June 30, 2014
Free Medical Care Creates Shortages of Medical Care
During the debate over ObamaCare, a frequently cited benefit of providing federally subsidized health care was the suggestion that doing so would reduce ER visits that end up being paid for out of public funds (that's "tax dollars").
Both the military health care system and the VA system were touted as examples of what a successful single payer system might look like. Sadly, the media are belatedly discovering that both the VA and military health care systems are plagued by the very shortages of care, long waiting lines, and bureaucratic incompetence they was supposed to have cured. And now this outrage!
...in England plenty of people want to go to a doctor because it is free. They just can't get an appointment so they go to an emergency room which costs far more, which makes the burden on taxpayers even greater.
A new paper estimated that in 2012-2013 there were 5.77 million emergency room visits in England that were preceded by an inability to get a timely GP appointment - an increase of 11 percent (2.2 million attendances) between financial years 2008-2009 and 2012-2013.
...for every 100 attempts that resulted in a GP consultation there were 1.67 attempts that resulted in visiting emergency rooms. Although this ratio is small, the absolute effect when multiplied by the 345.6 million GP consultations that occurred in 2012-2013 provides a figure of 5.77 million emergency room visits that were preceded by an inability to get a suitable appointment. This is 26.5 per cent of the unplanned emergency room visits (i.e. those that are not follow up appointments at A&E such as for removal of stitches).
No matter how many times the real world comes knocking, these folks continue to be surprised when it shows up. Who could possibly have predicted that reducing the cost of a good or service while capping the price providers can charge for it would produce an increase in demand coupled with a decrease in supply (commonly known as a "shortage")?
It's almost as though some invisible force were at work here.
June 10, 2014
Mein Gott im Himmel - WHO COULD HAVE PREDICTED....
President Barack Obama is calling tens of thousands of illegal-immigrant children languishing in temporary U.S. holding pens an 'urgent humanitarian situation,' but Republicans are pointing the finger of blame squarely at the White House.
Obama instituted an immigration policy that the GOP says enticed tens of thousands of Central American children to cross America's southern border illegally without any parents to guide them.
More than 33,000 have been picked up in Texas alone since October.
The U.S. border patrol says its forces are overwhelmed, and the courts are bracing for a flood of immigration cases from children held in temporary detention facilities designed to handle a fraction of the numbers. Sanitation problems are beginning to rear their ugly heads.
Obama rolled out a controversial Deferred Action for Childhood Arrivals (DACA) program in 2012, allowing many illegal immigrants who came to the U.S. as minors to escape deportation for two years. The White House gave them another two-year window last week.
As a result, say some GOP leaders, America's system for handling illegal immigration has been strained to the breaking point and is attracting hundreds of new illegal-immigrant children every day.
...The Obama administration expects as many as 80,000 of these 'unaccompanied minors' to cross the border in 2014, according to the Christian Science Monitor.
That number is twelve times what it was in 2011, the year before Obama announced his deferred-action plan.
The administration now estimates the holding facilities where the youngsters are being held cost taxpayers $252 per child per day, far more than the cost of a hotel and more than the children could expect to earn in two weeks of hard work picking crops, work that many were slated to do.
Facing the question of whether to deport the minors or play a game of catch-and-release, the administration has set aside $2 million to pay for their lawyers.
If only there were a leader whose job it was to see that our laws are faithfully executed. Instead, we have a leader who is continually blindsided by the entirely predictable consequences of his reckless and foolish decisions.
Won't someone please step in and fix this urgent humanitarian crisis he created?
April 28, 2014
Mortgaging Tomorrow to Pay for Today
The WaPo begins a long article about how the middle class can barely make ends meet with the sad tale of a couple who make almost twice the median income, yet had no money put away to replace a car with over 200K miles on it. Replacing it with a used car (we're told) caused them not to be able to pay their electric bills:
The Johnsons both work, earning $90,000 between them, not a princely sum but one that places the couple squarely in the middle of household incomes for the Washington region. But for the Johnsons and many other American families, being middle class means living paycheck to paycheck.
The couple’s retirement savings are meager. The college fund? Nonexistent.
We're supposed to believe that this couple are living paycheck to paycheck because they don't make enough money. But as their tale unfolds, a disturbing pattern emerges: they repeatedly spend money on "wants" and defer spending on "needs":
One factor behind the financial squeeze is that the middle class’s expectations — a house, music and dance lessons for the kids, the latest in home entertainment — have stayed the same or increased even as costs have soared.
A while back, we wrote about how artificially cheap credit was crowding out household saving. Essentially, American families are deliberately choosing not to save, relying on loans to cover the growing gap between what they spend and what they earn. And contra the WaPo's misleading assertions, wages aren't really stagnant and the basic cost of living has actually gone down over time:
Many articles on household savings cite unemployment or stagnant wages as possible causes. But unemployment can't possibly account for three-fourths of households not putting money away against hard times. And the supposed stagnation of wages doesn't stand up well to critical scrutiny. As this article points out, the average wage over time hasn't risen for several reasons:
1. Benefits like health insurance, pension funds, and paid leave have grown to 31% of total compensation, and these benefits aren't included in the calculation.
2. Even when wages are adjusted for inflation, the same salary has far more buying power today than it did 40 years ago.
3. The entrance of women and immigrants into the job market caused rapid growth of low skill/low wage jobs at the bottom of the pay scale. These job pull the average wage down.
The reduction in the cost of living over time is stunning:According to the Bureau of Economic Analysis, spending by households on many of modern life's "basics"—food at home, automobiles, clothing and footwear, household furnishings and equipment, and housing and utilities—fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today.
More on the reduction in basic living expenses over time. A little farther in the article, another "struggling" couple are spending money they don't have on luxuries and neglecting the (now relatively cheaper in constant dollars) basics:
While they struggle to meet basic expenses, the Johnsons’ home is filled with the electronics that have become a standard part of middle-class life in the 21st century. For $90 a month, a satellite dish provides basic television service for their three flat-screen sets and for the WiFi connections Scott needs when he works from home. They have one laptop and three iPads, and each girl has a computer in her bedroom. The bill for four cellphones runs about $300 a month.
Like many American homeowners over the past several years, they got a break on the mortgage by refinancing to a lower interest rate, stretching the remaining payments from 14 years to 30. It cut the monthly payment almost in half, down to around $700 a month.
The money was immediately sucked up. Scott expects his salary at the hospital to be frozen because of Medicare cuts. And the couple keeps postponing maintenance on the family’s 30-year-old home.
The air conditioner stopped working four years ago. The dishwasher is busted, too. The roof is missing a few shingles and leaks in a heavy storm. Last month, Scott installed a hand-me-down cooktop given them by a friend who remodeled her kitchen.
The problem here isn't lack of income. It's poor money-handling skills and a screwed up sense of what's most important.
There has been growing evidence in recent years that increasing numbers of children are starting school without being fully toilet trained.
Experts say it is not just pupils from deprived backgrounds who are having problems but those who have working parents too busy to address the issue.
Meanwhile, in response to complaints that it's "too hard" to make student loan payments, our government has stepped in to make things easier.... with predictable results:
A new report by the Federal Reserve Bank of New York finds that as of the fourth quarter of 2012 only about 40% of student borrowers were paying down their loans. About 17% were delinquent, defined as 90 days past their due payment. Hard to believe, but this "measured delinquency rate" is higher than any other consumer debt product, even credit-card debt.
Yet it is only half of the "effective" delinquency rate. A whopping 14% of borrowers who were not officially delinquent had the same balance as the previous quarter and 30% saw their balances increase.
That's because borrowers who can't afford to pay down their loans can ask the government for a deferment or forbearance, which freezes their payments while interest continues to accrue. During a deferment, Uncle Sam pays the interest on subsidized loans. To qualify for either option, borrowers merely need to claim an economic hardship or return to school. Borrowers can postpone payments indefinitely by enrolling in college half-time—during which time they can take out even more loans. Borrowers can use the loans to pay for incidental living expenses.
Heavily indebted borrowers can also enroll in an income-based repayment plan, which caps monthly payments at 10% of their discretionary income—about $150 per month for someone earning $30,000 annually. The government then forgives the entire outstanding loan after 10 years of making these minimum payments while working for a nonprofit or the government. You have to wait 20 years if you work in the profit-making economy.
But as the New York Fed report notes, borrowers who participate in income-based repayment plans may "make only small payments, which are often insufficient to cover the accumulated interest." Thus their loan balances grow.
Student loan debt nearly tripled to $966 billion in 2012 from $364 billion in 2004, but not merely because more students are going to school and taking out bigger loans. The Fed report's major finding is that government programs intended to prevent defaults are actually causing many borrowers to rack up more debt. Yet these borrowers aren't included in the government's official default or delinquency rates.
Eliminating painful consequences doesn't help people do a better job of managing risk. It entices them into ignoring risk.
Income inequality isn't the defining problem of our age. That honor belongs to moral hazard.
April 23, 2014
Lake Wobegone the IRS, Everyone Is Above Average
And they all deserve performance awards. Even the ones who break the rules:
"More than 2,800 Internal Revenue Service employees who recently had been disciplined received performance bonuses totaling more than $2.8 million between Oct. 1, 2010 and Dec. 31, 2012," reports the Journal.
No, the group that targeted conservatives didn't receive bonuses after the scandal broke last year. But the IRS sets a pretty low bar for employees to receive awards. About two-thirds of the agency's 98,000 workers received bonuses for fiscal 2012.
As for those who broke IRS rules and still got paid, the Journal reports: "The misconduct ranged from failure to pay taxes to misuse of government travel cards, violation of official-conduct standards and fraud, according to the report by the Treasury Inspector General for Tax Administration. The discipline included written reprimands, suspensions and even removal. The oversight agency said some of the conduct issues might have occurred after an employee earned a bonus."
The internal auditor's report notes with wry understatement that "providing awards to employees with conduct issues, especially the failure to pay taxes owed to the federal government, appears to be in conflict with the IRS's charge of ensuring the integrity of the system of tax administration."
Adds the Journal: "The report identified nearly 1,200 employees with tax issues or official-conduct violations during the period who received a total of $1.1 million in monetary bonuses, and about 11,000 hours of time off. One employee who was suspended for 10 days in September 2011 received a $1,300 performance award in August 2012, the report said."
Some people might be tempted to observe that what you reward, you get more of. We're guessing such observations would not be rewarded at the branch of government charged with making sure the rest of us follow the rules.
Update: the Washington Post chimes in:
A report from the Treasury Inspector General for Tax Administration shows that between Oct. 1, 2010, and Dec. 31, 2012, the IRS paid $2.8 million in bonuses to employees cited in the past year for such things as drug use, making violent threats, fraudulently claiming unemployment benefits, misusing government credit cards and — get this — failing to pay their taxes.
The report said more than 1,100 employees who failed to pay their taxes received discretionary awards of more than $1 million in cash bonuses and more than 10,000 hours in extra paid vacation.
At least five employees received performance awards after being disciplined for intentionally under-reporting their tax liabilities for multiples [sic] years, paying taxes late and under-reporting income.
Like many companies and government agencies, the IRS sweetens the deal for its employees by giving bonuses based on performance. But at the IRS, breaking the federal tax laws you were hired to enforce and running afoul of other agency rules aren’t considered relevant to performance-based awards.
You have to do something really bad before the IRS will take conduct into account, bad enough to be suspended for 14 days or more. Even then, conduct is only deemed relevant to awards of permanent pay increases, not for bonuses or extra vacation time.
None of this apparently violated federal guidelines or any internal policies related to rewarding employees.
In fact, the agency cut performance-based payments beyond what was required by a 2011 federal policy instructing agencies to limit incentive payments to 2010 levels. Everyone who got an award received a performance rating of “fully successful” as required by federal guidelines.
The IRS’s contract with the National Treasury Employees Union bars the agency from considering bad conduct when making performance-based awards. As for non-union employees, federal guidelines are silent on the subject.
Public unions are bleeding the country dry. Even FDR didn't think they were a good idea.