Paths to Tax Reform

The Republicans have two basic options. They can go for expediency, raising the deficit in the short-term for tax cuts, avoid stepping on any toes, or they can go for real reform that involves dealing with blowback from special interests and being fiscally responsible.

It’s a hard choice. The early signal is they will go for the coward’s cut, since they are seeking to use reconciliation and not starting from a place of bipartisanship. It’s the route used under President George W. Bush, which is why his tax cuts expired.

But let’s say they want to go the responsible route, instead. How do you deal with the real estate lobby that will count the sitting president among its members? Or the carbon fuel lobbies that will want to keep their own favorite tax toys? Or pharma?

One way, maybe the easiest, is to reduce all of their loopholes equally. If they all get a haircut, it’s hard for any one of them to claim they were singled out. And the stock reply to their wailing becomes, “We did it across the board, fellas. Suck it up. Walk it off.”

Now, some of those groups may find pressure points to lean on, but if they are all pushing at once, it’s possible that they create a keystone arch of pressure, all pushing against each other, and leaving a pocket that allows the thing to pass. The weak point, they keystone, would be the president, who would probably cave on real estate treatment, and the arch would collapse.

Another option would be a sort of parametric tax code. Basically, you would formulate a point system based on size of business (gross revenue, number of employees, etc.) among other factors. Then the business can spread their points among various tax strategies as they see fit. Some might have more points in capital investment, while others might have more points in employee perquisites. But the overall deductible income would be minimized, and the tax code could be modified not only to strengthen or weaken the areas of deduction, but to increase or decrease the points available.

We really do need tax reform, and if the Republicans would take it seriously they could do a lot of good. Nobody expects them to set the rates high enough, but that’s the beauty of the tax code: the Democrats or future generations can always increase the rates to a responsible level. Right now, it’s more important to see the code simplified, even if it means the rates aren’t right.


How About a Bill for Comprehensive Migration Reform

While the GOP decides whether to curtail legal immigration, how to handle tax reform, and generally struggles with existential doubts, they should instead be focusing on ways to make it easier for folks to move around (something Trump agrees with me on: The Washington Post: 3 August 2017: “Trump is right about this: Americans need to move where the jobs are”; too bad he’s not pushing for legislation to make it easier). They should work on things like making state taxes easier when you have moved across state lines so that you don’t have to struggle through three income tax codes in a year.

The modern economy concentrates too many workers in places like San Francisco, California. That’s driven housing prices too high, not to mention other woes. And part of the reason for that concentration is the concentration itself, like a gravity well, sucking talent in so that it cannot escape.

But spreading some of that talent outward would enhance the regional and national economy in the same way that immigration does: by adding more basic spending rather than marginal spending. The cost of moving is too high, though, especially for businesses that would have to pay for relocation costs for employees plus all of the red tape involved in setting up new offices.

One of the big ones for a business that might want to cross state lines is health insurance, of course. They have to deal with a whole different network and insurer. Making the system into a nationwide system, like most modern countries have, would go a long way to easing that burden.

Transportation is another big piece of the migration puzzle. With modern connectivity, train travel should be able to make a comeback, as a five hour train isn’t as bad compared to a much shorter plane if you’re connected the whole way. If people must work in the biggest cities, but housing is expensive, they could at least have better commutes where they aren’t staring at traffic.

The RAISE Act is undoubtedly a bad deal, which will cause economic drag, but that drag is only added to the existing drag that isn’t even acknowledged. We need to improve on the story of how Americans can move about this country while being productive and comfortable in the knowledge that they aren’t going to uproot only to find nothing when they arrive.

But another factor in all of this is that as workers move, it will cross-pollinate cultures, ideas, politics, which leads to new businesses and creations, not to mention shifts in who votes where. At least one of the factors in post WWII prosperity was the interactions of millions of young folks with peers from all over the country (nevermind that they took place in Europe amid horrific violence).

analogies society

Healthcare is Jars of Jellybeans

Insurance functions on risk pools. Think of this as the old jar of jellybeans, where you guess how many of each type are in there. In this case, each person pays to put their jellybean in a jar. There are all kinds of jellybeans, and insurers pay the sum of what’s in each jar, using the money people paid to add their own jellybeans. You want a nice mix of lots of low-cost jellybeans and fewer expensive ones, so that your total doesn’t cost too much.

The individual mandate required people with low-cost beans to add them to the jars. But the Republicans want to do away with that provision, because they believe people should be free not to add their jellybeans if they don’t want to. Fine. But without the mandate, there has to be some other way to balance the mix of jellybeans, if the system is going to work. The Republicans haven’t offered a good solution there.

The main pre-ACA way to deal with the known expensive jellybeans was to set aside jars just for them. The government would subsidize that jar, trying to keep the main jar cheaper. But the government would underfund the high-risk pools, meaning not everybody could put their beans in the jar.

The ACA tried to move the pre-existing jellybeans into the main jar by balancing them with young, healthy jellybeans. Again, the jellybean jar is the main thing to think about when you think about insurance, but the Republicans seem to not know about it. Their plans do not reflect an understanding of this jar and jellybean system.

Under Medicaid, poor peoples’ jellybeans are put in the Medicaid jar, which is cost-shared between states and the federal government. As most poor people are still healthy, and only a small amount are expensive, it works out pretty well even though it’s all paid through government spending.

The ACA expanded that jar in most states, with the federal government paying the overwhelming difference, but some states decided to keep the old jar, meaning there is a gap between jars, with those peoples’ beans just sitting on the counter, not getting covered.

Healthcare is not as complicated as the president claims. It’s only complicated when you deny the essential model of healthcare, when you pretend it’s not jars of jellybeans. When you recognize it is, and you are honest and willing to do what’s needed to make the system work, it becomes a hell of a lot simpler. The Republican reluctance here is all about explicitly not wanting to fix the ACA or do anything that actually works. That’s sad. Maybe they should get them some jars and jellybeans and let the Democrats show them how it works.


No, Seriously. We Have to Work Together.

The Republicans made a good show of trying to fix it all themselves, only to find out that they couldn’t agree. That’s fine. They should learn their lesson and we should all learn it. We can’t do it by ourselves.

Whether it’s finding a new balance on welfare and minimum wage, where we don’t want to subsidize Walmart workers, but we don’t want to push people out of work and onto welfare, or whether it’s on regulation where we want to be sure that we’re not poisoning our air and water, not destroying habitats, but we don’t want businesses to spend a ton of money just on paperwork, we have to come together.

That means we have to keep going back to first principles. What is the system there for, and if it’s there for the wrong thing, we need to change it to target our actual goals. And that’s hard, because it requires a level of honesty from politicians they’re not accustomed to. They can’t just hide behind calling the system a mess or sad, but have to say what they actually think it’s for.

On climate change, it’s harder as the Republicans hold somewhere between “it’s not happening” and “it’s not humans doing it.” On proposed actions, we see claims about killing jobs and high costs. For that reason, working together likely first requires establishing the baseline beliefs about jobs.

Jobs are there to do useful work. If the wages can’t be high enough to do needed work, the government subsidizes that job. Otherwise, the work isn’t important enough. Or, work for work’s own sake is good, and we should subsidize any work, no matter how useless. Or some middle ground.

Same on illegal immigration. Underpaid labor. Should the price of produce rise and we send those folks home, hoping their economies of origin grow to support them? Should we legalize them? Certainly the decision should not be made strictly on the basis of existing law. It should be what’s best. But that requires, again, someone like Trump to admit what their core goal is. Is it racism, or is it giving Americans those jobs, or just what is it?

But the alternative is basically to continue down the current path, which is a dumb beast of government that thrashes and turns randomly, wrapped in its own bindings, trying to see its way forward.


Why Don’t Republicans Want the Last Word on Healthcare?

The Democrats took their crack at major reform with the ACA, and since January the Republicans have been seeking to answer it (after their long chants of “Repeal and replace”). But the answers they have produced so far cannot and will not be the final say on the matter. They have to know that. The question is why?

The simplest answer is that they cannot come together on a reply. Their coalition is too broad and divided to give the answer that would be coherent, so they are stuck with simply saying “No” to the Democrats. Rather than admitting that the country needs universal coverage and figuring out how to spread the cost across the concerns, they are stuck simply reducing what the Democrats did.

Those concerns:

  1. Providers’ profits
  2. Taxes of the rich
  3. Taxes of the non-rich
  4. Coverage for the vulnerable (elderly, poor, disabled, etc.)
  5. Insurers’ profits

The Democrats spoke with the ACA, saying: “We will limit insurer profits, increase some taxes on the wealthy, and provide coverage for the vulnerable.” It was a cohesive statement.

But the Republicans are currently saying something like: “We will increase insurers profits, reduce some taxes on the wealthy, and reduce coverage for the vulnerable.” They’re just gainsaying. This is not an argument. It’s mere contradiction. Someone call up Monty Python.

The Republicans have to know that Democrats, next time, will not just repeat their previous statement when they enact healthcare reform. They will probably say, instead: “We will grandfather existing plans, but everybody else goes to a single-payer system paid for by taxes and with costs controlled by negotiating with providers.”

What will the Republicans say to that? “Socialized medicine?” When people will still pay at least part of their premiums, a la Medicare? When the CBO will say that it increases coverage and decreases costs?

This is the Republicans’ best shot at answering the Democrats, but their answer is weak. They may pass it anyway, but it will not be the last word, and they know it.