Our Editorial in the New York Times: “We Stand For Access”

As a member of the American Society of Law, Medicine & Ethics, I’m proud to add my name to this letter to the editor in the New York Times:

To the Editor:

We, many of the nation’s health law and health policy professors from law, medical, public health and graduate schools across the United States, write to address one of the most fundamental issues impacting our country: the potential repeal and replacement of the “Affordable Care Act” (“Obamacare”). It is clear that the House-passed “American Health Care Act,” as well as the legislation likely to be considered by the Senate, will cause severe, lasting harm to all of us, especially our society’s most vulnerable and middle class.

Today we raise our voices to oppose these proposals. While the Affordable Care Act has its shortcomings that should be fixed, the current proposals are merely “repeal,” with no effective “replace.” These proposals are wrong, and must be rejected. At a time when we are seeing significant declines in the number of uninsured and inadequately insured in our country, the House and Senate proposals represent a giant step backward. By cutting Medicaid funding, eliminating federal assistance for families securing private coverage, and encouraging individuals to either not purchase insurance or to buy barebones coverage, these proposals will result in a less equitable, less accessible system of health care. Ultimately, the public’s health will decline as needed care is forestalled or not sought, and costs will rise as a shrinking pool of Americans with “good” insurance pay more to subsidize those without.

Given the many health care challenges that we face— an aging population needing an increasing amount of health care services; a young and middle age population facing growing rates of obesity, heart disease, and other chronic conditions; a rapidly expanding “gig” economy of independent contractors needing to secure insurance without employer subsidies; and a rising number of individuals addicted to new and more prevalent illegal drugs— reducing access to health care services simply cannot be an acceptable policy option.

We also are deeply concerned about what this new legislation portends for women and children. Currently, the United States leads the developed world in maternal mortality. More women die during childbirth in the United States than in any other Western nation. Despite the urgency to protect women’s health and strive for better outcomes, lawmakers have specifically targeted maternal health coverage for cuts.

The same is true for infants in the U.S, whose health care is also at risk with these proposals. Our nation ranks 50th in the world on infant mortality. By shifting more families off of Medicaid, and creating a larger uninsured and under-insured population, children’s access to health care services will decline.

The Affordable Care Act protects all Americans from discrimination based on preexisting conditions, expands coverage for mental health treatment and drug addiction, and fosters preventive care. Millions of Americans have health insurance for the first time, and we are at an all-time low in the percentage of citizens who lack coverage. The reform legislation under development proposes to wipe away these essential gains, returning Americans to the pre-Affordable Care Act era of coverage limitations and exclusions thwarting the provision of essential health care services.

In 1966, Dr. Martin Luther King explained to a group of health providers, “Of all the forms of inequality, injustice in health is the most shocking and inhumane.” We agree.

Saving Capitalism From a Painful Demise

Below is my new article in the Winter 2015 issue of the Wharton Magazine. Thanks to editor Matt Brodsky for allowing me to reprint it here!

Retailers Need Consumers

American business leaders rallied around Franklin Delano Roosevelt in 1932 during his candidacy for the presidency, after which he immediately embarked on the most progressive legislative agenda in U.S. history to tackle the Great Depression. From today’s vantage point, it may seem surprising that titans of industry, executives from General Electric to Standard Oil to IBM, not only contributed to Roosevelt’s campaign but helped author many of his famous New Deal reforms. To the men who ran these companies, it was a simple matter of fiduciary responsibility — to current shareholders and to future ones — that they should ensure a more equitable distribution of prosperity, lest their own wealth be dashed to bits on the jagged rocks of a shrinking economy.

Today, we face a similar predicament. The great challenge of business in our time is reversing the destabilizing threat of inequality. While at first this may seem anathema to our profit-maximizing mission, distribution of income lies at the very heart of sustainable capitalism.

For this reason, today’s titans of industry have stepped forward to protest the growing distance between them and the rest of the country. Warren Buffett, Lloyd Blankfein, Stanley Druckenmiller, Bill Gross — legends whose lives and words are studied and idolized at the Wharton School — have all gone public with the wise advice that we steer away from those jagged rocks.

They are not alone in their concern. According to a recent analysis by the Center for American Progress, 68 of the top 100 retailers cite the flat or falling wages of the average American household as a risk to their business — a number that has doubled in the past eight years. A recent poll of small businesses similarly found a strong majority of them in favor of raising the minimum wage.

These business leaders sense an essential truth about our capitalism: Workers are consumers. They spend what they earn — or what they borrow. While the latter may work for awhile, it has limits — and calamitous risks. The only sure way to grow the economy in the long run is to grow consumer spending — and that means growing worker incomes.

In recent decades, workers’ incomes have not grown much, on average. Since the beginning of the Great Recession, the average household has lost 8 percent of its income, after adjusting for inflation. All the growth — and then some — has gone to the richest 10 percent of Americans. And most of that growth — 95 percent of total growth, to be precise — has gone to the richest 1 percent. And most of that growth has gone to the richest 0.1 percent. And so on.

Unsurprisingly, economic growth has been slower since the advent of this new trend. From 1950 to 1980, real GDP grew 3.8 percent per year, versus only 2.7 percent from 1980 to 2010. On the rare occasions when it has approached its previous faster rate, it was fueled by unsustainable borrowing. This is no coincidence. Recent work by economists Özlem Onaran and Giorgos Galanis has shown that most developed countries experience lower growth when the share of their income going to wages (as opposed to profits) declines. In the United States, for example, every 10 percent decline in the wage share causes the economy to shrink by 9.2 percent. In fact, that has been the experience of the global economy as well.

High wages are what economists refer to as a “positive externality.” They generate “spillover effects” that benefit the people who don’t pay for them. When workers receive high wages, they invest more in health and education, increasing their productivity and reducing the costs we all pay for a sicker, less-informed population. They motivate firms to invest in advanced technologies to reduce labor costs, making them more innovative and globally competitive. Workers who receive high wages are less likely to go out on strike, vote against free trade and immigration, protest in the streets, shirk on the job and commit crimes. That’s why, in an analysis of 19 developed nations from 1960 to 2004, economists Robert Vergeer and Alfred Kleinknect found that higher wage growth consistently led to higher productivity growth.

In other words, low wages may be good for one firm, but high wages are better for all firms. Yet many businesses would like to raise wages, but they fear losing ground to their competitors.

The only solution is collective action.

Economists have a collective action for precisely this sort of “coordination failure”: taxing the negative externality and subsidizing the positive. It is time that we recognize inequality for the negative externality that it is, slowing our productivity growth, roiling our markets with volatility, gridlocking our political system, and starving our economy of willing and able consumers. Inequality is a risk to our businesses, and it ought to be treated as such.

We should therefore see taxes not as penalties but as investments in a better, more equitable, more sustainable system. We should strive to prevent a “race to the bottom” in workers’ incomes; if we don’t, the day will come when no one will be left to pay the profits our shareholders demand. Business schools should teach courses about this issue, and business leaders should address it in their boardrooms. It is not merely a political issue. It is very clearly the business of Business.

Joseph Kennedy thought so when he went to work for President Roosevelt. As one of the nation’s most notorious stock manipulators, Kennedy might have been the last person we’d expect to join Roosevelt’s crew, but when Roosevelt named Kennedy as the first chairman of the Securities and Exchange Commission, he saw it as an opportunity to save the market from itself.

“We of the SEC do not regard ourselves as coroners sitting on the corpse of financial enterprise,” said Kennedy in a radio address to the nation. “On the contrary, we think of ourselves as the means of bringing new life into the body of the security business.”

As Wharton graduates, let us think of ourselves in the same manner, and act accordingly.

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.

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.