I received quite a bit of feedback from last week’s post about HSAs. I also had my first person post on my blog – FreedomistheSolution.blogspot.com. In this post I have included a list of concerns by Craig Williams of Bartlesville, OK.
1) Who puts the money in the HSA? The employer more than likely if he is not providing traditional insurance and can now get a tax reduction for funding the HSA.
This is correct. Under my proposal HSA deposits would still be tax deductible so the employer would still have an incentive to fund them. Premiums would make up a much smaller amount of the costs so the employer does not need to control premiums costs as much by interfering. I still support an employer sponsored high deductible health care plans.
However, when you left that job you would be able to take all of your HSA funds with you. Let’s say you were able to save up $4,000 in your HSA during 8 years you worked for one firm, then they let you go. You could then buy a private $4,000 deductible plan, which should be fairly inexpensive, and you’ll be completely covered.
2) Who is affected the most by the one time funding? The catastrophic illness recipient. Their HSA money is quickly consumed and they are left with a huge deductible and co-pay.
I don't see the HSA as being a one time funding. I would support legislation that encourages monthly deposits (in place of monthly premiums).
This week, I e-mailed a gentleman who works as a Health Plan consultant for a national firm asking him to confirm some points of a presentation he gave while I worked at the same firm. If he ever e-mails me back then I will let you know if he confirmed what I recall from his presentation.
He said that he was working with a company that was considering dropping their HMO style insurance and asked for alternatives. What he was able to tell them was that the incentives under an HSA were so much better that the company could offer a health plan with a $1,000 deductible and deposit $1,000 in a corresponding HSA for no additional costs over their current HMO expenses. What that means is that the employee would not have any out of pocket medical expenses.
3) What happens to all the left over money? If they never use much of their HSA savings, who eventually gets that money? The government is the likely recipient as with the FSA left over funds today.
Let me first clarify first that left over FSA funds actually go to the employer, not to the government. Any money left over at the end of the year would roll over to the next. Younger people who don't spend much on health care would often be able to build up a significant account balance so that insurance becomes less and less necessary. I would also support allowing transfers into a retirement account once the balance reached a certain level (say $25,000). I would also support allowing people to make a full withdrawal at age 65.
4) A number of employers fully fund High Deductible insurance premiums already today. Many employees pay a premium to have the more traditional insurance above the portion their employer pays.
The existence of PPOs is not only a result of the tax incentives given to corporations. There is a market for PPOs outside of employer plans. If a person chooses to take on additional insurance, that is their choice. Let me be clear, I do not support banning HMOs and PPOs, only the tax incentives that encourage them.
5) High deductible insurance only helps the non-employer paid insurance workers by having cheaper premiums. They must still fund their own HSA out of pocket. They still run the risk of having a large debt if they have a catastrophic illness.
It is true that HSAs aren't the best plan for every person in every circumstance. I’ve read a good amount about the subject and brainstorm from time to time, but I haven’t figured out a perfect plan for every person. As soon as I figure out the perfect plan for health care please write your checks to “Friends of Brian Shelley for President”
6) Our Aetna PPO severely limits the price that a doctor, hospital, or lab can charge for services. Many times I have seen reductions of as much as 90%. Which means my employer as well as me saves money, because my company is self-insured and only uses Aetna to administer the policy.
I am not 100% familiar with how organizations administer group discounts, but I imagine that many doctors agree to them so that they get more patients. I don't see a logical reason why group discounts couldn't be coordinated through an employer after the switch to HSAs.
I probably haven’t answered every question or concern, so don’t shy away from putting in your two cents. Our health care system is very complex and coming up with a short and sweet answer is not very likely. I can see now why this why Bush had a hard time getting people excited about HSAs. The principles that I am trying to stick to are slowing the growth of health care costs and expanding individual control and freedom over personal health care protections.
Monday, August 27, 2007
Thursday, August 23, 2007
More Health Care Solutions
Today, the vast majority of Americans with health insurance receive it through their employer. The employer typically pays a large portion and the employee pays the rest in premium. The reason why the employer offers health insurance is that premium payments are not taxed, meaning the company can offer a slightly more generous compensation package than with just salary alone. Most companies offer either HMO or PPO coverage.
An HMO requires you to be part of a network of medical providers, and typically requires a referral before seeing a specialist. Doctor visits cost the employee a co-pay (normally $5 to $20). Hospital visits also charge a co-pay ($100 is common). Beyond the co-pay, there is a very high dollar maximum for charges in a year. However, the company controls costs by limiting services available and often limits doctors on the care they can give you.
A PPO encourages you to be part of a network by offering discounts. A PPO does not typically require a referral before seeing a specialist. An employee must incur enough medical cost to meet the deductible (usually a few hundred dollars) before the insurance company begins to cover costs. After meeting the deductible, the insurance company will typically pay between 70 and 90% of the medical expenses, up to an annual maximum, after which they pay 100%.
Imagine if you will, that your local grocery store offered families a flat $100/week fee for groceries and then $5 per visit, and the family could pick whatever they wanted. What do you think would happen? People would take home more groceries than normal and they would choose the highest quality food in the store. I personally would die of a coronary after 50 straight days of eating my body weight in meat and Blue Bell ice cream. Few would exercise self-control about the kind of foods and the amount. Why get one Hershey’s bar when you could get three Godiva ones? Why not buy the free-range-slept-on-a-satin-pillow-with-daily-massage-and-yoga-classes eggs that cost $25 a dozen? The extra cost to the family to pick up a few more items would be zero, but it would still cost the grocer. The store would quickly go out of business.
This scenario is called “Income Smoothing” and it creates terrible incentives. Income smoothing is exchanging a random stream of expenses for a smooth and level one, which is exactly what an HMO does. An HMO does not actually meet the technical definition of insurance. Insurance is a financial arrangement to mitigate the risk of an unforeseen event, whereas an HMO covers all medical events expected and unexpected. There are a few special arrangements such as futures and swaptions in the financial world where income smoothing works, but it would not work well for our grocery store and it does not work well for health care.
Under an HMO, you pay a flat monthly fee and then just a few dollars for every doctor visit. There is an incentive to go to the doctor too much because your costs do not equal the actual costs. There are times when I could see myself spending $5 on a doctor visit and $5 on a prescription, because I can barely buy a bottle of Tylenol for that amount. There aren’t as many times when I would spend the real costs of $100 on a doctor visit and $150 on a prescription. A PPO is not as bad, but once the deductible is met and the policyholder only pays 10 or 20% of the actual costs, the incentives can be as bad as under an HMO. The added demand these health plans create increases the price of health care services nationwide.
Some may wonder just how big a problem these bad incentives really are. If the design of HMOs and PPOs caused every American to go to the doctor and get a prescription just one more time than needed each year (assuming an average doctor’s visit is $50 and a prescription is $50) this adds up to $30 Billion in wasted resources.
The general problem with the system of HMOs and PPOs is that they separate the costs from the consumer. The solution, as I have mentioned before, is Health Savings Accounts (HSAs). If you do not spend all the money in your account, you get to keep it. Every dollar of health care you use you have to pay for. Charges are not pooled with everyone else in the plan like an HMO or PPO. This incentive helps people control their use of medical services.
When the government started giving tax deductions for employer sponsored health plans, we lost control of our own medical care. We fear quitting a job we dislike because we are afraid of losing health care coverage. Some spend health care dollars irresponsibly because someone else is picking up the tab. To keep costs down, employers and insurance companies make many decisions for us and try all kinds of techniques to manipulate not just our decisions but also those of your doctor as well.
An HSA allows you to take your health care savings with you no matter what your employment situation. It corrects the bad incentives that have led to skyrocketing health care costs. It gives control of health care choices to doctors and patients, not employers and insurance companies.
Because of this, I support ending the tax deduction for companies offering health care plans like HMO and PPO plans and instead create a tax deduction for money placed in an HSA with a high deductible insurance plan. This would help fix the problems with the bad incentives caused by income smoothing. It frees us, and our doctors, from manipulation and interference by a cost-cutting bean counter sitting in a cubicle. It would also allow portability of insurance, and it gives you ownership of your health care funds.
An HMO requires you to be part of a network of medical providers, and typically requires a referral before seeing a specialist. Doctor visits cost the employee a co-pay (normally $5 to $20). Hospital visits also charge a co-pay ($100 is common). Beyond the co-pay, there is a very high dollar maximum for charges in a year. However, the company controls costs by limiting services available and often limits doctors on the care they can give you.
A PPO encourages you to be part of a network by offering discounts. A PPO does not typically require a referral before seeing a specialist. An employee must incur enough medical cost to meet the deductible (usually a few hundred dollars) before the insurance company begins to cover costs. After meeting the deductible, the insurance company will typically pay between 70 and 90% of the medical expenses, up to an annual maximum, after which they pay 100%.
Imagine if you will, that your local grocery store offered families a flat $100/week fee for groceries and then $5 per visit, and the family could pick whatever they wanted. What do you think would happen? People would take home more groceries than normal and they would choose the highest quality food in the store. I personally would die of a coronary after 50 straight days of eating my body weight in meat and Blue Bell ice cream. Few would exercise self-control about the kind of foods and the amount. Why get one Hershey’s bar when you could get three Godiva ones? Why not buy the free-range-slept-on-a-satin-pillow-with-daily-massage-and-yoga-classes eggs that cost $25 a dozen? The extra cost to the family to pick up a few more items would be zero, but it would still cost the grocer. The store would quickly go out of business.
This scenario is called “Income Smoothing” and it creates terrible incentives. Income smoothing is exchanging a random stream of expenses for a smooth and level one, which is exactly what an HMO does. An HMO does not actually meet the technical definition of insurance. Insurance is a financial arrangement to mitigate the risk of an unforeseen event, whereas an HMO covers all medical events expected and unexpected. There are a few special arrangements such as futures and swaptions in the financial world where income smoothing works, but it would not work well for our grocery store and it does not work well for health care.
Under an HMO, you pay a flat monthly fee and then just a few dollars for every doctor visit. There is an incentive to go to the doctor too much because your costs do not equal the actual costs. There are times when I could see myself spending $5 on a doctor visit and $5 on a prescription, because I can barely buy a bottle of Tylenol for that amount. There aren’t as many times when I would spend the real costs of $100 on a doctor visit and $150 on a prescription. A PPO is not as bad, but once the deductible is met and the policyholder only pays 10 or 20% of the actual costs, the incentives can be as bad as under an HMO. The added demand these health plans create increases the price of health care services nationwide.
Some may wonder just how big a problem these bad incentives really are. If the design of HMOs and PPOs caused every American to go to the doctor and get a prescription just one more time than needed each year (assuming an average doctor’s visit is $50 and a prescription is $50) this adds up to $30 Billion in wasted resources.
The general problem with the system of HMOs and PPOs is that they separate the costs from the consumer. The solution, as I have mentioned before, is Health Savings Accounts (HSAs). If you do not spend all the money in your account, you get to keep it. Every dollar of health care you use you have to pay for. Charges are not pooled with everyone else in the plan like an HMO or PPO. This incentive helps people control their use of medical services.
When the government started giving tax deductions for employer sponsored health plans, we lost control of our own medical care. We fear quitting a job we dislike because we are afraid of losing health care coverage. Some spend health care dollars irresponsibly because someone else is picking up the tab. To keep costs down, employers and insurance companies make many decisions for us and try all kinds of techniques to manipulate not just our decisions but also those of your doctor as well.
An HSA allows you to take your health care savings with you no matter what your employment situation. It corrects the bad incentives that have led to skyrocketing health care costs. It gives control of health care choices to doctors and patients, not employers and insurance companies.
Because of this, I support ending the tax deduction for companies offering health care plans like HMO and PPO plans and instead create a tax deduction for money placed in an HSA with a high deductible insurance plan. This would help fix the problems with the bad incentives caused by income smoothing. It frees us, and our doctors, from manipulation and interference by a cost-cutting bean counter sitting in a cubicle. It would also allow portability of insurance, and it gives you ownership of your health care funds.
Thursday, August 9, 2007
We Don't Need No Education
Every year Hollywood rolls out another “Tough Love Teacher” cliché where all it takes is someone with guts to fix a school. Too bad it’s not that simple. According to a 2006 PDK/Gallup Poll, 68% of Americans gave our nation’s schools a grade of C or worse. The problems are systemic and we need a new direction. Student behavior is bad, leaders do not embrace change, and the best teachers are burning out.
The answer is School Choice with charter schools and vouchers. A charter school receives school district funds based on the number of students enrolled. They have more freedom in their approach, but cannot charge tuition, teach religion, nor choose students based on ability (often using a lottery). A voucher allows private schools to receive public funds to educate a child, but does not bind them by the rules above.
School choice improves behavior because these schools can require parents to sign covenants outlining discipline methods. Our public schools have little real consequences for bad behavior because they are plagued by feel good intentions and fear of lawsuits. An independent school can expel unruly kids and the covenant makes it harder to sue. Parents are unlikely to endure many expulsions before working on bad behavior at home. Vouchers can take discipline a step further because they can teach morals and values.
In public schools, there are too many decision makers. Parents, school boards, teachers, state officials, national officials and teachers’ unions (in most states) all have a say in the curriculum and format. Pleasing more groups means compromises water down change. A charter school has fewer decision makers and a private school has even less. Both rely on market forces for feedback. They have to provide the results that parents want or face losing their jobs. Public schools do not face this pressure because they have a geographic monopoly.
According to a study done by Met Life, the Top 3 reasons cited for teachers burning out and leaving the profession were low pay, lack of respect from society, and disorderly student behavior. In most public schools, Harvard 4.0s make the same salary as a local city college 2.0. The school choice system is more competitive so the best teachers could command much higher salaries as their skills go to the highest bidder. Some would be able to start their own schools and reap the benefits. Increased pay, improved discipline, and being in demand should help these teachers feel more respected.
The standard-bearer for charter schools is KIPP academy, a nationwide system that caters to low-income students. KIPP academy requires every student and parent to sign a covenant that states the rules of behavior, extra workload and expected parental involvement. KIPP Academy generally pays its teachers about 20% more than the local school district according to the Houston Chronicle. Recently, a small group of donors, including Bill Gates and Oprah Winfrey, gave $100 million to their cause. While KIPP gets state money for operations, they need donations to build schools.
According to a recent study comparing students at charter schools and public schools in New York City performed by Dr. Caroline M. Hoxby, economics professor at Harvard:
A charter student in grades 3-8 is gaining about an extra 12 percent of a [grade] level in math each year over the comparison group, the study says. In reading, the growth is approximately an extra 3.5 percent each year. “This means that a charter school student whom we would have expected to be failing if he had stayed in the traditional public schools would be, at the end of 13 years of charter school education (K-12), above proficient in math.”
I know a school board member angry about a second charter school opening in his abysmal school district because the waiting list for the first was so long. He toed the line that “It takes money away from public schools”. Of course it does, that’s the whole point! Schools will have to put in effort to attract students and resources. If fewer students attend a school why spend as much money? The only way it cuts classroom budgets is when leaders fund too many non-classroom activities. If there is a long waiting list to leave his schools, is there even a debate about which schools are better? Better schools deserve the money.
Why are a number of people in the educational establishment against charter schools and vouchers? There are a few reasons, but primarily its fear of change. This is understandable, but not justifiable. If one has a stable job guaranteed for life, why choose a new system? The other big reason is loss of control. Many do not like the idea that the government would lose its ability to “enlighten” students whose dim parents have ideas that go against “the truth”. Some editorializing is unavoidable for teaching subjects like history, but it becomes propaganda when parents have no choice as to whether their children listen.
The evidence is clear that students perform better, behave better, and teachers are rewarded better with school choice. The preferences of a few should not stand in the way of improvement, especially amongst low-income students. Thankfully, victory for charter schools in major urban areas looks to be inevitable. Already 15% of Houston students and a majority of post-Katrina students in New Orleans attend publicly financed non-traditional schools. Vouchers are making progress, but they face more fierce opposition. However, Utah recently passed statewide vouchers. When Americans get used to charter schools running the show, the public will be more open to this next step in freeing our students, teachers, and parents.
Schools in the nation Phi Delta Kappa/Gallup Poll
http://www.pdkintl.org/kappan/k0609pol.htm
Leaving the profession http://www.metlife.com/WPSAssets/81821402701160505871V1F2006MetLifeTeacherSurvey.pdf
Houston Chronicle Articles on KIPP Academy http://www.tea.state.tx.us/comm/stars/links_pdfs/0607/hc_032007.pdf http://www.chron.com/disp/story.mpl/metropolitan/gray/4799167.html http://www.chron.com/disp/story.mpl/metropolitan/falkenberg/4955052.html
The answer is School Choice with charter schools and vouchers. A charter school receives school district funds based on the number of students enrolled. They have more freedom in their approach, but cannot charge tuition, teach religion, nor choose students based on ability (often using a lottery). A voucher allows private schools to receive public funds to educate a child, but does not bind them by the rules above.
School choice improves behavior because these schools can require parents to sign covenants outlining discipline methods. Our public schools have little real consequences for bad behavior because they are plagued by feel good intentions and fear of lawsuits. An independent school can expel unruly kids and the covenant makes it harder to sue. Parents are unlikely to endure many expulsions before working on bad behavior at home. Vouchers can take discipline a step further because they can teach morals and values.
In public schools, there are too many decision makers. Parents, school boards, teachers, state officials, national officials and teachers’ unions (in most states) all have a say in the curriculum and format. Pleasing more groups means compromises water down change. A charter school has fewer decision makers and a private school has even less. Both rely on market forces for feedback. They have to provide the results that parents want or face losing their jobs. Public schools do not face this pressure because they have a geographic monopoly.
According to a study done by Met Life, the Top 3 reasons cited for teachers burning out and leaving the profession were low pay, lack of respect from society, and disorderly student behavior. In most public schools, Harvard 4.0s make the same salary as a local city college 2.0. The school choice system is more competitive so the best teachers could command much higher salaries as their skills go to the highest bidder. Some would be able to start their own schools and reap the benefits. Increased pay, improved discipline, and being in demand should help these teachers feel more respected.
The standard-bearer for charter schools is KIPP academy, a nationwide system that caters to low-income students. KIPP academy requires every student and parent to sign a covenant that states the rules of behavior, extra workload and expected parental involvement. KIPP Academy generally pays its teachers about 20% more than the local school district according to the Houston Chronicle. Recently, a small group of donors, including Bill Gates and Oprah Winfrey, gave $100 million to their cause. While KIPP gets state money for operations, they need donations to build schools.
According to a recent study comparing students at charter schools and public schools in New York City performed by Dr. Caroline M. Hoxby, economics professor at Harvard:
A charter student in grades 3-8 is gaining about an extra 12 percent of a [grade] level in math each year over the comparison group, the study says. In reading, the growth is approximately an extra 3.5 percent each year. “This means that a charter school student whom we would have expected to be failing if he had stayed in the traditional public schools would be, at the end of 13 years of charter school education (K-12), above proficient in math.”
I know a school board member angry about a second charter school opening in his abysmal school district because the waiting list for the first was so long. He toed the line that “It takes money away from public schools”. Of course it does, that’s the whole point! Schools will have to put in effort to attract students and resources. If fewer students attend a school why spend as much money? The only way it cuts classroom budgets is when leaders fund too many non-classroom activities. If there is a long waiting list to leave his schools, is there even a debate about which schools are better? Better schools deserve the money.
Why are a number of people in the educational establishment against charter schools and vouchers? There are a few reasons, but primarily its fear of change. This is understandable, but not justifiable. If one has a stable job guaranteed for life, why choose a new system? The other big reason is loss of control. Many do not like the idea that the government would lose its ability to “enlighten” students whose dim parents have ideas that go against “the truth”. Some editorializing is unavoidable for teaching subjects like history, but it becomes propaganda when parents have no choice as to whether their children listen.
The evidence is clear that students perform better, behave better, and teachers are rewarded better with school choice. The preferences of a few should not stand in the way of improvement, especially amongst low-income students. Thankfully, victory for charter schools in major urban areas looks to be inevitable. Already 15% of Houston students and a majority of post-Katrina students in New Orleans attend publicly financed non-traditional schools. Vouchers are making progress, but they face more fierce opposition. However, Utah recently passed statewide vouchers. When Americans get used to charter schools running the show, the public will be more open to this next step in freeing our students, teachers, and parents.
Schools in the nation Phi Delta Kappa/Gallup Poll
http://www.pdkintl.org/kappan/k0609pol.htm
Leaving the profession http://www.metlife.com/WPSAssets/81821402701160505871V1F2006MetLifeTeacherSurvey.pdf
Houston Chronicle Articles on KIPP Academy http://www.tea.state.tx.us/comm/stars/links_pdfs/0607/hc_032007.pdf http://www.chron.com/disp/story.mpl/metropolitan/gray/4799167.html http://www.chron.com/disp/story.mpl/metropolitan/falkenberg/4955052.html
Thursday, August 2, 2007
Incentives have Consequences
Friends,
Last week’s post led to some good feedback from all of you. I’ve included a couple quotes I thought were worth mentioning.
Alex G. – I disagree with your plan. And you hit the nail in the head yourself. "I usually don't like the government telling me what to do with my money".
Yes, and I did make the comments two weeks ago about sticking to principles. Good point.
Mark S. – The majority of people are middle class working people who do have insurance, but rely on that check to make one yearly big purchase or down payment. I think that since you are making the majority of people fill out extra paperwork it would not go over well.
The great thing about getting feedback is that I can expand my understanding of where other people are coming from and adjusting my political strategies to meet those realities. No matter how good a plan is on paper, it has to capture the imagination of the public to make it through the legislature and become law. For me, filling out the extra form to get the money or directing my tax return into an HSA didn’t seem like a bother, but Mark obviously didn’t like it. I still like my idea in general, but I’ll have to think about some alternatives.
-On to this week’s post
In 1963, Dr. Stanley Milgram of Yale University devised a psychological experiment to test our level of obedience to authority in order to shed light on how thousands of people took part in the Holocaust. His test instructed a volunteer test person to ask a number of questions to a man hidden behind a screen. If the man gave the wrong answer, they were to flip a series of switches that started at 45 volts and increased to 450.
The man behind the screen was an actor. The actor made sure to let each person know that he had a heart condition before the questions started. As the volts increased, he would pound on the wall and make other noises. A recording played protests and screams to simulate that the man was in agony from the shocks. A “scientist” in a white lab coat would prod any person hesitant to continue by assuring them that this was very important research.
What kind of monster would keep flipping the switches? Out of the 40 people in the original study, every single person flipped the switches up to 300 volts. This level is lethal and was past the point where the actor went silent. All of them expressed some concern for the well-being of the man. In the end, however, 26 of 40 flipped all of the switches including the 450 volts three different times at the end. We have all wondered how we would behave in certain situations and like to believe that we would not succumb to peer-pressure and incentives that encourage us to go against our morals. This experiment revealed that doing so is not as easy as it seems.
When I talk to people face to face about the idea that our poverty programs have caused the awful mess our poor people live in today they don't like to believe that the incentives created by the programs can shape behavior that much. They believe that in any given population group a certain number of people are born reckless or unintelligent. Others believe that their upbringing has destined them for crime and immorality. I refuse to believe that the bell curve of human existence is unchangeable. Every human being is capable of greatness. A greatness defined by strong moral character, loving and peaceful relationships, and a lifetime of adventures and personal growth.
The Milgram Study shows that given the right conditions, bad incentives can make normal people to do horrible things. It is not a stretch to believe that bad incentives in our poverty system have led to the rampant problems today. Those at the bottom of the spectrum, plagued by criminal and immoral behavior, were not destined by fate to be there, our system has done it to them. Our poverty programs have been a horrible mistake.
Confusion also exists that correlates poverty programs with charity, when they do not normally have the same effects. Charitable organizations trying their best to lift people out of poverty, addiction, mental illness, or homelessness, can be very effective. The difference between charity and government programs is that when we help a friend in need, there is an expectation that they will do the right thing to prevent that situation from happening again. If they do not, we usually stop giving help in the same manner.
A government program doesn't work the same as charity. A dispassionate bureaucrat merely looks through documents to see if one qualifies and then hands out a check. Their job is to process paperwork efficiently, not to make moral judgments on the applicant. A charity can quickly react to changing events because they are typically small and have fewer rules. The government can’t change something without massive research projects and congressional hearings to figure out whether there is a problem and then a bill has to crawl its way through Congress. The government is simply too big to administer poverty programs effectively.
Unfortunately, too many in poverty today are ill prepared to take care of themselves and their children, so sweeping these programs away overnight would cause a lot of short-term chaos. This is why I proposed building a bridge to link those hurt by the horrible mistakes of the past to a better future. A future where they have the strength to rise up to the greatness God intended for them.
I think we’ve made a good start. Next week: Education.
As always, tell me what you think. Feedback has been slowly increasing and if it increases a little more I will probably switch to a blog format soon.
Milgram Study
http://en.wikipedia.org/wiki/Milgram_Study
Last week’s post led to some good feedback from all of you. I’ve included a couple quotes I thought were worth mentioning.
Alex G. – I disagree with your plan. And you hit the nail in the head yourself. "I usually don't like the government telling me what to do with my money".
Yes, and I did make the comments two weeks ago about sticking to principles. Good point.
Mark S. – The majority of people are middle class working people who do have insurance, but rely on that check to make one yearly big purchase or down payment. I think that since you are making the majority of people fill out extra paperwork it would not go over well.
The great thing about getting feedback is that I can expand my understanding of where other people are coming from and adjusting my political strategies to meet those realities. No matter how good a plan is on paper, it has to capture the imagination of the public to make it through the legislature and become law. For me, filling out the extra form to get the money or directing my tax return into an HSA didn’t seem like a bother, but Mark obviously didn’t like it. I still like my idea in general, but I’ll have to think about some alternatives.
-On to this week’s post
In 1963, Dr. Stanley Milgram of Yale University devised a psychological experiment to test our level of obedience to authority in order to shed light on how thousands of people took part in the Holocaust. His test instructed a volunteer test person to ask a number of questions to a man hidden behind a screen. If the man gave the wrong answer, they were to flip a series of switches that started at 45 volts and increased to 450.
The man behind the screen was an actor. The actor made sure to let each person know that he had a heart condition before the questions started. As the volts increased, he would pound on the wall and make other noises. A recording played protests and screams to simulate that the man was in agony from the shocks. A “scientist” in a white lab coat would prod any person hesitant to continue by assuring them that this was very important research.
What kind of monster would keep flipping the switches? Out of the 40 people in the original study, every single person flipped the switches up to 300 volts. This level is lethal and was past the point where the actor went silent. All of them expressed some concern for the well-being of the man. In the end, however, 26 of 40 flipped all of the switches including the 450 volts three different times at the end. We have all wondered how we would behave in certain situations and like to believe that we would not succumb to peer-pressure and incentives that encourage us to go against our morals. This experiment revealed that doing so is not as easy as it seems.
When I talk to people face to face about the idea that our poverty programs have caused the awful mess our poor people live in today they don't like to believe that the incentives created by the programs can shape behavior that much. They believe that in any given population group a certain number of people are born reckless or unintelligent. Others believe that their upbringing has destined them for crime and immorality. I refuse to believe that the bell curve of human existence is unchangeable. Every human being is capable of greatness. A greatness defined by strong moral character, loving and peaceful relationships, and a lifetime of adventures and personal growth.
The Milgram Study shows that given the right conditions, bad incentives can make normal people to do horrible things. It is not a stretch to believe that bad incentives in our poverty system have led to the rampant problems today. Those at the bottom of the spectrum, plagued by criminal and immoral behavior, were not destined by fate to be there, our system has done it to them. Our poverty programs have been a horrible mistake.
Confusion also exists that correlates poverty programs with charity, when they do not normally have the same effects. Charitable organizations trying their best to lift people out of poverty, addiction, mental illness, or homelessness, can be very effective. The difference between charity and government programs is that when we help a friend in need, there is an expectation that they will do the right thing to prevent that situation from happening again. If they do not, we usually stop giving help in the same manner.
A government program doesn't work the same as charity. A dispassionate bureaucrat merely looks through documents to see if one qualifies and then hands out a check. Their job is to process paperwork efficiently, not to make moral judgments on the applicant. A charity can quickly react to changing events because they are typically small and have fewer rules. The government can’t change something without massive research projects and congressional hearings to figure out whether there is a problem and then a bill has to crawl its way through Congress. The government is simply too big to administer poverty programs effectively.
Unfortunately, too many in poverty today are ill prepared to take care of themselves and their children, so sweeping these programs away overnight would cause a lot of short-term chaos. This is why I proposed building a bridge to link those hurt by the horrible mistakes of the past to a better future. A future where they have the strength to rise up to the greatness God intended for them.
I think we’ve made a good start. Next week: Education.
As always, tell me what you think. Feedback has been slowly increasing and if it increases a little more I will probably switch to a blog format soon.
Milgram Study
http://en.wikipedia.org/wiki/Milgram_Study
Thursday, July 26, 2007
Health Savings Accounts
This is the first of a longer discussion about health care. It’s a technical topic, so I will spread it out with easier reads in between.
Recently there has been a lot of talk by Barack Obama and John Edwards about Universal Health Care. Hillary has not committed to a particular plan, but leans that way. Republican Candidate Mitt Romney helped pass Universal Health Insurance in Massachusetts. A massive new tax hike to cover this new program is definitely at odds with the ideals of small government. Experiences in other countries have shown that it is impossible to provide every citizen cheap and high quality medical care. Attempts to do so are very expensive or low quality, and sometimes both. Many voters, however, are moving in favor of a government run system that guarantees health insurance for all Americans.
My health insurance, including the portion that my employer pays, costs around $400/month for just me. There are 45 million Americans without health insurance and if it costs the same $4800/year this gives us a $216 Billion tax hike for one year. At a conservative 5% increase in premiums per year, this adds to $2.7 Trillion dollars over the next ten years.
On Barack Obama’s website, he discusses his plans for socialized medicine. He states that he “will create a new national health plan to allow individuals without access to affordable insurance coverage to buy coverage similar to that available to members of Congress”. My analysis above may be too simple, but Congress does not have a cheap or flimsy medical plan. The scale of what he is proposing is enormous. The reality is that being uninsured does not mean that people are not receiving medical care. There are scores of government and charity programs that help with medical costs and many young people simply choose not to go to the doctor. Unfortunately, reality and perception are not always the same. Uninformed sympathies portray conservatives as denying basic medical care to the poor and unemployed by being selfish and miserly. The difficulty is coming up with a strategy that breaks this negative image.
The Club for Growth, a limited-government political action committee sponsors a website called www.freemarketcure.com, which provides an in-depth analysis of the problems with government run medicine. They have some dramatic videos to watch about Canada’s government run system. They also advocate Health Savings Accounts (HSAs), which are the key to fixing our nation’s health care problems. What are HSAs? A Health Savings Account allows someone to put tax-free dollars into a bank account to use on medical expenses. These accounts are often combined with a high deductible health insurance policy. If you don’t spend all the money, you get to keep it for next year. If you don’t spend it by retirement, you get to keep it all to spend on whatever you like. HSAs are nice in that they would let you keep your money to cover medical expenses if you lose your job. A Health Plan Consultant named Michael Rodriguez recently related to me how they keep down medical costs much better than HMOs or PPOs. Their shortcoming in the debate is that they do not do much in regards to expanding health insurance to more Americans.At the end of a recent trip to the ER for my youngest son, I was thinking about this idea of expanding health care coverage without increasing taxes. My idea needs more details ironed out, but it’s a starting place. Right now, the Child Tax Credit gives all households who earn below a certain salary $1,000 per child off their taxes (We are one of these households). Money from the child tax credit could be directed into an HSA for your child instead of receiving this as a tax refund. This would mean $1,000 per year, per child, of medical coverage that would not cost taxpayers one extra cent. You read that right, not one extra cent. Virtually every child in America could have some medical coverage without increasing taxes at all. Call it a Health Savings Refund for Children. If the parent already has insurance for their child, they could fill out an extra form that shows evidence of coverage. This would let them continue to receive the child tax credit in cash. Most parents would likely put some money into this savings account regardless of existing coverage just to be safe. This option is available so that those with no need to put money away would not have to. How do you access your account? Every bank that offered HSAs would be required to have a special debit card that would work at doctors’ offices and certified medical facilities. Can they deny your claim? No, because it’s your money. Do you lose it when you lose your job? No, it’s your money. Can you have a preexisting condition that keeps you from receiving medical care? No, it’s your money. As long as there is money in the account for that child, nobody can take away this medical coverage. What happens if you don’t spend it all? It rolls over to next year, with interest. So, if you don’t have big bills for several years thousands of dollars will build up to cover a major emergency. Imagine being unemployed and finding out that your child needs surgery, but knowing that you already have most of the money in the account to help cover the costs. No paperwork hassles, no getting pre-qualified, no sitting on hold with customer service for hours, and no government bureaucrat arguing with your doctor about medical necessity. Just swipe your card and it’s already paid for.I have debated whether this is a hidden tax hike. I don’t like the idea of the government telling us how to spend our money, but we at least get to keep it. This isn’t perfect and I need to work out some more details, but I figured I would throw it out there and see what people had to say.
As always, tell me what you think. I had my first person disagree this past week, which is always healthy. Pass this on to anyone interested.
Brian Shelley
Recently there has been a lot of talk by Barack Obama and John Edwards about Universal Health Care. Hillary has not committed to a particular plan, but leans that way. Republican Candidate Mitt Romney helped pass Universal Health Insurance in Massachusetts. A massive new tax hike to cover this new program is definitely at odds with the ideals of small government. Experiences in other countries have shown that it is impossible to provide every citizen cheap and high quality medical care. Attempts to do so are very expensive or low quality, and sometimes both. Many voters, however, are moving in favor of a government run system that guarantees health insurance for all Americans.
My health insurance, including the portion that my employer pays, costs around $400/month for just me. There are 45 million Americans without health insurance and if it costs the same $4800/year this gives us a $216 Billion tax hike for one year. At a conservative 5% increase in premiums per year, this adds to $2.7 Trillion dollars over the next ten years.
On Barack Obama’s website, he discusses his plans for socialized medicine. He states that he “will create a new national health plan to allow individuals without access to affordable insurance coverage to buy coverage similar to that available to members of Congress”. My analysis above may be too simple, but Congress does not have a cheap or flimsy medical plan. The scale of what he is proposing is enormous. The reality is that being uninsured does not mean that people are not receiving medical care. There are scores of government and charity programs that help with medical costs and many young people simply choose not to go to the doctor. Unfortunately, reality and perception are not always the same. Uninformed sympathies portray conservatives as denying basic medical care to the poor and unemployed by being selfish and miserly. The difficulty is coming up with a strategy that breaks this negative image.
The Club for Growth, a limited-government political action committee sponsors a website called www.freemarketcure.com, which provides an in-depth analysis of the problems with government run medicine. They have some dramatic videos to watch about Canada’s government run system. They also advocate Health Savings Accounts (HSAs), which are the key to fixing our nation’s health care problems. What are HSAs? A Health Savings Account allows someone to put tax-free dollars into a bank account to use on medical expenses. These accounts are often combined with a high deductible health insurance policy. If you don’t spend all the money, you get to keep it for next year. If you don’t spend it by retirement, you get to keep it all to spend on whatever you like. HSAs are nice in that they would let you keep your money to cover medical expenses if you lose your job. A Health Plan Consultant named Michael Rodriguez recently related to me how they keep down medical costs much better than HMOs or PPOs. Their shortcoming in the debate is that they do not do much in regards to expanding health insurance to more Americans.At the end of a recent trip to the ER for my youngest son, I was thinking about this idea of expanding health care coverage without increasing taxes. My idea needs more details ironed out, but it’s a starting place. Right now, the Child Tax Credit gives all households who earn below a certain salary $1,000 per child off their taxes (We are one of these households). Money from the child tax credit could be directed into an HSA for your child instead of receiving this as a tax refund. This would mean $1,000 per year, per child, of medical coverage that would not cost taxpayers one extra cent. You read that right, not one extra cent. Virtually every child in America could have some medical coverage without increasing taxes at all. Call it a Health Savings Refund for Children. If the parent already has insurance for their child, they could fill out an extra form that shows evidence of coverage. This would let them continue to receive the child tax credit in cash. Most parents would likely put some money into this savings account regardless of existing coverage just to be safe. This option is available so that those with no need to put money away would not have to. How do you access your account? Every bank that offered HSAs would be required to have a special debit card that would work at doctors’ offices and certified medical facilities. Can they deny your claim? No, because it’s your money. Do you lose it when you lose your job? No, it’s your money. Can you have a preexisting condition that keeps you from receiving medical care? No, it’s your money. As long as there is money in the account for that child, nobody can take away this medical coverage. What happens if you don’t spend it all? It rolls over to next year, with interest. So, if you don’t have big bills for several years thousands of dollars will build up to cover a major emergency. Imagine being unemployed and finding out that your child needs surgery, but knowing that you already have most of the money in the account to help cover the costs. No paperwork hassles, no getting pre-qualified, no sitting on hold with customer service for hours, and no government bureaucrat arguing with your doctor about medical necessity. Just swipe your card and it’s already paid for.I have debated whether this is a hidden tax hike. I don’t like the idea of the government telling us how to spend our money, but we at least get to keep it. This isn’t perfect and I need to work out some more details, but I figured I would throw it out there and see what people had to say.
As always, tell me what you think. I had my first person disagree this past week, which is always healthy. Pass this on to anyone interested.
Brian Shelley
Thursday, July 19, 2007
Getting back to Principles
Friends, First, I have to thank some of you for passing this newsletter on to friends and colleagues. I was told of at least 10 forwards this past week. It’s very flattering to think that I can make such a positive impression.
The father of a friend of mine in high school had been a smoker for years, and I have no doubt that he had heard a million messages about the dangers of smoking. One day his four-year-old daughter asked him if he was going to die from smoking cigarettes. He put his cigarette down and never smoked again. It wasn’t data or public service announcements; it was the realization that if he truly loved his daughter and wanted to be with her for as long as possible that he needed to quit smoking. A higher reason compelled him than his own health.
Recently there have been a number of articles posing the questions, “What happened to the Conservative movement?” and “Where did they go wrong?” Obviously, the war in Iraq has really hurt the Republicans, but conservatives started to lose their way before 9/11. The massive increases in government spending and the big entitlement program for prescription drugs, Medicare Part D, were choices Republicans made without regard to the war on terror. Bush passed the tax cuts and passed a few free trade bills, but other than that, his record on small government does not look much better than that of Bill Clinton.The Bush Administration has pushed some good smaller government initiatives like Social Security Private Accounts and Health Savings Accounts, but these never got out of the gate. The public never got inspired because the White House sold ideas like financial services on the technical merits of how they might help increase our income. Those are good reasons for voting for an idea, but they are not stand up and cheer good reasons.
Looking at Congress and the new Presidential candidates is there hope that the champions of small government can turn things around? Many seem to be afflicted like the President by their inability to communicate their ideas effectively. Michael Medved, a conservative syndicated radio talk-show host wrote a post this past week that echoes some of these thoughts in the excerpt below. http://michaelmedved.townhall.com/blog/g/bf4284e3-c94b-4a2a-bfca-c8476299cf5d
And Republicans are promising….what, exactly? So far, our only response to the Democratic promises on Peace, Health Care and the Environment is that liberal solutions don’t work and tend to make situations worse than before. These arguments need to be made, and the public should be appropriately frightened by the huge increase in the size and cost of government implicit in liberal plans. But these warnings hardly constitute the sort of positive program or soaring vision that can [energize] a cynical and dispirited electorate.
Everyone saw the crushing defeat that the immigration bill experienced. In a news report afterwards, several Republican Senators from the committee that created the immigration bill expressed bewilderment at the outcry. The first thing out of their mouths was a defense of its technical merits. With egos bruised, they lashed out with claims of prejudice as to explain why their bill failed.My first interpretation of what has happened echoed many other columnists I read. Conservative lawmakers had simply stopped paying attention to their constituents. However, suggesting that they shouldn’t have ignored the majority of voters presents a new problem. Where is the room for courageously standing up for what you believe in? Isn’t this why we remember Jimmy Stewart giving his passionate speech at the end of “Mr. Smith Goes to Washington”? How do you draw a line between being a suck up who follows popular sentiment like Clinton and going down with the ship like George Bush? It comes down to principles and some humility. Politics isn’t science. Statistics and rigorous logic will only take you so far. You must ground what you believe in and what you say on good principles if people are going to become passionate about your ideas. Strong principles hit deeper than strong data. One of the defenses I heard for the immigration bill was that it would help the Republicans woo the Hispanic vote, which is important for future voting patterns. It may be true, but what kind of principle is this based upon? Anything to win? Anything to stay in power? Tactical behavior doesn’t motivate, principles motivate. This is why Mel Gibson made Braveheart about William Wallace, dedicated to the freedom of his country, and not Robert the Bruce, who vacillated to gain long-term advantage.
Just having strongly held principles is not enough. Reason and experience must strengthen them continually. You can’t be that nut pulling a gun on city employees because it’s your God given right to pour battery acid down the sewer. You can’t be like Hugo Chavez spouting wild claims with nothing to back them up. Exercising humility and self-reflection are necessary to ground yourself in reality. The more developed your principles the better you can defend the other things built upon them. The conservatives lost power because they became convinced that winning elections was all that mattered. As long as they were in power, they thought that good legislation would just happen. George Bush and Karl Rove came up with brilliant tactics and statistical analysis to find the votes they needed to win. They hired market researchers to investigate which words to use when selling their ideas. What they failed to do was establish a core set of principles so that America could accept the downsides because of the goodness of the purpose. Americans do not get passionate about passing legislation that is beneficial to most and harmful to few. They get passionate about legislation when their principles demand it be passed. As always, tell me what you think. Do not let me be a hypocrite. Point out anything that is not principled that I espouse in these letters. Pass this on to anyone interested.
Thursday, July 12, 2007
Reverse Income Tax
Friends,
Last week I mentioned the “Reverse Income Tax” and I got a couple questions about it so I decided to make this week’s post about reforming poverty programs.
I recently ran across a woman who has a lot to say about these programs. Star Parker was born in a poor neighborhood in LA and like the African-American stereotype she got pregnant, got on welfare, admits to four abortions, and racked up a criminal record in her youth. However, she made a series of decisions and an acceptance of faith that changed her life. Today, she is a columnist and head of Coalition on Urban Renewal and Education. She is also a die hard Conservative who hates the welfare system.
I found this quote from her first book that puts our poverty programs in great perspective. “We have two economic systems working for America: capitalism for the rich and socialism for the poor. The problem with a government that lets both systems operate is that the middle class gets stuck working for the rich to support the poor.”
For me, it is not the existence of a poverty program that is the biggest problem, it’s the design. Before reform in 1995, Welfare (AFDC) was designed to give aid to unemployed parents of dependent children. The flaw was that for every dollar you earned at work you lost a dollar of welfare. Someone qualifying for welfare is unlikely to make much, so oftentimes they didn’t actually start earning any extra income until their work hours hit 30 or 35 hours per week. Why would anybody work 30 to 35 hours for nothing? That’s the problem. They didn’t.
Today, many of the poverty programs have the same design problems. If you work you lose a lot of benefits. If you put money into savings you lose benefits. Recently, a study by the National Center for Policy Analysis showed that for every dollar someone on benefits puts into savings, they lose $2.60 in benefits. If they get married or live with the other parent of their child they lose benefits. Those on benefits work less, save less, and they choose not to marry or stay with the father of their children because the system rewards irresponsibility. We have placed these people in a position where they must choose between dignity and putting food on the table for their kids.
How do we expect people to stay out of poverty if they aren’t building a career? How can we expect them to weather their next job loss or medical emergency without a decent savings account? The financial and emotional stability brought by marriage helps many stay out of poverty and rear healthy children. Why would we punish them for doing so? Like I mentioned last week, some on the Left have the idea that “bad luck causes poverty” so engrained in their heads that they never consider that we are eroding the strength and character of those on benefits by a poor design. We have made children out of adults and have trapped them in poverty. The reforms in 1995 accomplished a lot, but we still have a long way to go.
So how does the “Reverse Income Tax” come into this and what is it? The “Reverse Income Tax” raises your income if you make below the poverty level based on a percentage (40%) of the difference between your income and the poverty level. My idea takes the math from this and tweaks it a little. What do I mean by a percentage of the difference? Say a mother makes $7.00/hr as a day care worker. That’s $3.00 less than $10.00/hr. She would receive $3.00 * 40% = $1.20/hr added to her paycheck, giving her $8.20/hr. If this mother made $9.00/hr she would be given $0.40/hr ($10-$9=$1 * 40%).
This isn’t a perfect plan, but why is this better? Under the old system you earned nothing for each additional hour you worked until you hit 30 to 35 hours a week, so few worked. Under this system you earn not just your typical pay of $7.00/hr, you would earn $8.20/hr. It preserves the incentive to work just like Friedman’s plan. I could go into more detail, but the spirit of his idea created a system that didn’t seriously erode their character. While my idea is similar to Friedman’s, I think it offers a stronger incentive by adding it to their paycheck instead of having to wait until the next year to file a tax return.
The points of my idea are:
For every hour that a parent with children at home works they would receive 40% of the difference between their pay and $10.00/hr as long as they worked at least 20 hours a week.
Being married or living with the other parent would not count against your ability to receive the benefit.
Neither contributions to 401K, IRA, nor holding up to $10,000 in savings would count against your ability to receive benefits.
This Character Based idea is Marriage Neutral, Savings Neutral, and helps to provide a better wage to low income parents. By neutral, I mean it doesn’t discriminate for or against. Obviously there would be more details to work out to prevent fraud and cover other problems, but this is the basic framework.
Nothing in this idea requires us to bash the poor. In fact, it’s about giving them back their self respect. We can never know what they can accomplish if we don’t let them leave behind low expectations. How many Star Parkers are still trapped in poverty?
If you like this idea and can come up with a better slogan for this that would be great. As always, let me know what you think, and pass this on to friends. I got some good feedback this week so keep it coming.
From You: In Oklahoma, the state government is apparently running TV ads to encourage more people to get on welfare so that the state can maximize their grant from the Federal government. Another great incentive set up by poorly designed legislation!
Links:
Technical discussions about the reverse income tax. www.citizensincome.org/findings/abatkinson.html
Star Parker
http://www.urbancure.org/
http://www.amazon.com/ (Search for Star Parker)
http://www.wikipedia.org/ (Search for Star Parker)
National Center for Policy Analysis stat
www.latimes.com/business/la-fi-save7jun07,1,2701901.column?coll=la-mininav-business&ctrack=1&cset=true
http://www.ncpa.org/
Last week I mentioned the “Reverse Income Tax” and I got a couple questions about it so I decided to make this week’s post about reforming poverty programs.
I recently ran across a woman who has a lot to say about these programs. Star Parker was born in a poor neighborhood in LA and like the African-American stereotype she got pregnant, got on welfare, admits to four abortions, and racked up a criminal record in her youth. However, she made a series of decisions and an acceptance of faith that changed her life. Today, she is a columnist and head of Coalition on Urban Renewal and Education. She is also a die hard Conservative who hates the welfare system.
I found this quote from her first book that puts our poverty programs in great perspective. “We have two economic systems working for America: capitalism for the rich and socialism for the poor. The problem with a government that lets both systems operate is that the middle class gets stuck working for the rich to support the poor.”
For me, it is not the existence of a poverty program that is the biggest problem, it’s the design. Before reform in 1995, Welfare (AFDC) was designed to give aid to unemployed parents of dependent children. The flaw was that for every dollar you earned at work you lost a dollar of welfare. Someone qualifying for welfare is unlikely to make much, so oftentimes they didn’t actually start earning any extra income until their work hours hit 30 or 35 hours per week. Why would anybody work 30 to 35 hours for nothing? That’s the problem. They didn’t.
Today, many of the poverty programs have the same design problems. If you work you lose a lot of benefits. If you put money into savings you lose benefits. Recently, a study by the National Center for Policy Analysis showed that for every dollar someone on benefits puts into savings, they lose $2.60 in benefits. If they get married or live with the other parent of their child they lose benefits. Those on benefits work less, save less, and they choose not to marry or stay with the father of their children because the system rewards irresponsibility. We have placed these people in a position where they must choose between dignity and putting food on the table for their kids.
How do we expect people to stay out of poverty if they aren’t building a career? How can we expect them to weather their next job loss or medical emergency without a decent savings account? The financial and emotional stability brought by marriage helps many stay out of poverty and rear healthy children. Why would we punish them for doing so? Like I mentioned last week, some on the Left have the idea that “bad luck causes poverty” so engrained in their heads that they never consider that we are eroding the strength and character of those on benefits by a poor design. We have made children out of adults and have trapped them in poverty. The reforms in 1995 accomplished a lot, but we still have a long way to go.
So how does the “Reverse Income Tax” come into this and what is it? The “Reverse Income Tax” raises your income if you make below the poverty level based on a percentage (40%) of the difference between your income and the poverty level. My idea takes the math from this and tweaks it a little. What do I mean by a percentage of the difference? Say a mother makes $7.00/hr as a day care worker. That’s $3.00 less than $10.00/hr. She would receive $3.00 * 40% = $1.20/hr added to her paycheck, giving her $8.20/hr. If this mother made $9.00/hr she would be given $0.40/hr ($10-$9=$1 * 40%).
This isn’t a perfect plan, but why is this better? Under the old system you earned nothing for each additional hour you worked until you hit 30 to 35 hours a week, so few worked. Under this system you earn not just your typical pay of $7.00/hr, you would earn $8.20/hr. It preserves the incentive to work just like Friedman’s plan. I could go into more detail, but the spirit of his idea created a system that didn’t seriously erode their character. While my idea is similar to Friedman’s, I think it offers a stronger incentive by adding it to their paycheck instead of having to wait until the next year to file a tax return.
The points of my idea are:
For every hour that a parent with children at home works they would receive 40% of the difference between their pay and $10.00/hr as long as they worked at least 20 hours a week.
Being married or living with the other parent would not count against your ability to receive the benefit.
Neither contributions to 401K, IRA, nor holding up to $10,000 in savings would count against your ability to receive benefits.
This Character Based idea is Marriage Neutral, Savings Neutral, and helps to provide a better wage to low income parents. By neutral, I mean it doesn’t discriminate for or against. Obviously there would be more details to work out to prevent fraud and cover other problems, but this is the basic framework.
Nothing in this idea requires us to bash the poor. In fact, it’s about giving them back their self respect. We can never know what they can accomplish if we don’t let them leave behind low expectations. How many Star Parkers are still trapped in poverty?
If you like this idea and can come up with a better slogan for this that would be great. As always, let me know what you think, and pass this on to friends. I got some good feedback this week so keep it coming.
From You: In Oklahoma, the state government is apparently running TV ads to encourage more people to get on welfare so that the state can maximize their grant from the Federal government. Another great incentive set up by poorly designed legislation!
Links:
Technical discussions about the reverse income tax. www.citizensincome.org/findings/abatkinson.html
Star Parker
http://www.urbancure.org/
http://www.amazon.com/ (Search for Star Parker)
http://www.wikipedia.org/ (Search for Star Parker)
National Center for Policy Analysis stat
www.latimes.com/business/la-fi-save7jun07,1,2701901.column?coll=la-mininav-business&ctrack=1&cset=true
http://www.ncpa.org/
Thursday, July 5, 2007
Introduction
Friends, This being the first of what I hope to be many weekly political posts I thought I would talk about the topics I plan to discuss in them.
Those of you who know me, know that I fall into the “Republitarian” slice of political belief. Obviously, my posts are going to support free-markets, small government, and occasionally some commentary on social issues from my more traditional viewpoint. What I don’t plan to do is engage in character bashing and blowing small quotes from left wingers out of proportion to scare everyone into believing what I have to say. I think that market is more than saturated. I plan to deal in facts and solutions. My hope is that you will help me develop a plan for persuasion and not just good one-liners to throw at those who disagree with the ideals of a free society that we hold dearly. For example, I recently read a poll from Zogby International that only 44% of Americans believe that most people who are poor got that way by making bad decisions. I was really surprised by this at first, but it really helped explain why so many people continue to vote for politicians who blindly hand out money to the poor with little to show for it. In their minds they see poverty as a matter of chance, so the ethical thing to do is to help out those who suffer from it because it’s not their fault. If this was true, I can understand their logic. But it’s not true. The vast majority of the poor are able bodied people with plenty of brains to fix their own lives. In his book “Choice Theory”, Dr. William Glasser really explains how we are the result of our choices and that each of us has immense power to change our lives. I have seen this in dramatic ways in my own life in the last several years. I have also seen the mountains of evidence that our poverty programs do not work, and that they have actually made many things far worse than before. We’ve all heard the horror stories of welfare abusers and the astonishing lengths that lazy or brutish people will reach to secure their free check from the government. The problem with our approach to convert people to limited government is that we fail to recognize how deeply the beliefs of many go. Those on the Right have a habit of dismissing the poor as lazy bums, but using this as a way to convert those in favor of poverty programs doesn’t work. Some of them believe that poor people got there by accident; it’s not their fault because all people are inherently good, and we know this to be true because God wouldn’t have created a world full of bad people. Sure we could spend the weeks and years it would take to show them the evidence that they are misguided, but we don’t have the time or resources to do this, and many would still never change their minds. Believe me, I have tried. The point of these posts will be to build a bridge between the ideals of a small government/free society and the deeply held, and at times religious, beliefs that many in our society hold. How do we build this bridge? The answer is the same for any task worth doing: Hard work. I will find the information, create ideas, and pass them on to you. You tell me what’s wrong with them, and give me your own ideas. As an example, I ran across an article a while back written about the most revered economist of the last half of the 20th century, the late Nobel Laureate Milton Friedman. He suggested replacing our welfare system with a “reverse income tax”. Those with low incomes would be given money in reverse proportion to their income. His analysis showed that this would do the least harm in perverting the incentives to improve themselves, and would be the least costly to implement. While it might strike some that giving any tax dollars to them is abhorrent, we need that bridge between a truly free market and what we have today. Dr. Friedman has provided a loose framework with the “reverse income tax” with which to build our bridge. If we propose a social safety net that encourages work, encourages savings, and encourages strong families we can not only create a more free society, we can also begin to salvage the lives of millions of Americans trapped in poverty by the awful system we have today. In the coming weeks, please let me know what you think. If you see any articles that pertain to what we have talked about, please forward them to me. Pass these posts on to anyone you know who might be interested and sign them up to receive them by sending an e-mail to me. I plan to upgrade to all the snazzy tools the internet offers if your interest justifies it.
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