Questions Republican Healthcare Reformers Must Answer

Republicans do not yet have a full replacement for the Affordable Care Act (ACA or “Obamacare”), but the outlines of one are emerging. The Policy Brief on Repeal and Replace issued by House Republicans on February 16 points the way toward a three-tier system. It promises to provide  “coverage protections and peace of mind for all Americans—regardless of age, income, medical conditions, or circumstances,” while ensuring “more choices, lower costs, and greater control over your health care.”

Those are lofty aspirations, but reformers will have to address many difficult questions before they can be met. To find realistic answers, they will have to overcome divisions within the party, ideological constraints, outside pressures, and some hard realities of healthcare economics.

Conceptual framework

The new policy brief, and similar plans put forward by Rand Paul, Mark Sanford, Paul Ryan, and others, include many common elements. Together, they point to a three-tier system that, in broad outline, would look like this:

Central tier, for individuals and households with incomes well above the poverty line in which no member suffers from a serious chronic health condition. Such people account for roughly 70 percent of the population and roughly 25 percent of personal healthcare spending. Members of this tier would be served by conventional commercial health insurance. The cost of premiums would be covered by a combination of individual payments, advanceable healthcare tax credits (HCTCs), and employer contributions. Premiums and HCTCs could rise with age, but insurers would not be allowed to charge differential premiums based on pre-existing conditions or to refuse coverage. High-deductible policies would be encouraged by using health savings accounts (HSAs) for covering out-of-pocket costs.

Multiple Job Holders Represent a Still-Untapped Labor Reserve

The Office of Management and Budget is due to release tax and spending plans for the 2018 fiscal year soon. As reported recently by the Wall Street Journal, the plans are expected to be based on relatively optimistic growth forecasts of 3 to 3.5 percent per year, well above consensus estimates. The debate over the realism of the budget plan will turn, to a significant degree, on whether there are a sufficient reserves of untapped labor to support higher growth rates.

Although the headline unemployment rate is approaching levels that the Fed and many other observers equate with "full employment," other indicators, not so well known, suggest that there are still significant untapped labor reserves. This post looks at one such neglected indicator, multiple job holders. (In a post earlier this month, I looked at another neglected indicator, nonemployment index, which also suggests the existence of hidden labor reserves.) >>> 

Follow this link to read the full post at SeekingAlpha.com

Repeal Fuel Economy Standards and Replace Them with a Tax

The Wall Street Journal reports that automakers are asking the EPA to repeal automobile fuel economy standards, known as Corporate Average Fleet Economy (CAFE) standards, which are set to rise to 56 miles per gallon by 2025. Repealing the standards would be a good idea, provided they were replaced by tax designed to achieve an equivalent saving in fuel. A carbon tax would do the job nicely, but an increase in the existing tax on motor fuels would also work.

What, exactly, is wrong with the CAFE standards? The fundamental problem is that they attack the third-party effects, or negative externalities, of motor fuel use, such as pollution, highway congestion, and accidents, only partially and indirectly. As a result, the cost of achieving a given reduction in fuel use via CAFE standards is higher than it would be if the same result were achieved more directly through a carbon tax or an increase in the federal gasoline tax.

What Happened to the OMB Data? Mystery Solved (Partially)

Yesterday I wanted to retrieve some data from the OMB archives, so I went to the usual spot, https://www.whitehouse.gov/omb. There was almost nothing there. All I found were links to “budgetary analysis” of the new administration’s executive orders. The “analysis” pages themselves contain nothing but short paragraphs signed by Acting Budget Director Mark Sandy, which say that the executive orders will not have any significant budgetary impacts. 

I had read of the efforts of paranoid climate scientists to download data from NASA, NOAA, and other sites, fearing that the Trump administration would scrub them all clean, so I got a little paranoid myself. Could it be that the new gang doesn’t want us to have any background data that might be used to put their budget efforts in a bad light?

It turns out that the situation is a little less sinister than it first looked. Turns out that the Obama administration had a “digital transition plan” that archived all the old data. The OMB archives are here, for example. There are no permalinks, though. Any old links you have saved to Obama-era materials take you to a broken link page on the Trump White House site that has a link to the Obama digital transition page. Down at the bottom of that page there is a long list of agency archives, including the one for the OMB. Eventually you can find what you are looking for.

On Thursday, the Senate finally got around to confirming Mick Mulvaney as the new budget director. We can hope he will assign someone to get to work on the amateurish OMB web page that is still there as of today. We can hope that Mulvaney’s people will give us links to the Obama archives. When a new, professional-looking, user-friendly, OMB website appears, we will know that the chaos has settled down in at least one branch of the Trump White House.

Crop Insurance Targeted By Budget Cutters As Deficit Debate Looms

Congress will soon start debating the federal budget for the 2018 fiscal year. As the following figure shows, the Congressional Budget Office projects that after shrinking for several years, the budget gap will soon begin to widen if there are no changes in current policy. Crop insurance is one of several farm programs in the crosshairs of Congressional budget hawks who hope to keep that from happening.

Crop insurance may seem like small change compared to massive programs like health insurance subsidies under the Affordable Care Act, but critics have long targeted it as wasteful. The Heritage Foundation, a consistent ally of budget cutters, characterizes crop insurance, along with other farm subsidy programs, as “a massive transfer of wealth from taxpayers to mostly large agribusinesses that are (or should be) fully capable of managing their business operations without this special treatment.”

Universal Basic Income: The Complete Caplan-Dolan Dialog

Bryan Caplan is Professor of Economics at George Mason University and Senior Scholar at the Mercatus Center. He is the author of The Myth of the Rational Voter: Why Democracies Choose Bad Policies, named "the best political book of the year" by the New York Times, and Selfish Reasons to Have More Kids: Why Being a Great Parent Is Less Work and More Fun Than You Think. He has published in the New York Times, the Washington Post, the Wall Street Journal, the American Economic Review, the Economic Journal, the Journal of Law and Economics, and Intelligence, and has appeared on 20/20, FoxNews, and C-SPAN. He is now working on a new book, The Case Against Education.

Ed Dolan is a retired economist, active blogger, and Adjunct of the Niskanen Center. At various times, he taught at Dartmouth College, the University of Chicago, George Mason University, the American Institute of Business and Economics in Moscow, the University of Economics in Prague, and the Stockholm School of Economics in Riga. He is the author of TANSTAAFL: A Libertarian Perspective on Environmental Policy and editor of Foundations of Austrian Economics. He contributes regularly to Economonitor.com, SeekingAlpha.com, The Milken Institute Review, and Ed Dolan’s Econ Blog. He holds a PhD in economics from Yale University.

This impromptu dialog took place over several days in early 2017 on several different platforms. For readers’ convenience, I have put all the separate segments together here. To help keep things straight, everything written by Caplan is set in the Helvitica font and everything written by Dolan in Times

CAPLAN: Opening Statement (Econlog, Jan 24, 2017)

The Many Faces of Means Testing

Isn't a Universal Basic Income just another name for a negative income tax, such as Tax = -$10,000 + .3*Income?  If so, isn't a Universal Basic Income means-tested by definition?
The answer to the first question is Yes.  UBI is just Milton Friedman's negative income tax in new packaging.
The answer to the second question, however, is more equivocal.  The UBI is means-tested in the weak sense that your net payment falls with income.  But the UBI dispenses with many other traditional forms of means-testing.  Most notably:
1. Means-testing by age.  Most welfare states prioritize children and the elderly.  The implicit theory is that, unlike prime-age adults, the very young and the very old are unable to provide for themselves.
2. Means-testing by dependents and marital status.  Most welfare states prioritize single moms with minor children.  The implicit theory is that single moms have reduced opportunities to work due to their family responsibilities.
3. Means-testing by health.  Most welfare states prioritize the disabled.  The implicit theory is that they're not healthy enough to work.
4. Means-testing by job history.  Most welfare states prioritize people who recently lost their jobs over people who have never worked, or lost their jobs a long time ago.  The implicit theory is that the short-term unemployed are unlucky, while the long-term unemployed are lazy.
If your UBI proposal includes factors like these in its formula, it's very hard to see what makes it a UBI. 

Where Will An Expanding Economy Find New Workers? Clues From The Non-Employment Index

The hope of faster economic growth is a major factor behind the upturn in markets since the November election, but where will an expanding economy find the workers it needs? If it cannot find them, then any stimulus from tax cuts, regulatory reform, or infrastructure spending risks turning into inflation rather than healthy growth.

Some observers place their hopes on tapping the reserve of workers who have left the labor force. The percentage of the population who participate in the labor force has fallen from its peak of around 67 percent in the 1990s to about 63 percent today.  Just how likely are those labor-force dropouts will return to work? We can get an idea by looking at data on transition rates, by which we mean the probabilities that a non-employed worker in any labor-force category will find a job in the next month.>>>

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