Why Don't Republicans talk more about the new Medicare tax?

By Luke Freedman in Seattle, Washington

8 June 2013

If there's two things the current Republican Party hates its taxes and Obamacare. As such, ACA taxes would seem to provoke a unique white-hot anger amongst the GOP faithful. And that's been the case when it comes to the excise tax on medial equipment, the Supreme Court's reclassification of the individual mandate as a tax, and semeingly every other regulation or fee associated with the law.  Which makes it all the more surprising that  the party hasn't latched onto what would seem an obvious target for criticism; the laws new taxes on high-income earners. 

It's by far the biggest revenue raisers for the ACA and its right in plain sight.  A .9% Medicare tax on individual income over $200,000 ($250,000 for joint filers) and a 3.8% tax on investment income above the same threshold. These aren't gigantic increases but they aren't insignificant either, especially considering the heated debate in 2012  over extending the Bush tax cuts for income over $200,000. Yet I hardly ever hear Republicans call attention to these provisions of the bill. Is it because complaining about taxes on the wealthy will make them less sympathetic? Maybe, but the folly of punishing the rich has been a big part of the GOP strategy in  recent years.

My guess is this. Republicans love to argue that the ACA will end up hurting the people it intends to help. And if health insurance companies can't convince young people to sign up for coverage, creating a death spiral of ever-rising premiums, they might be correct.  But if the law works as designed it's a pretty good deal for lower and middle class Americans. They're getting new benefits primarily financed by a wealth transfer from the rich and healthy.

People like the specific provisions of the bill, community rating, subsidies, children staying on their parents plan until they are 26 etc. And so perhaps Republicans are fearful that  highlighting the new Medicare taxes will simply highlight who's actually footing the bill for these new health insurance rules that people are in favour of. It's harder to talk about how the ACA is a bad deal for the middle class when you're also emphasizing the burden it places on those making over $200,000. 

As every survey shows people hate taxes but like most of the things the government spends money on. And in this case, it's not simply an abstract argument about how much Uncle Sam should take. The taxes are explicitly tied to a new set of benefits; thus making the usual anti-tax talking point a harder sell. So that's my theory. But I'd love to hear what you have to say!

 

 

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Dole on the filibuster

By Luke Freedman in Seattle, Washington

5 June 2013

Bob Dole delivered some pointed criticisms of his Republican Party and its current obstructionism in an interview with Fox News' Chris Wallace last week. "No doubt about it," the former Senate Majority Leader replied when asked whether the filibuster was being abused; "there are some cases we can probably justify it, but not many." Things have changed in the time since Dole left office. But he might want to consider his own role in laying the groundwork for this evolution. From Alan Erenhalt's 1998 New York Times op-ed:

 It was on Election Night 1992, not very far into the evening, that the Senate minority leader, Bob Dole, hinted at the way his party planned to conduct itself in the months ahead: it would filibuster any significant legislation the new Democratic President proposed, forcing him to obtain 60 votes for Senate passage.

This was a form of scorched-earth partisan warfare unprecedented in modern political life. Congress is supposed to operate by majority vote. It is true that the filibuster has a long and disreputable Senate history and that, over the years, it has been used more by Democrats than by Republicans. But only after 1992 did it become the centerpiece of opposition conduct toward an elected President. What the Republicans did in the Senate in 1993 amounted to an unreported constitutional usurpation. It should have been denounced as such at the time, but it wasn't. The punditocracy chose not to notice.

In any case, it worked. Little that the President proposed became law in the two years that he operated with Democratic majorities. There was no health care reform, no economic stimulus package. On the merits, that is just as well. But the procedural consequences turned out to be grave: Congressional Republicans were tempted by success into even more dangerous constitutional mischief.

 

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A more nuanced look at STEM worker reforms

By Luke Freedman in Seattle, Washington

4 June 2013

Shortly before the November election Sean Gallagher and I co-wrote a Conversation piece on proposed changes to US immigration law for STEM (science, technology, engineering and mathematics) workers. We argued that while reforms could hurt the Australian education sector, looser immigration laws were low-hanging fruit for America.

Whatever the outcome of the election, it seems likely that comprehensive immigration reform is on the agenda in the US.

According to the Romney campaign website: “every foreign student who obtains an advanced degree in math, science, or engineering at a US university should be granted permanent residency". These changes, a Romney campaign report explains, would offer graduates “the certainty required to start businesses and drive American innovation".

While Obama has made no similar policy pronouncements during this campaign, his intentions are clear. In January this year, the president favoured “stapling greencards to the diplomas of certain foreign-born graduates in science, technology, engineering and math fields”, as per a US federal government report.

Whatever the outcome of the election, it seems likely that comprehensive immigration reform is on the agenda in the US.

This would be a smart win-win for America. The US would attract talented foreign students to its universities and encourage those already in the country to remain after graduation. These changes could be especially beneficial in helping create the advanced manufacturing jobs both candidates have talked so much about on the hustings.

Bringing in talented science and math graduates is a key foundational step in spurring the innovation that leads to job growth and wealth creation.

However, recent research indicates the issue isn't quite the no-brainer we made it seem. The businesses community has long complained about the supposed shortage of high-skilled workers in the U.S. labor market; a problem they say necessitates importing more overseas STEM workers.

It's an assumption that's gone more or less unchallenged in the U.S. policy debate, but a new reportby the left-leaning Economic Policy Institute blows a pretty big hole in the theory. If there is a significant shortage of STEM workers in the U.S. economy, the report explains, then Economics 101 indicates that worker's wages should be increasing dramatically. Instead, salaries in these sectors have remained fairly flat.

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The real reason companies want more overseas workers, critics argue, is to provide a source of cheap labor that will drive down the salaries of American workers.

The EPI paper has important implications for this policy debate, but I still think what Sean and I wrote stands up reasonably well.

We never used the "worker shortage" myth as justification for immigration, instead pointing out that these laws would have plenty of other benefits. For instance, high-skilled workers will start businesses, pay taxes, drive down prices, and benefit workers in complementary sectors. 

It's also worth noting that while the EPI report was responding mainly to proposals for more non-immigrant visas (H1-B's), we were writing about greencards for graduates of American universities. A proposal that in my opinion makes more economic sense. Businesses tend to like H1-B visas because the employer is tied to their company, and it can be difficult if not  impossible  to change jobs without losing the visa. As such, these workers have signficantly less bargaining power and their presene in the labor market is more likely to exert downard pressure on the wages of Americans.

All things being equal, the free movement of labor is a good thing. But I also realise that immigration laws and free-trade agreements can be exploited by members of the powerful class, allowing them  to benefit from cheap labor while protecting their own interests. The proper response to the EPI paper should not be to turn against immigration reform, but rather ensure that policies are drafted with the interest of the majority of Americans in mind, and not simply the business class.

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Actually getting real about racism

By Luke Freedman in Seattle, Washington

31 May 2013

The reason “casual-Eddie-McGuire-type-racism persists in Australia,” Sam de Brito explains in his SMH column “Getting real about racism,” is because there are no consequences for this kind of behavior.

By consequences de Brito means two things. First there aren’t sufficient punishments (i.e. getting fired), and second, you don’t run the risk of getting the crap getting beaten out of you for saying something offensive.

“This is not to say the standard result for using racial slurs in a country like the US is death - but baby, you pull an "ape" or "nigger" line out on the subway of your average US city, you're odds-on to get a beating. You say it to the wrong person and you're gonna get shot or stabbed or stomped into a cranial pizza.”

…..

“If NSW State of Origin NRL assistant coach Andrew Johns had called an opponent on another team "a black c---" in American sport, he'd first have been knocked out by the closest black player and may now, possibly, be coaching some high school team in Alabama while nursing a prescription drug addiction.”

“If a 13-year-old white girl called LeBron James an "ape" at an NBA game, not only she, but her entire entourage, would have had to have been escorted from the arena FOR THEIR OWN SAFETY. I guarantee there would have been a 13-year-old black girl so in her face, whitey could sketch her from memory.” 

It’s a well-intentioned piece. And there’s plenty to agree with. But it’s also frustrating that an article about racism ends up perpetuating stereotypes of its own. Because de Brito’s imagined America, in which racism is nearly guaranteed to provoke African Americans into a violent rage, is very different than the one I’ve grown up in.

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One of my more vivid childhood memories comes from when I was ten or so and taking the ferry back home from Seattle. A kid, probably fourteen or fifteen, wandered by a group of black teenagers and muttered something about “worthless lazy gangstas.”  

He didn’t get beaten, or stabbed, or knocked out, or stomped into a cranial pizza. Instead the kids turned around, shared a couple of disbelieving looks, then started laughing and returned to the arcade game they were playing.

When I’ve talked to African American friends about their experiences with racism, they mention the humiliation, frustration, isolation and anger it can provoke. What I haven’t heard are these feelings culminating in an irrepressible desire to curb stomp the bastard right on the spot.

Which of course isn’t surprising. When somebody makes a hurtful comment, even something as deeply offensive as a racial slur, most people aren’t going to respond with violence. It’s a point so obvious that it's usually taken for granted.  And if this was a column about bigotry towards Catholics, or Asians, or gays and lesbians de Brito would have almost certainly done just that. But when we’re talking about African Americans, the same basic assumption doesn’t seem to apply. 

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Josh Barro

By Luke Freedman in Seattle, Washington

24 May 2013

In the June issue of The Atlantic Jonathan Chait profiles Republican heterodox and apparent coconut horde Josh Barro. There have been plenty of conservative critics of the Republican Party. But what makes Barro unique, according to Chait, is his willingness to acknowledge the enormous gulf between the GOP and his own policy preferences.

Writers like David Brooks, Ross Douthat, Reihan Salam, and Ramesh Ponnuru have made versions of this case for several years. In recent months, owing to the shock of Mitt Romney’s defeat, more-orthodox figures like James Pethokoukis and Michael Gerson have joined them. But all have delivered their critiques with a velvet touch that underplays the scale of the change they advocate. Of course Reagan’s canon—taxes bad, spending bad, markets good—addressed the problems of 1980, they gently submit. But new problems have replaced them, like too-big-to-fail banks and middle-class wage stagnation, thus demanding new, middle-class-friendly solutions. The reformers offer positive alternatives and cheerfully tout any signs, however faint, of their imminent adoption. What they do not do is face up to the stark contrast between their imagined Republican Party and the real thing.

There's a lot of truth here. But the differences between Barro and the other conservatives Chait mentions is not just one of means but ends as well. And what sets Barro apart for me is captured in a column he wrote shortly after the November election. I just can't see Brooks or Ponnuru writing something like this.

But the big problem for conservatives is that these policies cannot fully substitute for progressive fiscal policy. The dirty secret about the last 30 years' rise in pre-tax income inequality is that we probably can't reverse it. Instead, we will have to rely on policies that ameliorate it on an after-tax basis -- that is, the dreaded redistribution of income, or "spreading the wealth around"...

Eventually, if conservatives want to keep putting their stamp on American economic policy, they will have to give in to that reality that government must become more redistributive. Otherwise, the Republican Party will be left with an economic appeal to an affluent minority of the population and an ethnic appeal to a shrinking older white-voter base -- and that will win them fewer and fewer elections.

 

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The Benghazi Mistakes

By Luke Freedman in Seattle, Washington

18 May 2013

Sharyl Attkisson of CBS has an interesting piece on the acknowledged mistakes of government officials in the wake of the Benghazi attacks. It's worth reading in its entirety, but here's the cliff notes:

The list of mea culpas by Obama administration officials involved in the Benghazi response and aftermath include: standing down the counterterrorism Foreign Emergency Support Team, failing to convene the Counterterrorism Security Group, failing to release the disputed Benghazi "talking points" when Congress asked for them, and using the word "spontaneous" while avoiding the word "terrorism."

From where I'm standing the failure to immediately send in the Foreign Emergency Support Team "FEST" is the most egregious error. Ultimately, this wouldn't have made a difference as the attacks were over by the time FEST could have arrived. But as the article points out, no one knew this at the time, and this type of results-oriented thinking shouldn't absolve the mistake.

Overall, the piece highlights the great divide between the legitimate questions about the Benghazi investigation and the spectacle that Congressional Republicans insisted on turning it into. There were certainly mistakes made by the administration, but the acute politicization of the investigation ended up distracting from these worthwhile inquiries. I get how this works, and either political party will take advantage of a story if it can be used for political gain. But I just wish we'd gone about this whole thing a little more like Attkisson does and a little less like how it actually ended up transpiring.

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How the Obama administration misplayed its hand

By Luke Freedman in Seattle, Washington

15 May 2013

No this isn't about the controversies that emerged this week. I'm pretty sure you can find an article or two about those somewhere else. Rather the headline refers to the sequester, which has become something of a pet project of mine in recent months.

I'm hesitant to write these sort of pieces. The blogosphere is already saturated with green lantern critiques of the presidency. If only Obama had twisted a few more arms and kissed a few babies we'd have gun control and a bipartisan debt deal! And I'm amused at the ease with which journalists assume they understand the art of political deal-making better than the people who do it for a living. Caveats aside though, I'm comfortable calling the adminstratration's sequester strategy a mess.

The merit of the Obama administration's decision to suggest the sequester - a bargaining chip to get Republicans to raise the debt ceiling back in 2011 - always hinged on whether they could replace it before it caused a serious drag on the economy.

But not only did Democrats underestimate how easy this would be, they repeatedly refused to exert any political capital to try and do so. Given the devastating effects of the immediate jobs crisis, this was a serious error.

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The sequester was something of an afterthought during the fiscal cliff negotiations. Once it became clear that no large-scale budget deal was going to be reached, Democrats appeared eager to reach a narrow deal on taxes and then move on to the next issue. 

But decoupling the tax increases from the automatic spending cuts effectively conceded that the sequester would go into effect. Sure, a lot of Republicans were worried about the $500 billion in defence cuts, but it should be clear to anyone who follow politics that the GOP's anti-tax orthodoxy has superseded its commitment to military spending. Once tax increases were off the table there was pretty much no chance of getting Republicans to sign off on a new bill to avert the sequester.

The strategy was puzzling at the time and dosen't look any better in retrospect.

Plan B for the Obama administration was to highlight the painful effects of the budget cuts, and count on outside pressure from interest groups and citizens to force Republicans back to the negotiating table.

This was always going to be an uphill climb given that the sequester is more of a slow-burn than an immediate shock. But, if this strategy were to work, it required holding firm and refusing to rearrange the budget cuts to make them more politically palatable.

Democrats though had no interest in taking this sort of political stand. The week after FAA sequester cuts began causing extended flight delays, the President signed a bipartisan bill ending the air traffic controller furloughs. Putting aside the moral question of whether it's appropriate to prioritize air travel over earl childhood education programs; it's clear that making these fixes greatly reduced the chances of passing a sequester replacement. Ezra Klein put it well...

In effect, what Democrats said...was that in any case where the political pain caused by sequestration becomes unbearable, they will agree to cancel that particular piece of the bill while leaving the rest of the law untouched. The result is that sequestration is no longer particularly politically threatening, but it’s even more unbalanced: Cuts to programs used by the politically powerful will be addressed, but cuts to programs that affects the politically powerless will persist. It’s worth saying this clearly: The pain of sequestration will be concentrated on those who lack political power.

One can understand, if not agree with, the adminstration's logic in each instance. The Obama camp proposed the cuts during a hostile political climate in which the country faced the threat of default. And during the fiscal cliff negotiations and FAA furloughs, there was outside pressure to get some type of deal done.

But taken together it becomes apparent that Democrats had no coherent strategy for dealing with the sequester; no sense of urgency to find a permanent solution. Instead, they seemed content to issue tepid warnings about the dangers of immediate budget cuts, and then back down when faced with any sort of pushback.

In general, the administration has done a pretty good job playing defence against potential austerity measures that would hinder the recovery. It's surprising to see them look so flat-footed on this issue.

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The South Carolina special election is not that important

By Luke Freedman in Seattle, Washington

6 May 2013

Hi, I'm Mark. But enough about me, what are your thoughts on Obamacare?

It's easy to understand why Tuesday's special election in South Carolina's 1st Congressional District is getting so much press. The Democratic candidate, Elizabeth Colbert Busch, is the sister of comedian Stephen Colbert. The Republican, Mark Sanford, resigned as governor of the state in 2009 after disappearing for six days to meet his mistress in Argentina.

It's an entertaining matchup. I get it. But at the risk of being a buzkill, the broader political significance of the race is close to zilch.

There are times when special elections have big implications for pending legislation. Think of Scott Brown's victory in the Massachussett's Senate race, denying Democrats the filibuster-proof majority seemingly needed to pass healthcare reform.

But, the circumstances here are quite different. The only major legislative item on the agenda is immigration.* And while its fate is still very much in the air, one vote out of 435 isn't going to make the difference.

Even if Colbert Busch wins, it will be an uphill battle to keep her seat past 2014 in such a conservative district. The Cook Partisan Voting Index, which measures how heavily a congressional district leans towards one political party, rates SC-1 as Republican+11.  By my count, only 2 other districts with a larger political lean are represented by a politician from the opposing party.

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Incumbency can partially compensate for these disadvantages. For instance, House Democrat Jim Matheson has used his familiarity with voters and some sort of wizardry to remain in office in Utah since 2001.* But that's far from the norm. And Colbert Busch should start the 2014 election as the decided underdog once she's facing an opponent who won't be in court two days after the election for supposedly trespassing at his ex-wife's house.

Which brings us to what this election is really about: will Republican voters prioritize their political beliefs over their personal feelings about Sanford? Right now it's up in the air. A Sunday Public Policy Polling poll had the former governor ahead by one point despite a net favourability rating 17 points lower than his opponent.* 

In short, the special election isn't a bellwether of the political landscape heading into 2014. The reason this race is so close has nothing to do with national politics or current trends; but the simple fact that the Republican candidate seems like a borderline crazy person. 

Colbert Busch recognizes this, and is doing everything she can to distance herself from national Democrats. While campaigning on Sunday she referred to the Affordable Care Act as "so problematic" and explained that she had "a respectful disagreement with President Obama's budget." It's probably a good strategy. Nancy Pelosi has a 24% approval rating in the district with Obama fairing only slightly better at 39%. 

An email I got the other day from the Democratic Congressional Committee exclaimed that a victory on Tuesday would be "monumental" and "the heaviest blow to the Republican Party since President Obama's re-election." It's a good way to fire up donors, but describing the outcome of a race which national Republicans haven't spent money on in weeks as "monumental" is full-blown hyperbole.

*Edit: I should have mentioned gun control as well. It's possible that some version of Manchin-Toomey will reemerge before the midterms.

*This past election, Republicans tried to kick Matheson out of office once and for all by redistricting him into Utha's newly created ultra-conservative 4th district. Nevertheless, his R+16 constituents decided to send him back for another term by a thin 768 vote margin.

*It's worth pointing out that PPP's poll two weeks ago had Colbert Busch up by 9 points. Given the trendl I'd make Sanford the favourite to claim the open seat.

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The terrible cost of long-term unemployment

By Luke Freedman in Seattle, Washington

25 April 2013

Megan McArdle is spot on when she calls long-term unemployment "the most important issue facing America today." Currently 4.7 million workers have been without a job for at least six months. And that figure is unlikely to get much better anytime soon.

Being out of work for more than half a year is a significant black mark on a resume. In fact, whether you've had a job in the past six months is more important in determining whether you get a callback from an employer than your industry experience or how often you've changed jobs.

The libertarian-leaning McArdle says she's skeptical of stimulus but ends up proposing some "alternative" solutions that sound an awful lot like the response she claims to disavow.

Luckily, I think there are some ways to rehabilitate that labor. We could, for example, replace extended unemployment benefits with a WPA-style jobs program. We could implement a federal hiring preference for the long-term unemployed, akin to the benefit that veterans get, paired with a very lengthy probationary period in case some of the long-term unemployed are unemployed because they're lazy or useless. We could offer to suspend payroll taxes for those who rehire the long-term unemployed: one or two months for every month of unemployment. We could offer people in areas with very high unemployment a mobility grant to move elsewhere.

These things would be expensive. But they're not more expensive than having fellow citizens permanently drop out of the labor force, which costs us in three ways: first, because they are not producing anything, which makes all of us a little bit poorer; second, because they may well end up finding their way onto government benefits, such as Social Security Disability; and third, because those folks are our friends and family, and seeing them suffer makes us suffer too.

Anyone who reads this blog knows there's additional policies I'd advocate for; but given the current state of politics in Washington it would seem incredibly petty to spend much time quibbling with her list or defintion of stimilus. McArdle is clearly serious about addressing this economic disaster. Congress is not. Only four of the nineteen members of the Joint Economic Committee could be bothered to show up for a Wednesday hearing on long-term unemployment. It's a tragedy to see so many Americans suffering, and an outrage that the government is so disconnected from the problem.

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The abstract then becomes the reality

By Luke Freedman in Seattle, Washington

23 April 2013

The budget sequester has fallen out of the news since it went into effect on March 1st but that may be about to change. In order to comply with the sequester's across-the-board cuts in discretionary spending, the Federal Aviation Administration furloughed 10 per cent of federal air traffic controllers. Monday was the first weekday these cuts were in place and the effects were felt immediately. Flights out of New York quickly fell behind schedule, producing a "ripple effect" that caused travellers across the country to face extended delays. 

Republicans were quick to blame the Obama administration, saying that the President needed to use the flexibility the GOP offered him to divert the cuts to other areas. Obama "should focus more on making responsible spending cuts" the Republican Governors Association tweeted "& less on reckless political stunts." But then what programs or agencies should bear the extra burden? Airline travel is vitally important, but so too is food safety, early childhood education, and cancer treatments for Medicare recipients: all programs that have been cut by the sequester.  

None of this should be at all surprising. When most people think about the $16 trillion debt they likely imagine woefully inefficient government bureaucracies frivolously wasting hard-earned tax dollars.

In actuality, discretionary spending is at its lowest levels relative to GDP since the Eisenhower administration. Rather, the massive deficits we've seen in recent years have been caused almost entirely by decreased revenues and automatic welfare spending triggered by the global financial crisis. And the imposing budget challenges the country faces down the road come not from the FAA but rather increased entitlement spending stemming from rising health-care costs and an aging population. 

In short, the sequester does almost nothing to change our long-term budget forecast while creating entirely unnecessary collateral damage. The Center on Budget and Policy Priorities estimates that  it will cost a million jobs over the next two years. 

As such, perhaps we should see the flight delays as a blessing in disguise. It's never fun waiting around at the airport, but if the furloughs create some backlash that eventually leads to the sequester's repeal or replacement, it would be well worth the hassle.

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