May 1, 2008 5:42

Wyden-Bennett vs. McCain on health care

With all the talk here and on Swampland over the past couple of days about John McCain's health-care plan, it's worth remembering that there's already a bipartisan bill in Congress that would do pretty much what McCain says he wants to do as far as taking health insurance out of the hands of employers, yet actually addresses many of the hard questions about making coverage universal and keeping costs down that McCain so far has not.

That would be the Healthy Americans Act, sponsored in the Senate by Oregon Democrat Ron Wyden and Utah Republican Bob Bennett (although it's really Wyden's baby). And today the Congressional Budget Office and Joint Committee on Taxation came out with an analysis that says the bill would, over time, "tend to become more than self-financing and thereby would reduce future budget deficits or increase future surpluses." Bloggeth Ezra Klein: "In other words, we can cover the 47 million uninsured without spending more money. As a talking point, this is huge."

Both Wyden-Bennett and McCain would remove the existing tax subsidy for employer-provided health insurance--in which companies get to deduct the cost of that insurance from their income taxes, but employees aren't taxed on the value of the health insurance they receive--with an across the board break for individual taxpayers. In McCain's case it's a $5,000-per-family tax credit; with Wyden-Bennett it's a $15,210 per family (of three) tax deduction that begins to phase out at an annual income of $125,000 for joint returns or $62,500 for individuals.

But while McCain pretty much stops there and leaves the rest to the market (apart from some not-very-well-developed thoughts about special programs for the hard-to-insure), Wyden-Bennett includes subsidies for the lower-middle class, new state Health Help Agencies to coordinate the purchase of insurance, a universal coverage requirement, and a tax on employers to help pay for it all. It's all so health-wonkish I can barely bear it, but it's clearly a far more thought-out plan than McCain's--and is both more sweeping and farther along the road to becoming reality than Clinton's or Obama's. So, uh, maybe it is what we all ought to be discussing.

I'm not saying it hasn't been discussed at all. Joe Klein gushed about it in the pages of Time last summer. Ruth Marcus wrote a column about it in February. The CBO report is getting a smattering of coverage. But nothing like the McCain plan. Funny that, huh?

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May 1, 2008 2:45

So would the McCain health plan cost more or less than what we've got now?

For those of you who don't stop by Swampland first on the way to this blog, here's McCain's adviser Doug Holtz-Eakin splainin' something about his boss's health insurance plan:

For the typical ESI [employer-sponsored insurance] recipient -- $12,000 policy — nothing changes. The tax liability on the policy ($12,000 x .35) when insurance is taxed as compensation is $4,200; this will be immediately offset by the credit of $5,000. In short, if they want to stay with the current plan, it just means a lot of computer entries on the pay stub.

If that's the case, the McCain plan would decrease the tax subsidy only for those with more-generous-than-average corporate health plans, while increasing it for those with plans that are average and worse, plus all the people out there who currently have no health insurance at all. Which means that, at least initially, the McCain plan would substantially increase the tax subsidy for health care, but distribute it more fairly and evenly than it is now. Over time, though, the subsidy is likely to shrink, as James Kvall of the Center for American Progress explains in yet another of Karen T's posts:

This would work by holding down the growth in the credit to the inflation rate (about 2% a year), unlike the current benefit which rises with health care premiums (about 6%). Surprisingly quickly, the tax cut turns into a tax increase, even for typical workers with ordinary health care plans.

Now if you believe that the tax subsidy for health care is a major part of what drives health care costs up, as many conservative economists do, this is a good thing. If you don't, everything's messier. The McCain plan would still be fairer than the current system, in which the people with the swankiest employer-paid health plans get the biggest tax break. But it might well mean a decline in the quality of health-care available to most people now covered by corporate plans.

And that's still leaving aside all those questions about adverse selection, the value of expert decision-making, etc. I don't think this McCain plan is some kind of scam. It just shows clear signs of having been designed by free-market-oriented economists who don't know all that much about the health-care system. As a mostly free-market-oriented non-economist who doesn't know all that much about the health-care system, I'm naturally sympathetic to it. But I'm also extremely dubious of how well it would work in practice.

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May 1, 2008 12:01

How about a property-tax holiday for the residents of Brooklyn, funded by the state of Wyoming?

A reader whose office happens to be a couple of doors down from mine writes, with regard to caitlilly's plaint about life in rural Wyoming in a time of a high gas prices:

Is "tough s***" an acceptable answer?

OK, maybe I wouldn't put it that harshly, although having spent half my life in the Detroit area I think I have a fair enough right to make the comment. But the tactful way of phrasing it is: don't lots of people live in places where their choice of location and lifestyle leaves them vulnerable to shifts in various markets?

For instance, people who live in urban areas, especially on the coasts, left themselves vulnerable to the dramatic rise in real estate costs and rents over the last several years. Should they get a tax credit? A property tax holiday?

Of course, the counterargument is that some people want to give people living in expensive places a bailout in the form of the mortgage bailout, which in my uninformed opinion is no better... but in any case I wonder how warm Wyoming residents are to helping foot the housing bills of people living in $500,000 condos.

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May 1, 2008 10:56

How to call the bottom of the housing market

Mark Dotzour, chief economist at Texas A&M's Real Estate Center stopped by yesterday to chat. Lots of parts of Texas are doing just dandy, he reported, thanks to the booming energy and technology industries, trade with Mexico, internal population growth and people moving to Texas from other parts of the country. House prices last year were up 7.9% in Austin, 8.2% in San Antonio, and 10.1% in Waco.

Of course, not all cities have it that rosy (see: Dallas). So Dotzour does spend time trying to figure out when certain markets will bounce back. Seems to be a popular pursuit these days. He was nice enough to break it down into a four-step process for playing along at home:

1. Read your local Sunday newspaper and keep track of the concessions homebuilders are offering to get people into new houses. In Texas, building permits were off 31% last year, but they've still got another 10-20% to fall, Dotzour figures. When inventory stops being so slack, homebuilders will stop throwing $30,000 kitchen upgrades at potential buyers.

2. Make friends with a Realtor and find out how many months' inventory you've got in your local MLS. Some recent research by Dotzour's colleague Ali Anari adapts an old Milton Friedman concept in order to predict future house price appreciation from home inventory. If the number of houses for sale is below an area's natural inventory level, then prices have got to appreciate. Unfortunately, that varies by market (Houston's equilibrium is 9.8 months; Austin's is 6.3), so talking to your Realtor friend and getting a feel for what's happening now compared to the long-term trend is going to have to be something of a guesstimation. If you want to spend a little time at this, plotting historical data of local inventory against home price changes gets you to the same place.

3. Keep an eye on OFHEO's city-level data on home prices and look for an uptick.

4. Keep an eye on foreclosure notices (in your local paper or at a site like RealtyTrac) and look for a downtick.

Not the most precise methodology in the world, but maybe fun for armchair economists.

In other news, I'm heading to Omaha this afternoon for the Berkshire Hathaway annual meeting and as many Warren Buffett encounters as I can pack into three days. I've never been and am very very excited—but am desperately trying to play it cool. I'll be sending in some dispatches, so stay tuned.

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May 1, 2008 9:41

What if you live in Wyoming and NEED that gas-guzzling SUV?

Commenter caitlilly asks a couple of good questions:

I live in Wyoming - and live, as most people do in Wyoming - a lifestyle that truly benefits from SUV's and trucks. Come to any rural area like this and the streets are dominated by gas guzzlers. But here it's not a status symbol - it's a way to live the life we've chosen: one that embraces camping trips over shopping centers and hunting over the opera. Most of the access roads are absolutely impossible to navigate without an SUV - not to mention the fact that we all usually cart around our fleets of retrievers and sheep dogs. Many people need these trucks for their agricultural related work and countless other needs associated with life in Wyoming, Montana, the Dakotas, etc. To aggravate the problem, you have to drive distances for absolutely EVERYTHING - I travel 30 miles to a nearby town to see my dentist and doctor. The nearest airport to board most major flights is a full 3 hour drive away.

I own an SUV - old and used. I've used it to haul many, many dogs in. In the winter, the 4-wheel drive has been invaluable. However, with gas the way it is I would dearly, dearly love to trade it in for some gas efficient miniature car. But I've staked my own little claim as a sufferer of the credit crisis, and can in no uncertain terms afford to get a new car - paying for gas at 3.50 a gallon doesn't help either. Most of the people who live here are in about the same shape. I understand that the U.S. needs to be weaned off oil in no uncertain terms - but can't this issue be more nuanced? Is there seriously no other remedy in our immediate future?

Or will you all just consider us clinging to our trucks out of bitterness?

The first answer is that, even in Wyoming, most people probably don't NEED huge pickups and SUVs. I was in and around the Norwegian city of Tromsø a few years ago and was struck that, despite the fact that it's a mountainous place 200 miles north of the Arctic circle where the ground and roads are covered with snow much of the year, there were fewer SUVs to be found in the entire area than you'd see in the average Southern California strip mall parking lot.

The second answer is that, if gasoline had been appropriately priced for the past couple of decades (and no, I don't know what the appropriate price is; it's just a convenient hypothetical) fewer people would have chosen to live in Wyoming. Same if we didn't subsidize living in Wyoming by giving the state $1.11 in federal largesse for every dollar in federal taxes paid by Wyomingites (according to the Tax Foundation), by the way.

Of course, given the numbers involved here (Wyoming's population as of mid-2006 was about 515,000), reducing Wyoming's population by a few percent wouldn't exactly end our nation's dependence on foreign oil. And how the heck was caitlilly supposed to know that the gas prices of the 1990s were a temporary anomaly? And who knows if they were? Maybe it's today's prices that are the anomaly.

So no, caitlilly, I don't think you and your neighbors are hanging on to your trucks out of bitterness. I also don't have any good answers for your current predicament. I certainly don't think we ought to raise gas taxes in the middle of a maybe-recession, but I also think we'd only lose by giving in to the McCain-Clinton Gas Tax Pander of 2008.

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