, by contrast, was seen as a threat because it would impose its preferences on local regions, thus enacting tyranny.  Federal = threat.

Unless, of course, you were a slave.  Or a political/social outsider.  Or someone of a different religion. Or someone the corrupt machine politics of the 19th century (and 20th—thanks, Chicago!) chose to ignore/abuse while stealing all your tax money.

Which is where the pro-federal government argument begins. Every major action government has taken to expand and protect human rights since the Civil War has been undertaken by the federal government—often at loggerheads with the states. The ending of slavery took a war, and the expansion of labor protections took federal action and intervention.  The federal government began the process of destroying the party machines, and it took federal action to create the New Deal and support the Civil Rights Movement. Absent action by the federal government, millions of Americans would be living under what, for them, would be highly repressive state governments.

Which brings us to the crux of the tea party debate.  Tea partiers and most political conservatives are convinced of the Framers’ arguments that state control is best, and that federal action, even to overcome historical bias, is inherently tyrannical.  (States’ rights, after all, were the central demand of the segregationists in the 1950s and 60s.) For them, the balance of suffering—minorities enduring limits imposed by democratic, state legislatures versus majorities compelled by the federal government to pay taxes/change laws or social practices, etc.—requires respect for states’ rights.

Liberals and anti-tea partiers see it the other way.  Rights are rights and are not subject to the vagaries of democratic opinion.  This is true whether the issue is the rights of African Americans, or women, or gays—or health care.  Your rights are your rights and if the states abuse them, the federal government ought to force them to change.

222 years of experience have conclusively proved that individual rights have been protected far better by the federal government than by the states.  The Framers’ fears of a rampant federal government were overblown, while their confidence in non-tyrannical state consensuses rested on willful inattention to the problem of slavery as well as on their ignorance of the kinds of class-based cleavages that would come to America with the Industrial Revolution.  Yet their suspicion that citizens would be skeptical of policies and laws seemingly imposed from afar has been prescient.  

On balance, I believe that state governments pose far greater threats to individual freedoms and liberties than does the federal government.  Which, of course, will do precisely nothing to change anyone’s mind!

Next up: democratic capitalism, or capitalist democracy?