Tag Archives: political parties

Obama’s Stimulus Promise Revisited

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James Pethokoukis at AEIdeas did the visit, and this graph is the highlight of it.

The red dots on the right axis reveal the Obama tale.  It’s an especially humorous, if simultaneously mendacious, one, given that in this auspicious quarter we were supposed to be in the same prosperous state with or without Obama’s promised stimulus benefit.  The benefit, after all, only was supposed to ameliorate the pain of the last five years.

Instead, those red dots demonstrate, not just the failure of Obama’s stimulus, but the active damage that “stimulus,” in concert with the rest of Obama’s economic and jobs policies, have done and still are doing to our economy.

In case the dots’ captions are hard to read, here they are, from highest dot to lowest, all for December 2013:

  • unemployment rate based on the 2009 Labor Force Participation Rate: 11.8%
  • unemployment rate based on CBO’s then forecast for 2013’s LFPR: 10.1%
  • unemployment rate based on 2012’s LPFR: 7.9%
  • unemployment rate, actual: 6.7%

These compare with Obama’s promised rate of 5%, or roughly full employment.

Can we really afford another five years of these destructive Progressive policies?  Or even two more years?

Here Come the Insurance Company Bailouts

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Humana is taking point on this one.  This from Dr Scott Gottlieb at AEIdeas:

Humana announced that it expects to tap the three risk adjustment mechanisms in Obamacare for between $250 and $450 million in 2014.  This amounts to about 25% of the insurer’s expected exchange revenue.  This money is needed to offset losses that the insurer will take as a result of slower enrollment in its Obamacare plans, and a skewed risk pool that weighs more heavily toward older and less healthy members than it originally budgeted.

And

More than half of the money will come from the $25 billion reinsurance pool that Obamacare provides (collected through a tax on employer-sponsored health plans). The other half will come mostly from the risk corridors.

Of course, President Barack Obama was counting on the “migration” of folks in the private health insurance market to the plans pushed through ObamaMart.  However, as Humana is experiencing, and as other health plan providers (I hesitate to call them insurers, anymore) are discovering, that “migration” isn’t happening, and those that are buying have the wrong demographics for the law’s operation.

We know, though, that the “migration” was intended to be a forced migration, because during the 2010 Obamacare summit which our President hosted in the run-up to its party-line passage, he told [especially the first 30 seconds] then-Minority Whip Eric Cantor (R, VA) that “8 to 9 million people…might have to change their coverage….”

And those that are “changing” still aren’t responding in the Obamacare-required demographic breakdown.

Hence bailouts.  Unless we get serious in the upcoming primaries and the fall elections.

Chuck Schumer’s Progressive Solution to Immigration Reform

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Senator Charles Schumer (D, NY) tried to break the impasse over immigration on Sunday, suggesting that Congress pass a law that wouldn’t take effect until after President Barack Obama leaves office.

Yeah.  Because it’s entirely appropriate that the present President—or any President, come to that—refuse his sworn duty to enforce the laws on the Federal books whenever those laws are inconvenient to his ideology.

The distrust of Obama isn’t limited,either, to his decision not to deal with existing immigration law as it stands, his purported increase of deportations notwithstanding.  It has to do with his contempt for those laws, from his implementation of the DREAM Act by executive fiat after it had been explicitly rejected by Congress, to his execution of carbon cap-and-trade by executive fiat after Congress had explicitly rejected that, to his piecemeal rewrite of the Obamacare law by executive fiat, to….

Moral Hazard and Obamacare Welfare

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The recent CBO report on the mid- and long-term effect on willingness to be employed of Obamacare hinted at the moral hazard of Obamacare and of welfare, generally [emphasis added].

In 2014, for example, a single person or a family whose income is 150 percent of the FPL [Federal Poverty Level] and is eligible for subsidies will pay 4 percent of their income for a certain “silver” health care plan purchased through an exchange; if their income is 200 percent of the FPL, they will pay 6.3 percent of their income for that plan.  An increase in income thus raises the enrollee premium (and reduces the subsidy) both because the percentage-of-income formula applies to a larger dollar amount and because that percentage itself increases.  People whose income exceeds 400 percent of the FPL are ineligible for premium subsidies, and for some people those subsidies will drop abruptly to zero when income crosses that threshold.

That’s the mechanism through which this particular iteration of moral hazard works.  It’s a tradeoff of a short-term gain of minor security in return for giving up the opportunity for better lives in the longer term and permanently through working more hours, including to the point of working full-time, thereby increasing their earned income.

This mechanism is, in fact, an enormous marginal tax on the next dollar of earned income, and it hits our poor and marginal citizens the hardest.  This tax reduces the net value of the income increase from taking a better job or working more hours.  It’s a cynical poverty trap.

It’s not that these folks are lazy—that’s a question only in the minds of Progressives trying to distract from their failure by demonizing Republicans and Conservatives.  It’s that this iteration of moral hazard has honest men making entirely rational economic decisions—to stay on the welfare program(s).

Beyond the damage inflicted directly on these subsidized people’s true welfare and their morality, the moral hazard inflicts a broader failure, too:

Apart from harm to individuals, ObamaCare is also wasting human potential because fewer workers mean a less prosperous, less dynamic economy.  Contrary to liberal patronizing, many near-seniors, moms, and the rest like their jobs and contribute to productivity.  The 2.5 million worker ObamaCare job exodus, CBO estimates, translates into a 1.5% to 2% reduction in the total number of hours worked, which means less growth.

That failure, that slowed growth rate, reduces the ability of those who do wish to work more, who do wish to make things concretely better for their families, to do so.  It hits hardest, again, our poor, but this effect extends to the lower- and mid-middle class man who is working and looking to work more and earn more.

Here’s a concrete example, courtesy of Keith Hennessy, via AEIdeas:

  • A family of four with one wage-earner has $35,300 of income this year and no health insurance through work. Because of the significant Affordable Care Act subsidies, this family can buy health insurance for only $1,410/year.
  • The other spouse wants to take a part-time job to supplement their family income. This part-time job would earn them an additional $12,000 per year (gross).
  • But this additional income would reduce their ACA premium subsidy, so they would now have to pay $2,970/year for the same health plan.
  • This reduced subsidy, a direct result of the spouse’s part time work and higher family income, reduces the value of the $12,000 of added income by $1,560 (=$2,970 – $1,410). That subsidy reduction is 13 percent of the gross income increase.
  • So maybe this spouse chooses not to take the new part time job because the net financial benefit of additional paid work just isn’t worth it.”

When all the welfare payments (means-tested, also) for which a family in this income stratum is eligible are included in this sort of calculation, the subsidy reduction becomes a much larger per centage of the income increase—and even can be larger than that increase: a net income reduction from earning more through working.

This is illustrated in the graph below from Pennsylvania State Secretary of Public Welfare that shows how public benefits interact with each other to create welfare cliffs—income cliffs—that “phase” out as income smoothly increases.

What this means is that as people in these low-end earner brackets make more money, they face massive effective marginal tax rates—sometimes the equivalent of 100%.  Every dollar they earn would lose them more than a dollar in public assistance.

Hennessey extended his example [emphasis his]:

My back-of-the-envelope calculation, using H&R Block’s tax calculator, is that the ACA increases this moderate income family’s marginal effective [federal] tax rate by 13 percentage points, from about 37% to about 50%. The 37% includes very little income taxes, but a lot of reduced EITC and reduced refundable child credit, as well as higher employer and employee-side payroll taxes.

Then, the moral hazard question Hennessy asked, but which the Progressives avoid:

Finally, the hard one: do the benefits of the premium subsidy to this family outweigh the costs of trapping this family at this income level by killing the financial benefit they receive from more work, education, training, or other professional advancement?

This is moral hazard.  It’s economically more efficient, at least in the near term—that paycheck to paycheck, welfare payment to welfare payment time frame in which our poor and working poor exist—to not work more, to not earn more, but rather to continue the welfare payments.  This is not a matter of laziness; this is that cynically created poverty trap.

Again, it reaches beyond the welfare recipient, too.  Those who do make the choice to work more are forced by that choice to pay for those who choose to work less: the former are the ones who must pay the taxes that partially cover the welfare payments, with government borrowing covering the rest (a future tax on those working men and their children).

Regulations Begetting Regulations

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Insurers are facing pressure from regulators and lawmakers about plans that offer limited choices of doctors and hospitals, a tactic the industry said is vital to keep down coverage prices in the new health law’s marketplaces.

Yeah—Obamacare regulates what coverages must be offered and at what prices (i.e., at no increase in price while adding mandatory coverage for contraceptives, pre-natal care, maternity care, etc.  And regardless of whether the man required to buy a health plan needs these things.  Or the empty-nesters.  Or post-menopausal women.  Or…).

However, since the insurers can only control costs—and remain in this new business of supplying government-mandated welfare—by controlling how many doctors or hospitals are in their networks, now we “need” additional regulations to “instruct” the insurers in this area.

Under [a] new federal proposal, insurers selling plans in the federally run marketplace would be required to submit to the Centers for Medicare and Medicaid Services a full list of providers in a network before their plans are approved for listing in the exchanges.  In the future, regulators also plan to develop federal standards for the required number of providers.

And [Emphasis added]

California Insurance Commissioner Dave Jones said he plans to revise his agency’s standards for insurers’ health networks partly because current regulations don’t give him enough power to continue oversight after a health plan goes on the market.

And so on, across lots of states.

Of course, absent government’s Obamacare intervention in this “market,” such layers of regulation wouldn’t be necessary.  The bottom layer of regulation wouldn’t be necessary.

But then, what would these bureaucrats do for jobs?  How would Progressive politicians justify their elective jobs?