Americans are making a big mistake about health care funding – Vox

Almost everyone who has health insurance in the United States gets help from the government to afford it.

For the elderly, that’s Medicare. For the disabled and the poor, that’s Medicaid. For full-time workers it’s the tax subsidy for employer-provided health insurance.

via Americans are making a big mistake about health care – Vox.

Democrats are under more pressure from interest groups to pass policy

democrat interest groups

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Why does the Left in New Zealand support old age pensions for millionaires?

Pensioners

Michael Littlewood from the Retirement Policy and Research Centre has a commentary on redesigning NZ Superannuation. He says (and I agree) that we should not just look at one issue in isolation or just the cost.

He highlights eight key design features that should be agreed on. They are:

  • Universal or means-tested (I favour means-tested if the administrative costs of doing so are not prohibitive)
  • Age of entitlement (I favour increasing it and tying it to life expectancy)
  • Residency test – how long should someone live here to quality. The current threshold is ten years and I think it should be higher. It used to be 25 years.
  • The level. Currently is 43% of the net average wage for a single person. Set at 66% of  the after-tax national average wage for a couple.
  • How to revalue? Is indexed to both CPI and the average wage.
  • How to pay for it? Pay as you go and partially pre-funded. Should it be both? What should the mix be?
  • Payments to single people? Why does a married couple get less than two singles living together?
  • Overseas pensions? The rules for deducting overseas pensions are inconsistent

via Redesigning NZ Super | Kiwiblog.

I was walking back to the office with a mate who I will call the ecological socialist after a meeting with the government department responsible for income support to old age people in New Zealand.

We were both shaky our heads in utter disbelief. We couldn’t understand their idea of defending an old age pension that is free of any means test been paid to millionaires on the grounds of egalitarianism.

foodstampsphone.jpg

By coincidence, we are both Australians where the old age pension is means tested. We couldn’t understand in any way, shape or form the notion of paying old age pensions to rich people when that money could be used to increase the old age pension for those who we lived in ordinary circumstances all their lives and couldn’t save for their retirement.

The Great Enrichment since 1979 in the USA

Over the past one-, two-, and three-decade periods, both middle class and poor households have experienced noticeable gains in living standards. Their gains are slower than those experienced by middle-income families in the earlier post-war era, but the gains are well above zero.

In 1980, in-kind benefits and employer and government spending on health insurance accounted for just 6% of the after-tax incomes of households in the middle one-fifth of the distribution. By 2010 these in-kind income sources represented 17% of middle class households’ after-tax income

…The broadest and most accurate measures of household income are published by the CBO. CBO’s newest estimates confirm the long-term trend toward greater inequality, driven mainly by turbo-charged gains in market income at the very top of the distribution. The market incomes of the top 1% are extraordinarily cyclical, however. They soar in economic expansions and plunge in recessions. Income changes since 2007 fit this pattern.

What many observers miss, however, is the success of the nation’s tax and transfer systems in protecting low- and middle-income Americans against the full effects of a depressed economy.

via Gary Burtless

Charts showing everyone is seriously richer after-taxes

income-growth-disparity-full

Everyone is 30-50% richer.

Chart 18

Average Federal Tax Rates, by Income Group, 1979 to 2011

Microsoft PowerPoint - Group C Federal Budget (KF).pptx [Read-Only]

Ordinary Americans do not pay much in taxes.

CBO

Low income Americans receive large amounts of government transfers and increases their income by at least 50%

NY Times

The middle-class is getting seriously smaller because more of them are getting richer

Ricardian equivalence alert: Millennials and the funding of their retirements

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The working class is missing from US political discourse

One of the things I noticed in the 2008 US presidential campaign was everyone was appealing for the middle class vote. Presidential primary and general election debates were about how things were getting harder for the middle-class and the Republican or Democratic candidate who happen to be pitching for votes would stand up for the middle-class better than their competition in the presidential primary or general election at hand.

Another big feature in the 2008 presidential campaign was Joe the plumber. This was the small businessman who asked then candidate Obama at a rope line three days before the final presidential debate about his plans to put up taxes. Obama replied he wanted to spread the wealth around. Obama’s response was

It’s not that I want to punish your success. I just want to make sure that everybody who is behind you, that they’ve got a chance at success, too… My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody.

If you’ve got a plumbing business, you’re gonna be better off… if you’ve got a whole bunch of customers who can afford to hire you, and right now everybody’s so pinched that business is bad for everybody and I think when you spread the wealth around, it’s good for everybody

Andrew Cherlin did the service counting up references to the working class in State of the Union addresses since President Obama was elected.

In his State of the Union addresses, Obama has used the term middle class 28 times. But he has never said “working class” except in 2011, when he described Vice President Biden, who was seated behind him, as “a working-class kid from Scranton.

This dearth of references to the working class is no surprise in light of Director’s Law and the median voter theorem. Politicians who do not pitch to the American middle class will not win elections unless there is a lot of expressive voting by the educated middle class. In general social surveys of Americans, 44% identify as working class and 44%  identify as middle class.

Republicans consistently win voters making $50,000 or more – the U.S. median income. The margin doesn’t vary much: In 2012, Mitt Romney got 53% of this group’s vote; in 2010, Republican House candidates got 55%.

The margin by which the Republicans win income brackets above 50,000 doesn’t vary much if you just look at those earning above $100,000 or those earning between $50,000 and $75,000. These margins only matter in a close election, a very close election.

Democrats consistently win voters making less than the median but the margin varies.  Whether the Democrats win these voters earning less than $50,000 by a 10-point or a 20-point margin tells you who won every national election for the past decade.

The Democrats would also do well among the college educated vote. Obama won this over Romney and 2012 by 10 percentage points. This may explain why the Democrats are slightly conflicting: they must win the working class vote as well as the college educated vote to win.

Andrew Cherlin didn’t give many reasons for the disappearance of working class from modern American political discourse, but he showed some insight into expressive politics when he observed that:

Politicians may prefer to call working-class families by the class position they aspire to rather than the one they hold.

Is the middle-class disappearing?

Hayek supported a guaranteed minimum income for all

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What does the media and Left give top athletes a pass on their membership of the top 0.1%?

Postwar vs. New Gilded Age: How did the middle class do?

Noahpinion: Postwar vs. New Gilded Age: How did the middle class do?.

Gordon Tullock on avoiding difficult decisions about saving lives – updated

Gordon Tullock wrote a 1979 New York Law Review book about avoiding difficult choices. His review was of a book by Guido Calabresi and Philip Bobbitt called Tragic Choices which was about the rationing: the allocation of kidney dialysis machines (a “good”), military service in wartime (a “bad”), and entitlements to have children (a mixed blessing).

Front Cover

Tullock argued that we make a decision about how to allocate resources, how to distribute the resources, and then how to think about the previous two choices. People do not want to face up to the fact resources are scarce and they face limits on their powers.

To reduce the personal distress of making these tragic choices, Tullock observed that people often allocate and distribute resources in a different way so as to better conceal from themselves the unhappy choices they had to make even if this means the recipients of these choices are worse off and more lives are lost than if more open and honest choices were made up about there only being so much that can be done.

The Left over Left and union movement spends a lot of time pontificating about how we must not let economics influence health and safety policy rather than help frame public policy guidance on what must be done because scarcity of resources requires the valuation of life in everything from health, safety, and environmental regulations to road building. health budgeting is full of tragic choices about how much is spend to save so lives and where and for how long.

The Left over Left and the union movement deceive themselves and others into make futile gestures to make themselves feel good. These dilettantes cannot assume that they are safely behind a veil of insignificance. They have real influence on how public policy on health and safety are made.

A major driver of the opposition among the Left over Left and the union movement to the use of cost-benefit analysis and the valuation of statistical lives is its adoption makes people confront the tragic consequence of any of the choices available to them.

By saying how dare you value a statistical life does not change the fact that choices made without this knowledge will still have tragic consequences, and more lives may be lost because people want to conceal from themselves the difficult choices that they are making about others as voters and as policy-makers.

One of the purposes of John Rawls’ veil of ignorance and Buchanan and Tullock’s veil of uncertainty is that the basic social institutions be designed and agreed when we have abstracted from the grubby particulars of our own self-interest.   Buchanan and Tullock explain the thought experiment this way

Agreement seems more likely on general rules for collective choice than on the later choices to be made within the confines of certain agreed-upon rules. …

Essential to the analysis is the presumption that the individual is uncertain as to what his own precise role will be in any one of the whole chain of later collective choices that will actually have to be made.

For this reason he is considered not to have a particular and distinguishable interest separate and apart from his fellows.

This is not to suggest that he will act contrary to own interest; but the individual will not find it advantageous to vote for rules that may promote sectional, class, or group interests because, by supposition, he is unable to predict the role that he will be playing in the actual collective decision-making process at any particular time in the future.

He cannot predict with any degree of certainty whether he is more likely to be in a winning or a losing coalition on any specific issue. Therefore, he will assume that occasionally he will be in one group and occasionally in the other.

His own self-interest will lead him to choose rules that will maximize the utility of an individual in a series of collective decisions with his own preferences on the separate issues being more or less randomly distributed.

Behind the veil of ignorance and the veil of uncertainty, we would all agree that resources are limited, including in the health sector and some drugs can’t be funded – choices must be made.

Once we go in front of the veil of ignorance and find out that we are the one missing out on that drug, naturally, our views will change.  We agreed to these rules  as fair for the distribution of basic social resources when, as John Rawls put it:

…no one knows his place in society, his class position or social status; nor does he know his fortune in the distribution of natural assets and abilities, his intelligence and strength, and the like.

Is always the case that someone just falls on the other side of any line in the sand. If you move that line, there is always another set of people who are just on the other side.

George Stigler on income redistribution policies

Robert Lucas on the defining belief of the Left over Left and the Greens

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Eamonn Butler on how economical with the truth Oxfam was on global inequality

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