The GOP’s Phony Outrage on Subsidies

If Obamacare were going to be as apocalyptic as the GOP claims (The whole country will be working part-time!), they’d just sit back and wait for that disaster and savor their sweep of both Houses of Congress in 2014 and the White House in 2016.

But, really, they are afraid that people are going to like Obamacare, especially with the subsidies for lower and middle-income families.  They are outraged about these “government subsidies.”

But what do they think the government is already doing with health care?  Health care subsidies are the biggest tax expenditure in the tax code, costing the government hundreds of billions of dollars each year.

If you get health insurance from your employer, you don’t pay taxes on the value of that benefit, it’s not counted as part of your income.  Your employer, in turn, gets to deduct all those health insurance premiums as a business expense.

So our current employer-based health system is already heavily subsidized by the federal government.  And by the way, one of the reasons wages have stagnated is the growing cost of health insurance.  Your employer is paying you more, he’s just doing it by paying those increased premiums for you.

So for the GOP to decry that the government is suddenly subsidizing health insurance is specious.  It’s been going on for decades. Big time.

The GOP claims they want consumer-based health care.  Well, this is it.  Every time someone buys insurance on the new exchanges from a private insurance company, that’s consumer-based health care.

 

Beware the Robots and Robber Barons

While Washington obsesses about what high-thirties number will be our top tax rate come January 1, I worry about what jobs will be available come the next few decades and what incomes they will provide.  Our American prescription for success — get more education than your parents — may not work anymore.

From “Robots And Robber Barons,” Paul Krugman, NYT:

[T]he wage gap between workers with a college education and those without, which grew a lot in the 1980s and early 1990s, hasn’t changed much since then.  Indeed, recent college graduates had stagnant incomes even before the financial crisis struck.  Increasingly, profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today’s economy.

“[T[here are two plausible explanations, both of which could be true to some extent.  One is that technology has taken a turn that places labor at a disadvantage; the other is that we’re looking at the effects of a sharp increase in monopoly power.  Think of these two stories as emphasizing robots on one side, robber barons on the other.

[M]any of the jobs being displaced [by robots] are high-skill and high-wage; the downside of technology isn’t limited to menial workers.

What about robber barons? …  [I]ncreasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.”  Emphasis added.

We may be heading for a jobs cliff much scarier than the fiscal cliff. 

Fifty Shades of Sado-Monetarism

From “Another Bank Bailout,” Paul Krugman, NYT:

“Most notably, last week the European Central Bank declined to cut interest rates. This decision was widely expected, but that shouldn’t blind us to the fact that it was deeply bizarre. Unemployment in the euro area has soared, and all indications are that the Continent is entering a new recession. Meanwhile, inflation is slowing, and market expectations of future inflation have plunged. By any of the usual rules of monetary policy, the situation calls for aggressive rate cuts. But the central bank won’t move.

“And that doesn’t even take into account the growing risk of a euro crackup. For years Spain and other troubled European nations have been told that they can only recover through a combination of fiscal austerity and ‘internal devaluation,’ which basically means cutting wages. It’s now completely clear that this strategy can’t work unless there is strong growth and, yes, a moderate amount of inflation in the European ‘core,’ mainly Germany — which supplies an extra reason to keep interest rates low and print lots of money. But the central bank won’t move.

“Put all of this together and you get a picture of a European policy elite always ready to spring into action to defend the banks, but otherwise completely unwilling to admit that its policies are failing the people the economy is supposed to serve.

“Still, are we much better? America’s near-term outlook isn’t quite as dire as Europe’s, but the Federal Reserve’s own forecasts predict low inflation and very high unemployment for years to come — precisely the conditions under which the Fed should be leaping into action to boost the economy. But the Fed won’t move.

“What explains this trans-Atlantic paralysis in the face of an ongoing human and economic disaster? Politics is surely part of it — whatever they may say, Fed officials are clearly intimidated by warnings that any expansionary policy will be seen as coming to the rescue of President Obama. So, too, is a mentality that sees economic pain as somehow redeeming, a mentality that a British journalist once dubbed ‘sado-monetarism.’

“Whatever the deep roots of this paralysis, it’s becoming increasingly clear that it will take utter catastrophe to get any real policy action that goes beyond bank bailouts. But don’t despair: at the rate things are going, especially in Europe, utter catastrophe may be just around the corner.”  Emphasis added.

And that utter catastrophe may put Mitt in the White House.  Catastrophe squared!

Our Two Economies

When I was growing up, the stock market pretty much tracked the job market — chances are if the Dow was high, unemployment was low.  Productivity gains translated into higher wages.  Wall Street and Main Street prospered together.  Since the Great Meltdown, we’ve seen the stock market come back, while unemployment and underemployment have remained high, and productivity gains go to profits, not wages.  I believe this hurts Mitt’s chances for election.

Americans don’t doubt that Mitt is amazing at making money.  We know he’d be good for corporate profits and the stock market.  Where we have less confidence is that he’d be good for getting us or our brother or neighbor a job.

Back in 2004, in the first post-9/11 presidential election, Bush defeated Kerry by convincing us that Kerry wasn’t ruthless enough to deal with the terrorists. That’s what the Swift-Boating was all about, casting doubt on the toughness of someone who’d actually served in combat, unlike Bush himself.

In this election, Obama will defeat Mitt by convincing us that Mitt, based on his Bain record, is too ruthless to deal with the Main Street side of our economy, as opposed to the Wall Street side.  Mitt identifies with the bottom line, not the unemployment line.  If 2004 called for toughness abroad, 2012 calls for some tenderness at home, a trait we don’t associate with Mitt.

Strong corporate profits, a high Dow Jones no longer mean the jobs are “trickling down” to us.  There’s definitely a trickle, but it’s just the one percent peeing on your leg.