Wednesday, April 27, 2011

The Ecosocialist Critique of Capitalism vs. Real World Socialism

It has been twenty years now since first glasnost and then the collapse of the USSR lifted the curtain on the appalling environmental record of Soviet socialism. Over that same 20 years, the burgeoning economy of socialist China has overtaken the United States as the world's largest emitter of greenhouse gasses. Still, it remains common to hear capitalism singled out as the greatest environmental threat to our planet, and socialism as its salvation.

Thursday, April 21, 2011

What Can We Learn about the Ryan Medicare Plan from German Experience?

Last week Republicans in the US House of Representatives, following the lead of Representative Paul Ryan, endorsed a far-reaching plan to reform Medicare, the nation's health care system for the elderly. Since it began in 1965, Medicare has been a government-run, single-payer system that reimburses private doctors and hospitals for the health care services they provide. Under the Ryan plan, it would be transformed into a system in which seniors would choose from a list of  competing private insurance plans, with the premiums paid partly by government and partly by the beneficiaries themselves.

Supporters of the Ryan plan see several benefits. An open letter, posted on the web site of the American Enterprise Institute and signed by a list of prominent physicians and economists, puts it this way:
Having more control over their health care spending would encourage consumers and patients to make better health care choices. It would stimulate more innovative and accountable competition by health care providers and give them incentives to better coordinate the care of their patients. Enhanced competition could offer seniors relief from rising Medicare premiums. Just as important, this reform could begin to ease the crushing tax burden imposed by the current program on our children and grandchildren.
Critics fear that in its zeal to ease the burden on taxpayers, the Ryan plan would make Medicare-equivalent health care unaffordable for many, if not most seniors. Under the plan, the value of government payments would be capped at the rate of growth of the Consumer Price Index. If medical costs continued to grow faster than the CPI, as they have in the past, more and more of the financial burden of health care would be shifted over time to beneficiaries. A study from the Center for Economic and Policy Research, using assumptions from the Congressional Budget Office, claims that by 2022, a senior citizen at the median income would have to pay 35 percent of that income to obtain coverage equivalent to Medicare, with the figure rising to 68 percent by 2050.

The idea of competing private health insurance plans, with premiums split between beneficiaries and the government, is far from new. It has been used for many years in Germany, among other places. What insights regarding the likely effects of the Ryan plan can we get by looking at the German experience?

Thursday, April 14, 2011

Is Tax Reform Really on the Table, or Not?

Last October I wrote a lengthy post explaining why tax reform is the best path to growth-friendly deficit reduction. At that time, six short months ago, hardly anyone in Washington was talking about tax reform. Now both the Republicans, in the Ryan plan, and President Obama, in this week's deficit-reduction speech, are trumpeting tax reform as the centerpiece of their respective proposals. Does that mean tax reform is finally on the table? Should we expect a dramatic, bipartisan breakthrough soon? I'm afraid not.

Thursday, April 7, 2011

Is Financial Reform Working or Will It Make Things Worse?

The 2008 financial crash gave rise to a world-wide call for a review of regulations. In the United States, the EU, and international forums like the Basel Committee on Bank Supervision, the conclusion was reached that regulators had allowed banks and other financial institutions to take risks well in excess of those justified by the public interest. Legislatures were brought into the act where needed to change the regulatory framework. Everyone vowed to fix things.

Now, with some of the key pieces finalized on paper, but not fully implemented, financial reform is running into a backlash. Skeptics, including former Fed Chairman Alan Greenspan, who expressed his misgivings recently in the Financial Times, argue that reform efforts not only will not work, but are making things worse. Others, like U.S. Representative Barney Frank, co-sponsor of the 2010 Dodd-Frank financial reform act, strongly disagree. In a reply to Greenspan, Frank argued that the financial system can be made safer while still leaving it able to perform its essential economic functions. Who is right?