The Poor Don’t Lie and Cheat Any More Than the Rest of Us

Those no-good, dirty, rotten poor people. They lie, and they steal, and they spend our money.

Or so I’ve been told by readers since my last op-ed column, where I did the math proving that government benefits aren’t generous enough to make people want to be poor.

But you’re just doing the legal math, said one reader. What about what goes on under the table? Surely all that welfare fraud is proof that poverty can be the good life, if only you have the gumption to bilk the taxpayer.

Food Stamp Error RateFirst of all, the government has conducted investigations of fraud in programs like welfare and food stamps, and they’ve found it to be shockingly low. Less than 2 percent of the programs’ budgets get ripped off. That’s lower than the private sector, where the average business loses 5 percent of its annual revenue to fraud.

Second, and perhaps more surprising, investigators have found that the majority of government fraud is committed by the middle class and the rich, not the poor!

After Hurricane Katrina, for example, the investigative reporter Eric Schnurer discovered that most of the $500 million lost to fraud did not go into the pockets of the poor people who lost their homes but rather to the “shifty contractors” who were supposed to be rebuilding the homes.

Similarly, reports Schnurer, “Medicare and Medicaid fraud is largely committed not by patients — very few people are trying to rip off taxpayers to obtain unneeded spinal taps or root canals — but by providers: unscrupulous (or sometimes just incompetent) doctors and hospitals billing for procedures the patient didn’t need or didn’t receive.”

Throw in another $100 billion a year in defense contractor fraud, and you quickly find that fraud is more likely to make the rich richer than it is to make the poor want to be poor. It’s redistribution alright, but the wealth is moving up, not down, the ladder.

Once upon a time, I might have been surprised by these findings, but in writing my new book Letter to the One Percent, I found a consistent pattern in the research literature. Psychologists have conducted many experiments on the rich and the poor, and they’ve found that the rich are less likely to have empathy for other human beings. They’re more likely to break the rules and feel that they’ve earned the right to do so. They’re less likely to think of the moral consequences of their actions, especially when money is involved, and they’re more likely to put their own needs ahead of others’.

The notion that the poor are uniquely morally deficient, it turns out, is completely backward. They’re actually more virtuous, on average, than the rich.

And yet, we have politicians who assume that the poor are less trustworthy and therefore less deserving of our help. On the 50th anniversary of the War on Poverty, they took to the floor of Congress and criticized “single mothers” and “deadbeat dads” for dropping out of school and having babies and cheating the system. Then they proposed a budget that would cut government benefits for tens of millions of Americans.

Meanwhile, in Florida, they’re fighting a recent court decision that struck down a law requiring drug testing of all welfare applicants. But they don’t seem concerned about corporate executives who apply for billion-dollar subsidies. They’re not clamoring for drug testing doctors who receive Medicare payments or retirees who receive Social Security checks or Congress members who receive six-figure salaries.

Why? Because they assume that the poor are more likely to waste taxpayers’ money on drugs. Well, I’ve got news for them: The rate of illicit drug use is no higher among the poor than it is among the rest of us, and the rate of alcohol addiction is actually lower.

Human nature is human nature. There are liars and cheaters in every walk of life. But the facts are irrefutable: The poor are not poor because they lie and cheat, nor are they responsible for high taxes and mounting debt. If anything, they have contributed less to fraud and waste than the rest of us. The next time you hear Senator Marco Rubio and his Republican colleagues say otherwise, remember: That’s a stereotype, and it’s wrong.

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

Do the Math: People Don’t Choose to Be Poor or Unemployed

Long-Term Unemployment HistoryGod, I wish I were poor.

And unemployed. That’s the good life. Poor and unemployed.

I mean, just look at all the cool stuff you get. Medicaid and welfare. Food stamps and unemployment insurance. And don’t forget public housing.

This stuff is so awesome that it’s like a “hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.” That’s what Paul Ryan says, at least, and as the Chairman of the House Budget Committee, he’s supposed to know these things, right?

According to Ryan and his fellow Republicans, if I have unemployment insurance, I’ll never want to work again. Senator Rand Paul says it will cause me “to become part of this perpetual unemployed group.” With an average benefit of $269 per week, I’ll be living on Easy Street.

This is a common belief. There’s an email making the rounds from a 54-year-old consulting engineer who makes $60,000 a year and has to pay $482 a month for health insurance under Obamacare, but that’s not his biggest complaint. He’s really upset that his 61-year-old girlfriend who makes $18,000 a year only has to pay $1 a month for health insurance.

He thinks she has it so easy that she can afford to pay more, but he’s wrong.

On average, Americans earning $18,000 a year pay more than $3,000 in taxes, so she really only has $15,000 leftover to pay her expenses. She lives in Monterey, CA, where the average rent and utilities add up to $15,000 a year. So, after paying taxes, rent, and utilities, she’s completely broke. She doesn’t have money for food, let alone health insurance.

The consulting engineer thinks people will choose her lifestyle over his. “Heck, why study engineering when I can be a schlub for $20K per year?” he asks. (Nice way to talk about your girlfriend, by the way.) To which I’d like to reply: If being a “schlub” is so attractive, why don’t you do it? Why don’t you quit your engineering job and join the “$20K per year” club?

For that matter, why don’t we all quit our jobs right now and start collecting unemployment insurance? How far do you honestly think we can stretch $269 a week?

I’ll tell you how far: It would cover less than half of the basic necessities for the average American family.

That’s why unemployment makes you more likely to have to borrow money from a friend, withdraw money from your retirement savings, and have trouble paying your medical bills, rent, and mortgage. It makes you more likely to have a stroke or heart attack, lose self-respect, have difficulty sleeping, and seek professional help for anxiety and depression. It makes you more likely to kill yourself, kill others, and drink yourself to death.

And if you’ve been unemployed for more than a few months, most employers won’t even look at your résumé. It doesn’t matter how qualified you are. It’s like you don’t exist anymore.

The last time it was this bad, with long-term unemployment close to 3 percent of the workforce, was the peak of the 1980-81 recession. Back then, the federal government kept extended unemployment insurance in place for almost two more years, until the long-term unemployment rate fell close to 1 percent. In fact, that’s been standard operating procedure for every recession in the modern era, including 1990-91 and 2001. But now, with long-term unemployment as high as it’s been since World War II, Republicans have killed the emergency unemployment insurance program, and they’re fighting Democrats’ efforts to restore it.

They don’t seem to care that there are 2.9 applicants for every job opening. They don’t seem to care that people on unemployment insurance actually spend more time searching for work than their fellow unemployed who are ineligible for benefits. They’re sticking to their story.

On the 50th anniversary of the War on Poverty, many Americans are still operating under the assumption that people choose to be poor and unemployed, that they’d rather be lazy than rich, that they can afford the basic necessities of life. But the numbers tell a different story.

I don’t wish I were poor. Or unemployed. And I sure don’t wish it on anyone else. If you did the math, neither would you.

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This op-ed was recently published in the South Florida Sun-Sentinel and the Huffington Post.

Obamacare Is Not a Reason to Give Up on Government Programs

Health Insurance Enrollment Under Obamacare

The biggest myth of the Obamacare debate goes like this: The failures of Obamacare prove that the government can’t be trusted to run our health care system.

This single myth is so powerful that it has become the rallying cry of every Republican who’s considering a run for the presidency in 2016. It has single-handedly brought the Tea Party back to the forefront of American politics. It has been uttered on every cable news channel everyday since HealthCare.gov launched on October 1.

And it is wrong on every possible level.

First of all, the premise is wrong. Obamacare cannot be a litmus test for government-run health care because Obamacare is not government-run health care.

Obamacare creates an online exchange where people can buy private insurance. The government merely sets basic standards that every plan has to meet and gives consumers a place where they can locate those plans. The rest is up to the free market.

This simple concept has been so twisted and misunderstood that many Americans actually believe that the government will have access to their medical records. This is completely false. Under Obamacare, the IRS only needs to verify that you have health insurance. It does not — and cannot — see any of your private health information.

The second problem with this myth is that it’s too soon to judge Obamacare. All new software goes through a trial period. It’s frustrating, but it’s inevitable — and temporary.

Back in 2005, the same thing happened when the Bush administration launched the website for Medicare Part D. First, they had to delay the launch. Then, when they finally rolled it out, it didn’t work at all. Then they got it working, but it was too slow and full of inaccuracies.

Every major news outlet carried stories about the failures of Medicare Part D. According to polling data, the program was actually less popular than Obamacare is today.

Within a few months, the glitches were fixed. Medicare Part D now has a 90 percent approval rating. No one remembers the initial bugs in the system.

The third problem is that many of the so-called “failures” of Obamacare aren’t actually Obamacare’s fault. Remember that Obamacare wasn’t supposed to create one big national insurance exchange. Each state was supposed to create its own insurance exchange, but the Republican governors in half of the states refused to follow the law.

As I wrote back in May, “These Republican governors, who say the states are better at governing than the feds, ceded enormous power to the federal government, violating a core principle of their party’s ideology. And then they crowed that Obamacare was a failure because it required a massive federal bureaucracy — the very bureaucracy that they chose to create!”

What’s worse, these governors didn’t announce their decisions until 2013, so it’s completely false to assert that the federal government had three years to build a national online exchange. They really only had a matter of months.

The fourth problem with this myth is that Obamacare is not a failure. This week, the government announced that more than 500,000 Americans signed up for health insurance through Obamacare in its first month of operation.

Think about that. Obamacare, with all its kinks and snafus, has already improved the lives of over half a million people.

You’ve probably heard that 106,185 people have signed up for health insurance through the new online exchange, but even more impressive is the 396,261 people who got their insurance through Medicaid or CHIP.

In all the hubbub about HealthCare.gov, we seem to have forgotten the Medicaid expansion under Obamacare, and the media hasn’t bothered to remind us because…well, it’s going so smoothly.

And that brings us to the fifth and most fatal flaw in this myth: The biggest success story from Obamacare has been Medicaid, the one part of the law that actually is government-run insurance. To say that the government can’t be trusted is to say that the millions of Americans who benefit from Medicare and Medicaid and CHIP don’t count and don’t matter.

That’s an ugly thing to say, but if you listen closely, you can hear it all around you. Every time the government tries to help the less fortunate, there is always a contingent of Americans who oppose it. But that doesn’t mean we shouldn’t help them. And it certainly doesn’t mean we can’t.

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An abbreviated version of this op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.

Reader Request: Who Will Benefit from ObamaCare?

CBO Estimates vs. Actual Obamacare Premiums

A reader asks: Under ObamaCare, what will happen to the millions of people who don’t file tax returns, are illegals, etc? Will there be more uninsured than before? Will this new law raise the cost of health insurance?

The individual mandate does not apply to undocumented immigrants, who are also ineligible for Medicaid and the subsidies available under the Affordable Care Act. To answer the question that’s really on your mind: The new law does not allocate any of your tax dollars to them.

Where it does allocate tax dollars is to American citizens and legal immigrants who cannot afford health insurance. It’s true that some of these folks don’t file federal income tax returns because they don’t earn enough income. (They still pay a lot, however, in state, local, and payroll taxes.) They will not be eligible for the subsidies offered on the new exchanges because those subsidies come in the form of tax credits. However, if they work for a company that has more than 50 employees, they will be able to receive health insurance from their employer. If not, their fate likely depends on geography. So far, about half of the states have chosen to expand Medicaid eligibility up to 133 percent of the poverty line, all of which will be covered by federal funding. If you’re poor and uninsured and you live in one of the states that refused to expand Medicaid, you’re S.O.L., as the kids say.

By the time the ACA is fully implemented a decade from now, the Congressional Budget Office projects that it will reduce the number of Americans without health insurance by 25 million, leaving 31 million uninsured. That’s not a complete solution, but it sure is a giant leap in the right direction. It will certainly save thousands of lives.

The CBO also predicted that the ACA will lower the cost of health insurance for the individual market, where the exchanges and subsidies are targeted. Critics latched onto the prediction that people will pay 10 to 12 percent more, but that’s a misleading statistic. They’ll be paying more because they’ll be receiving more. The CBO predicts that people will be able to afford better plans; hence, the higher cost. When they compared policies with the same quality, the CBO found that premiums will fall by 14 to 20 percent — and that doesn’t include the subsidies from the government that will make the plans even cheaper.

As it turned out, the CBO was wrong: Under ObamaCare, premiums are falling more than 20 percent!

The first evidence of this success came in May when California announced the premiums that insurers will be charging on the individual market exchange next year. Plans that were supposed to cost $400 to $500 per month are actually going to cost $200 to $300.

And in case you thought California was a fluke, New York just released its individual market premiums for 2014, and they’re going to be 50 percent lower than what they are now!

The New York rates are even more newsworthy because they prove that the individual mandate is essential and cannot be postponed.

In 1993, New York passed a law requiring insurers to charge everyone the same price. As I noted in my op-ed last week, without an individual mandate, this is a recipe for extremely high premiums because healthy people will choose not to buy insurance, leaving only the sick people who are willing to pay high rates because they need the insurance so badly.

That’s exactly what happened in New York. For two decades, they’ve had the highest insurance costs in the country. Currently, only 17,000 people purchase health insurance on their individual market.

But all that will change in 2014 for one reason and one reason only: ObamaCare. The individual mandate and the subsidies will bring healthy people into the market, spreading the costs of health care among less expensive patients.

It’s important to remember that we’re only talking about the individual market. If you get insurance from your employer or the government, these numbers don’t apply to you.

It’s also important to note that someone has to pay for those subsidies. This fact alone has caused some confusion, so let me add one more myth to last week’s listMyth #5: ObamaCare will force everyone to pay higher taxes.

There are a few new taxes under the ACA, like 10 percent on indoor tanning and a higher penalty on non-medical withdrawals from Healthcare Savings Accounts, but the majority of Americans will never have to pay these taxes. The only taxpayers who will definitely face a higher rate are the richest 2 percent, who earn more than $200,000.

In other words, the cost of ObamaCare is far less than its critics would have you believe.

We Don’t Have a Government Spending Problem. We Have a Health Care Problem.

Nobody’s happy about the sequester, the government spending cuts that took effect a few days ago, but most people think it was a necessary evil.

Evil? Maybe. Necessary? Absolutely not.

In June 2011, before Congress passed the Budget Control Act, the Congressional Budget Office released its annual “Long-Term Budget Outlook.” This is the best nonpartisan projection we have of what the federal budget would look like without the sequester.

The CBO considered two possibilities.

First, what would the budget look like if Congress did absolutely nothing? The Bush tax cuts would expire as scheduled, Obamacare would take effect, and Medicare payments to doctors would remain at current rates. They called this the “Extended-Baseline Scenario.”

Second, what if Congress stopped all those things from happening? They extended the Bush tax cuts permanently, repealed Obamacare, and raised Medicare’s payment rates for doctors every year. They called this the “Alternative Fiscal Scenario.”

The difference is stunning. In the Extended-Baseline Scenario, the government’s debt never increases. Relative to the size of the economy, it’s the same in 2033 as it was in 2013. Meanwhile, in the Alternative Fiscal Scenario, it skyrockets. By 2033, it’s double what it was in 2013.

The Alternative Fiscal Scenario is what scared legislators into passing the Budget Control Act. They decided to slash government spending across-the-board by over $2 trillion over the next decade in order to avoid a massive increase in debt.

But why were they looking at the Alternative Fiscal Scenario? After all, the Extended-Baseline Scenario showed that the debt problem disappeared if Congress simply did nothing. Why didn’t they just…do nothing?

Well, if they did nothing, taxes would go up, and doctors’ payments wouldn’t. The politics speaks for itself.

Instead of doing nothing, Congress made 84 percent of the Bush tax cuts permanent at the beginning of this year, and of course, doctors’ payments continue to rise.

And that’s why they needed the sequester to rein in rising debt.

But that doesn’t explain why the sequester was an across-the-board cut in government spending when, according to the CBO, we don’t have an across-the-board spending problem.

Let’s look at the 2011 Budget Outlook one more time.

In the Alternative Fiscal Scenario, it’s true that spending increases dramatically — from 24.1 percent of our nation’s income in 2011 to 33.9 percent in 2035. But it’s not across-the-board. In fact, if you exclude health care programs and interest payments, federal spending actually decreases from 17.1 percent in 2011 to 14.6 percent in 2035!

In other words, we don’t have a spending problem. We have a health care problem!

If we had the health care costs of the average industrialized country – which has a higher life expectancy than us, by the way – we’d save over $2.5 trillion over the next decade, far more than the sequester.

And yet, looking at these numbers, our legislators decided to slash government programs across-the-board, the vast majority of which nothing to do with the problem. They chose to kick 70,000 kids out of Head Start; eliminate funding for 1.2 million disadvantaged students; serve 4 million fewer Meals on Wheels; eliminate nutrition assistance for 600,000 women and children; kick 120,000 families out of low-income housing; kick 100,000 homeless people out of shelters; conduct 2,100 fewer food inspections; conduct 1,200 fewer workplace safety inspections; treat 373,000 fewer mentally ill Americans; employ 1,000 fewer federal law enforcement agents; prosecute 1,000 fewer criminal cases; issue 1,000 fewer science research grants; guarantee $540 million less in loans to small businesses; conduct 424,000 fewer HIV tests; and treat 7,400 fewer AIDS patients. And that’s only this year, when less than 10 percent of the sequester will kick in.

All because they didn’t want to deal with the real problem.

Last month, the CBO published a new Budget Outlook. Including the effects of the sequester, it shows debt declining for the next few years, and then in 2019 it starts to rise again. That’s the dirty little secret that Congress won’t tell you: Even $2 trillion in spending cuts can’t stop the rise in debt…because spending simply isn’t the problem.

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