Our American Discourse, Ep. 22: While the World Burns, a More Sustainable Future Is in the Making

At this very moment, wildfires rage across Southern California. Florida, Puerto Rico, and Texas are picking up the pieces from Hurricanes Harvey, Irma, and Maria. These are only the latest instances of an increasingly volatile and destructive climate. But there is hope. Even as the United States withdraws from the Paris Agreement “for Sustainable Development,” cities, states, and private companies are rushing to fill the void. Sustainability is becoming a win-win-win: environmentally, socially, and even financially. The question is, are we too late?

In this episode, Christine Harada gives us an optimism that sustainability can prevail — and tangible proof that we can make it happen right in our own backyard.

Continue reading “Our American Discourse, Ep. 22: While the World Burns, a More Sustainable Future Is in the Making”

How Obama Cut the Deficit in Half — and Made Us Pay the Price

U.S. Budget Deficit Over Time

Remember when everybody was talking about the budget deficit?

It wasn’t that long ago. In fact, it was one of the biggest factors in the 2012 presidential election. After all, it was over $1 trillion at the time.

Today, it’s $500 billion. And falling.

This, of course, is one of Barack Obama’s legacies. He raised taxes on the rich and cut spending across the board. Even with strong growth in mandatory programs like Social Security and Medicare this year, the federal government is going to spend about the same amount of money it spent in 2012 — and less than it spent in 2011. Adjusted for inflation, the government has shrunk.

But it has come at a cost.

Case in point: We have run out of money to fight wildfires.

A couple decades ago, wildfires in the western United States typically consumed 2 to 4 million acres in a year. Nowadays, they consume 6 to 8 million acres. As a result, the cost of wildfire suppression has more than tripled in that amount of time. And yet, Congress continues to allocate funding based on what it cost a decade ago, instead of what it costs today.

So it’s not surprising that Agriculture Secretary Tom Vilsack ran out of money to fight wildfires this year, forcing him to divert money away from programs that preventwildfires — magnifying the problem in years to come.

Traveling to the other side of the country, a Pennsylvania official testified in court earlier this week that he and his fellow regulators didn’t investigate chemical leaks that were allegedly poisoning citizens’ drinking water near natural gas wells.

But this shouldn’t surprise us either. After all, the Associated Press recently discovered that 40 percent of new oil and gas wells haven’t been inspected in this country. The report described the regulators as “so overwhelmed by a boom in hydraulic fracturing, or fracking, that [they have] been unable to keep up with inspections of some of the highest priority wells.”

It’s not like those investigations really matter, right? The Pennsylvania trial revealed that landowners were drinking water with “explosive levels of methane.” Meanwhile, a new paper published this week by researchers at Stanford and Duke showed that even tiny amounts of fracking wastewater can contaminate drinking water with toxic compounds.

So I guess it’s no big deal that regulators are so underfunded that they’re neglecting almost half the country’s drilling wells.

You’d think we would’ve learned this lesson last year when the IRS scandal revealed that auditors were singling out political groups — conservative and liberal, by the way — for investigation without any apparent probable cause.

For years, the IRS has been underfunded. The National Taxpayer Advocate said so. A Boston Globe investigation said so. The Government Accountability Office said so. And they all predicted that underfunding would result in less enforcement and more cutting corners. In fact, they said taxpayers would lose money because every dollar in budget cuts led to seven dollars in lost tax revenue that they would’ve collected if they’d had the manpower to do so.

Then the scandal hit, revealing that IRS officials were so “overworked” that they felt they had no choice but to take shortcuts through the “flood of applications” on their desks.

These are only a few examples of the price we have paid for a smaller deficit.

Barack Obama deserves credit for delivering on his promise to shrink the deficit — a promise that Mitt Romney and his tax cuts would surely have violated — but Americans have to ask themselves whether they really want a smaller government. Do we really want millions of acres destroyed by fire, and drinking water contaminated with toxic chemicals, and government officials harassing the innocent? I know I don’t.

And I also know there’s a better way. It begins with the understanding that, for all its faults and inefficiencies, our government does many good, essential things in our society. And yes, those things come at a price. But that is a price worth paying.

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This op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.

Finally! Someone Explains What All Those Obamacare Numbers Mean!

You’re going to hear a lot about Obamacare this fall, especially from Republicans. They’ll try to convince you that it was a bad deal. They’ll throw numbers at you to make you think that the cost of health insurance is spiraling out of control. In all likelihood, those numbers will be wrong, but how will you know? There are so many numbers flying around out there that even the experts are having trouble keeping track.

That’s why it’s time for a math lesson. After reading this article, you’ll know what the numbers mean — and which ones you should trust. No candidate will be able to fool you.

Millian Medical Index

And you won’t even need a calculator.

First of all, you have to understand that we’re only talking about the individual market, where people buy insurance if they’re not covered by their employer or a government program. That means the “individual mandate” and the “government-run exchanges” only affect 7 percent of the population. For the majority of the population covered by their employer, the cost of health insurance rose less in 2014 than it had in any year since the Milliman Medical Index started keeping track. We can probably thank Obamacare’s cost control provisions for some of that achievement, but that’s a conversation for another day.

For now, let’s focus on the individual market. Before Obamacare, insurers charged low rates to healthy people and high rates to sick people, making insurance unaffordable for the people who needed it the most. Obamacare banned discrimination against sick people and mandated that all people must purchase insurance. Without that mandate, insurers would have raised rates to cover the new sick customers, and healthy people would have refused to pay the new high rates, driving rates up even higher as the population became sicker on average.

When the law was passed, the Congressional Budget Office predicted that premiums would increase 10 to 13 percent, but only because people would be receiving more generous coverage. Obamacare required every health insurance plan to meet basic minimum standards. Additionally, by making it more affordable, more people would want to buy more generous coverage. If you compared plans with the same level of coverage, the CBO predicted that premiums would actually go down.

When states started announcing the premiums for their new “exchanges,” you probably started hearing about “sticker shock.” By comparing the new premiums to old quotes from health insurance websites, Obamacare critics claimed that the law had drastically raised prices. The problem with their argument was that the quotes on the old websites were very unreliable. They rarely reflected what insurers would actually charge you, once they factored in your medical history, age, gender, etc. In fact, many Americans would be denied coverage altogether. Anyone who knew anything about health insurance knew that the website quotes were lowballing the cost.

State governments like California countered by making a more reasonable comparison. They argued that the new exchange premiums were actually lower than premiums for small group coverage, for which they had better data. Obamacare critics weren’t satisfied. Small group plans may have been more expensive than the plans on the new exchange, but that’s because they offered more generous coverage.

The Manhattan Institute, led by conservative health expert Avik Roy, tried to find a middle ground by adjusting the quotes on the health insurance websites, raising the estimates for people who were “surcharged” or denied, and finding that Obamacare increased prices by 41 percent.

The problem with Roy’s analysis was that his adjusted numbers didn’t match reality. Before Obamacare, Roy suggested that 27-year-olds — the ones who were being hit the hardest, he argued — paid between $1,596 (men) and $1,980 (women) in average annual premiums. But the Kaiser Family Foundation conducted a survey in 2010 and found that they were actually paying closer to $2,630. Across the board, Roy had underestimated the pre-Obamacare cost of health insurance, and he wasn’t including costs that consumers paid out of their own pockets.

Last month, three Wharton economists used the Current Population Survey to calculate a more accurate estimate of the average pre-Obamacare premium. They found that it was basically identical to the lowest-cost plan available on the Obamacare exchanges. Compared to more expensive plans, of course, it was cheaper, but when they factored in out-of-pocket costs, they found that the new plans were 14 to 28 percent more expensive than the old ones, only slightly higher than the CBO’s original predictions.

Monthly Subsidized Premiums on Federal Exchange

But wait. The Wharton study only counted people who purchased insurance, not people who were denied or who refused because the insurer’s quote was too expensive. We’ll never know what that quote was, but we can assume it would significantly raise our estimate of the average premium. To ignore those people — and there were millions of them — is to say that they don’t matter, even though Obamacare was designed specifically with them in mind.

The Wharton study also doesn’t include the tax credits that the federal government uses to subsidize low-to-middle income buyers on the exchanges. Last month, the government announced that 87 percent of shoppers received a subsidy on the federal exchange, bringing their average monthly premium down from $346 to only $82!

That’s a 76 percent reduction, and it more than makes up for the 14 to 28 percent premium increase, which may not be much of an increase after all if you include people who didn’t buy insurance in the past.

Bottom line: On average, Obamacare clearly lowered the cost of health insurance.

Sure, some people will pay higher rates, but you have to remember that those people only paid low rates in the past because insurers were discriminating against sick people. The new market is much fairer and more affordable for more people — a fact that you might want to point out to Republicans on the campaign trail this fall.

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Similar versions of this op-ed were published in today’s South Florida Sun-Sentinel and Huffington Post.

Guess Who Tried to Prevent the VA Crisis — and Who Stood in Their Way!

The Three Trillion Dollar War

Linda Bilmes and Joseph Stiglitz predicted the VA scandal.

Back in 2008, the eminent researchers — one a professor at the Harvard Kennedy School, the other a Nobel laureate in economics — published a book called The Three Trillion Dollar War, where they argued that most Americans were drastically underestimating the cost of the Iraq War. They didn’t specifically describe the events that have unfolded in recent weeks, but they did point out the enormous burden that would be placed on the VA system as veterans returned from Iraq — a burden that we were not preparing for.

And that was before the surge in Afghanistan.

Upon taking the oath of office, Barack Obama tripled U.S. troop levels in Afghanistan, sending over 60,000 troops into combat. Only now, five years later, have troop levels reverted to the level they were at when he took office. So you can add 60,000 troops for five years on top of the costs projected by Bilmes and Stiglitz — projections that were verified and replicated by the Joint Economic Committee of Congress, as well as Nobel laureate Lawrence Klein, the father of modern economic forecasting.

And yet, Congress refused to boost the VA budget.

For years, discretionary funding for the VA health care system had been growing at approximately 6 percent per year, slightly less than health care costs for the average American family, making it the most cost-efficient system in the country. Meanwhile, it ranked at the top of quality rankings, better than all its private competitors, year after year. It was the best medical care system in America.

That is, until the troops came home.

“Republicans beat back a Democratic attempt to provide almost $2 billion in additional health care funding for veterans,” reported the Washington Post in 2005, “rejecting claims that Department of Veterans Affairs hospitals are in crisis.”

The following year, Bilmes told ABC News, “In 2004, the VA had a backlog of 400,000 cases. Last year it was 500,000 cases. Now the backlog is 600,000 cases. That’s just in two years. And the big wave of returning Iraqi veterans has not even hit yet.”

And yet, the VA budget kept growing by 6 percent per year, as if the war didn’t exist at all.

As if that wasn’t a big enough problem… “Proposed cuts in Department of Veterans Affairs spending on major construction and non-recurring maintenance threaten to derail efforts to update the department’s aging infrastructure,” reported the Washington Post in 2012. And so, Democratic Senator Patty Murray led the charge to boost the VA’s construction funding, only to have it beat down by Republicans.

Later that year, Paul Ryan, the Republican chair of the House Budget Committee, released the party’s annual budget proposal. Had it become law, the VA would’ve sustained billions of dollars in budget cuts, forcing smaller facilities to shut down in rural areas.

So it wasn’t surprising to Senator Murray when allegations surfaced of VA hospitals lying about the number of veterans on their waiting lists because they didn’t want the world to know that they were unable to give their patients lifesaving treatments. “In an environment where everybody is told, ‘Keep the cost down. Don’t tell me anything costs more.’ — it creates a culture out there for people to cook the books,” she said in a recent interview.

Who would’ve ever thought, after years of relentless cost-cutting in the halls of Washington, that the federal government actually spends our money on important stuff? Who would’ve thought that wars cost money, and tax cuts cost money, and maintaining our infrastructure costs money? Not the Republicans, that’s for sure. While the Bush administration plunged us into two wars and cut taxes on the rich, who were already taking a bigger piece of the pie than they had since the Roaring Twenties, Republicans in Congress were blocking every Democratic attempt to give the VA the funding they needed to give our veterans the medical care they were promised. And then, when the Obama administration tried to correct this funding crisis, Republicans responded by proposing deeper spending cuts.

Let this be a warning to every politician and every voter who thinks we can cut our way to prosperity: Those dollar figures represent real services that the government provides to real people. Every cut has a cost, and not just in money. In lives.

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This op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.

The Ryan Budget Is an Affront to Economics and American History

A few years ago, when the unemployment rate was near its peak, two Swedish economists, Stefan Eriksson and Dan-Olof Rooth, conducted an experiment. They wanted to find out just how hard it was to get a job if you’d been unemployed for a long time. They sent 8,466 fictitious job applications to employers across Sweden. They varied the number of months that each “applicant” had been unemployed. For some, it was a matter of days. For others, several months. Then they waited for the employers to call them back for interviews.

Overall, one out of every four job “applicants” received an interview. Unsurprisingly, it was higher for high-skill jobs and lower for low-skill jobs. What was more significant was the effect of unemployment on the fictitious resumes.

Eriksson and Rooth found that unemployment didn’t matter if it lasted less than six months. Applicants who had been unemployed for the past six months were just as likely to receive an interview as applicants who just quit their job yesterday. If they had been unemployed for nine months or more, however, they were 20 percent less likely to get an interview, even if they had the same work experience, education, and other qualifications as everyone else.

In the United States right now, over 3 million people have been looking for work for nine months or more — and that doesn’t include the millions more who gave up searching because they couldn’t find anything.

Eriksson and Rooth have mostly confirmed what we already knew, but their experiment adds more specific and more reliable evidence to the overwhelming conclusion that these people need our help. Fortunately, another paper, published alongside Eriksson and Rooth’s, proves that we can help them.

While Eriksson and Rooth were sending out job applications, Emi Nakamura and Jón Steinsson were reading military procurement forms.

Both economists at Columbia University, Nakamura and Steinsson were trying to figure out what effect the federal government has on the economy when it increases its spending. They found a database at the Pentagon that summed up all large military purchases in every state in the U.S. from 1966 to 2006. It wasn’t exactly an experiment, but it was close enough.

The danger in estimating the effects of government spending is that it’s hard to tell whether states had faster economic growth because they received more funding — or whether they received more funding because they happened to enjoy faster economic growth. With military purchases, Nakamura and Steinsson knew they didn’t have that problem. States don’t receive military contracts based on the state of their economy. The two are usually independent.

Nakamura and Steinsson compared military spending in each state with subsequent economic growth over the course of four decades, and they found that a 1 percent increase in government purchases resulted in a 1.5 percent increase in income per person in that state.

Then they calculated the effect on the national economy. When the Federal Reserve couldn’t lower interest rates any further — the situation we’re in now, known as the “zero lower bound” — Nakamura and Steinsson found that a 1 percent increase in government purchases resulted in at least a 1.7 percent increase in national income per person.

In other words, the federal government can stimulate the economy and create jobs, and the resulting increase in income will far exceed any cost to the taxpayers.

Budget ProposalsLike Eriksson and Rooth, Nakamura and Steinsson aren’t telling us something we don’t know, but they are giving us another valuable piece of evidence that our government is headed in the wrong direction.

At a time when the long-term unemployed need more support, our government is giving them less. The leadership of both parties have agreed to shrink the federal budget drastically over the coming decade, and now Paul Ryan, the Republican chair of the House Budget Committee, has issued a new proposal that will cut the budget even further, to the point where most programs that support the unemployed will be half the size that they were during the Reagan administration, relative to the size of the economy.

This is a cruel, counterproductive path we are on, and that is not a statement of mere opinion. It is the inescapable conclusion of data-driven, cutting-edge economic research based on real-world evidence and the accumulated lessons of American history.

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This op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.