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Morning Reading
Good morning. I told you recently about the Dynamite Prize in economics (for helping to blow up the economy). Well, we have the winners. Plus, more on the president's health plan, a GM autoworker who commutes 1,000 miles to keep his job, and a novel that was written before the financial crisis eerily predicted the real events.
Dude, where's my Cadillac Tax? (Real Clear Markets)
A weakening of the Cadillac Tax is regrettable for two reasons. First, it's a "curve-bending" reform that encourages people to buy lower-cost plans with higher deductibles and co-payments. This would make health "insurance" more like actual insurance, instead of a pre-payment mechanism for routine care. Under such plans, patients consume care more thoughtfully, and health care costs fall.
The other problem is that the foregone revenues will be replaced with another tax that is much more economically damaging. The President proposes to more than make up for the lost Cadillac Tax revenue by extending Medicare Tax to high-income people's unearned income.
Cadillac Tax? Wheres my public option? (The Nation)
But the real news is what it does not do.
Despite urging from House leaders and a growing number of senators, "The President's Plan" does not include a public option.
Nor does it bow in any meaningful way to progressive proposals to expand access to Medicare and Medicaid.
GM autoworker commutes 1,000 miles to keep his job (Huffington Post) Wow:
"I like to say I gave up an eight-minute commute for an eight-hour commute," he says wearily, running a hand though salt-and-pepper hair as he watches his two sons play basketball for the first time this season.
A novel written before the financial crisis portrays it (NPR)
Sections of the book read almost as if they were transcripts of meetings between officials at New York's Fed and failing banks, including one scene in which Henry Graves tells bank officials that Union Atlantic will be allowed to fail rather than being bailed out -- a bluff, as it turns out. But Haslett wrote that passage, and others like it, well before most Americans had any idea our major financial institutions could be so vulnerable. And Haslett sounds as surprised as anyone that his fiction dovetailed so neatly with reality.
And the winners(?) of the Dynamite Prize are... (Real World Economics Review Blog) Remember, this is awarded to the three people who most contributed to blowing up the global economy:
Alan Greenspan (5,061 votes): As Chairman of the Federal Reserve System from 1987 to 2006, Alan Greenspan both led the over expansion of money and credit that created the bubble that burst and aggressively promoted the view that financial markets are naturally efficient and in no need of regulation.
Milton Friedman (3,349 votes): Friedman propagated the delusion, through his misunderstanding of the scientific method, that an economy can be accurately modeled using counterfactual propositions about its nature. This, together with his simplistic model of money, encouraged the development of fantasy-based theories of economics and finance that facilitated the Global Financial Collapse.
Larry Summers (3,023 votes): As US Secretary of the Treasury (formerly an economist at Harvard and the World Bank), Summers worked successfully for the repeal of the Glass-Steagall Act, which since the Great Crash of 1929 had kept deposit banking separate from casino banking. He also helped Greenspan and Wall Street torpedo efforts to regulate derivatives.
Gb, I used to work in the middle of the night, and sometimes people would ask me that question. What's the big deal? Or a new person came on the shift for a week, and they would say, what's the big deal about working in the middle of the night?
It isn't until you're the one who has to do it, first of all, that it becomes a big deal. And it isn't until you have to do it, week in and week out, year after year, that you find out the toll it takes on you.
So I think 1,000 miles a week is a big deal. Well, unless you're a truck driver.
My opinion is 1000 miles per week is not news worthy. For past 2 days this news was all over the media. Couple of years back I watched in local TV (San jose bay area) where a guy was commuting around 400 miles per day. I dont exactly remember the numbers but the guy had to refill the tank again while going back.
There are lot of people who commute from San Fransciso to San Jose daily or San Ramon to San Jose. This comes to around 600 miles per week and they commute every day in bad traffic. So 1000 miles per week where 500 miles is done one strech is not a big deal.
I like to add it onto an 8 hour work day as part of the job.
So, 1000 miles in 5 days is 200 miles a day. At say 65 mph that's roughly 3 hours. That means the GM employee works 11 hours out of a 24 hour day. Lets say sleep accounts for 8 hours. That means he has 5 hours everyday for chores, meals, and free time. If he works shift work then it's tougher to compute.
I get the you're-lucky-to-have-a-job argument Sam makes below and JPM's math breakdown.
But I'm sticking to my opinion here. Let's assume he works a regular 9-5. That means he has to drive on Sunday to get to work for Monday morning, unless he drives all night and then works an eight-hour day immediately after that. Then on Friday, he either has to drive eight hours after working eight hours or he has to wait until Saturday (which it sounds like he does). So, he has about 24 hours with his family before turning around and going back.
Breaking it up into neat 200 mile drives per day doesn't quite explain the real situation.
I agree with you Scott. I thought the idea of 5 hrs on a workday to get kids ready, homework, cook meals, etc is tight.
However in the story, the figures don't seem to add up. The 530 miles later part. He must be doing shift work or double shifts and not an everyday commute.
The Cadillac Tax. Do not want.
True Story: I have an aunt in need of serious surgery. She can not afford it. She works for a small company (less than 20 employees) that provides health insurance, but her condition is not covered. Two year's ago an employee at the company had surgery for the exact same condition my aunt has, and the employer's insurance covered it. The next year, the insurance rates went up dramatically for the employer because the insurance company viewed the company as a higher risk - based on that one expensive surgery. Rather than pay the higher rate and go out of business, the employer reduced its coverage. Today my aunt is in very bad spot: She will not be able to work for much longer if her condition is not treated.
So, riddle me this, how will a increasing the cost of health insurance with a tax also increase the health care coverage of Americans? It seems to me that employers are already struggling to provide coverage, and any increase in cost will only reduce coverage over all.
I really enjoyed this story. Very sobering.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aaeViPPUVSw4&pos=2
Scott, I think gb's point is: we're in the middle of a severe recession with 10% (that we know of) unemployment, and severe under employment; that GM worker at least has a job, and he has made a deliberate choice. When compared to someone in the 10% without a job, doesn't really look like too much of a stretch.
And, Real Clear Markets' story on "Cadillac Tax": really, taxing the unearned income for rich people is going to be "more economically damaging"? Based on what? More trickle down economic theory? that rich people won't invest in the markets to make their ungodly UNEARNED sums of money? Isn't everyone tired of this nonsense piece of illogical excuse being pushed in order to subvert reform in financial regulation and tax policy?
And (sorry, I know this is long now), lastly, on the "cadillac tax", the "curve bending" theory is hampered by reality as well, namely that unions and other with these plans negotiated for them, and insurance companies are providing them. If we are convinced that the provisioning of health services to these people is such a detriment to the healthcare system overall, why not tax the insurance companies that provide them? give health insurance companies an incentive NOT to offer these plans, instead of taxing individuals?
What about the danger that small businesses that happen to employ people with high risk of needing health care (older, fatter, sicker employees) will have to drop coverage all together once more tax is added on top of the already high premium costs?
Cadillac Tax is a bad name because it implies high quality and luxury accouterments. This tax risks hitting many people that are driving jalopies which happen to need engine rebuilds. If a company's plan is expensive because of the condition of the people that are insured, then the Cadillac Tax is going to eliminate coverage entirely.
