The Bullock Pulpit: Calculated musings of a pragmatic idealist

Paul Ryan's Medicare plan...could it work?

One of the "highlights" of the Paul Ryan budget plan is his reformation of Medicare.  It's been difficult to get the facts on his plan through all the partisan noise on both sides, so I sat down with Google and decided to figure out exactly how Ryan's Medicare plan would actually work.  Keep in mind that Ryan's budget includes the repeal of the Affordable Healthcare Act, aka Obamacare.  This becomes important later on.

The changes to Medicare would apply only to people who are now 54 years old or younger; current beneficiaries and those approaching retirement age would not be affected, meaning that changes wouldn't begin until 2022, when those currently 54 begin to turn 65.  For these new beneficiaries, Medicare would be transformed into an annual "premium support payment" to be used to purchase insurance.  The amount of the payment would be higher for those with greater health needs, and would be adjusted for geographical differences in the cost of health care. Seniors could choose either traditional Medicare or a private health insurance provider. The providers would be part of a health insurance exchange (much like that in the Affordable Care Act, ironically enough) and would theoretically compete for seniors' business, thus keeping costs lower. The premium support payments would go directly from the government to the insurance plan chosen by each individual (so seniors can't cash the check and spend it on riotous living instead of health insurance).

The amount of the annual payment would be based on the second-cheapest plan in each market.  Seniors who wanted a more expensive plan would have to pay the difference out of pocket.  Every year, Medicare and the private insurers would submit bids, and the annual payment would be adjusted based on those bids. Every year, the payment amount would also rise to reflect inflation, and to reflect the fact that most seniors need more health care as they age.  Currently, the payment amount for the average 65-year old under the Ryan plan is projected to be $8000 in 2022, which is the same amount as projected federal per-capita spending under traditional Medicare in 2022.  The program will also be means-tested, so that the richest seniors get a smaller benefit.  The wealthiest  2% of enrollees will receive 30% of the premium support amount. The next wealthiest 6% would receive 50% of the premium support amount, and the remaining 92% of Medicare enrollees will receive the full premium support payment amount.  Also beginning in 2022, the age of eligibility would rise by 2 months every year until it reached 67 by 2033.

Few will dispute that Medicare needs reform. It is clear that, with the growing number of seniors becoming eligible for Medicare, payment of benefits at current levels will become unsustainable.  And I give Paul Ryan grudging kudos for sitting down and coming up with a plan.  But will it work?   The death knell for his plan is that absolutely nothing happens until 2022.  Current projections by Medicare trustees show that Medicare Part A (hospital insurance) will become insolvent in 2024; should nothing else change, after 2024, the Medicare Trust Fund would recieve enough income to pay 87% of anticipated Part A expenses in 2024.  However, this projection relies on the Affordable Healthcare Act remaining law.  Without it, Medicare could run dry as early as 2016.  So Paul Ryan's plan effectively shoots itself in the foot by eliminating the very health care reforms that would keep Medicare solvent until its new iteration would take effect.  So no, by definition, it wouldn't work.  I won't even get into the question of whether the concept of competing health insurers will actually drive down costs for the demographic that uses the most health resources. But I will say that if it gets people thinking about how we will handle Medicare for baby boomers and beyond, then it has served a beneficial purpose.  In other words, it's greatest use is in theory, not in practice.

 

The Affordable Care Act: Insurance Mandates and the Exchange

 The cornerstone of the Affordable Care Act, and what makes it most controversial for some people, is the requirement that nearly everyone purchase health insurance. The mechanism by which purchasing insurance is being made simple and affordable is the insurance exchange.  The motivation to purchase insurance - if peace of mind and preventive care is not enough - is provided by the fine for not doing so, which the Supreme Court ruled to be legal under the federal government's power to tax.

What the heck is an insurance exchange anyway?  I'll lead off by saying that it is NOT government-run health care.  The exchange will be made up of private insurance companies (Aetna, Blue Cross, Humana, etc.) offering health plans that consumers will be able to review, compare, and purchase online, similar in concept to Orbitz or Travelocity.  Effective January 1, 2014, each state will establish its own exchange, and consumers will go the exchange's web site to compare plans and their prices and benefits, from modest to generous (the official terms for the benefit levels of health plans are platinum, gold, silver, and bronze). All plans must be approved by the exchange before they can be included.  All plans must include basic comprehensive medical coverage and prescription drug benefits, and no insurer can refuse to sell a consumer a policy.  There will also be annual limits on deductibles and copays.  Consumers are not required to purchase insurance through the exchange, but subsidies to help with the cost for lower-income individuals are only available if policies are purchased through the exchange.  

The exchanges are not only for people who do not receive insurance through their employers.  Businesses with fewer than 100 employees can also purchase coverage for their employees through the exchange. The exchanges will be attractive to small employers in several ways.  Exchanges can offer employers an aggregated bill that covers the premiums of all employees, regardless of the policies they choose. Through the exchange, employers can either pay a fixed percentage of employees' premiums with the employee covering the rest, or charge the employee a premium share based on richness of coverage, and potentially on tobacco use and participation in a wellness program.  Employers also have the option of paying a greater share of the premium for lower-income employees.  The exchange is designed to be flexible enough to attract employers, because the bigger the pool of enrollees, the lower the cost for both the insurance companies, the insured, and the employers. The exchange will also allow small employers to have the same purchasing power as large employers, because it will put them in a much larger pool than just their own workers.

Why should healthy young people be required to buy health insurance?  You may be young and healthy, but that doesn't mean you won't get hit buy a bus, break a leg skiing, or suffer a serious allergic reaction. And to say that "well, it's only hurting my own bank account if I take a chance on getting hurt" is simply not true.  If you are in an accident, you will be brought to an emergency room and treated regardless of your ability to pay.  You will get bills, for sure, but it's impossible to get blood from a stone, so to speak, so if you don't have insurance and don't have the means to pay, the cost of treatment will be written off.  This means that hospitals lose money, and the state and federal government lose money as they partially reimburse hospitals for your uncompensated care.  In the meantime, your credit will take a hit as bill collectors come after you.  Insurance of all kinds is, by definition, something that you purchase and hope never to need, but if and when when you do need it, it can save your financial life.  It is worth mentioning that single people under 30 will have the option of purchasing only catastrophic coverage, which will be cheaper than the "bronze" comprehensive plans, but of course won't include preventive care or prescription drugs. 

So what happens if you don't purchase any insurance?  This is where the penalty kicks in, the "tax" as the Supreme Court refers to it.  In 2016, the penalty is $695 or 2.5% of annual income, whichever is greater, and will rise with the rate of inflation.  Not very punitive, according to many, and it may be tempting to just pay it and go on one's merry insurance-free way.   But purchasing insurance may not even be any more expensive than paying the penalty.   Here is how the insurance cost pans out for a family of four at various income levels: 

 Under $30,000 family income, families qualify for Medicaid and pay nothing for insurance

Under $37,000, most families will receive subsidies that allow them to purchase a bronze policy (basic comprehensive) for free

Under $45,000, the cost of a bronze policy is definitely lower than paying the fine.

Under $50,000, the cost of a bronze policy is slightly higher than paying the fine.

Over $50,000, the cost of the policy is higher then paying the fine, but most families at this income level have access to employer-provided health plans anyway.

The penalty for businesses who don't provide health insurance is more complex, and probably worthy of its own post, but essentially, employers with 50 or more full-time workers must offer "affordable" health insurance to their staff.  "Affordable" in this case means that the insurance must cover at least 60% of covered health care expenses, and the employee must not be made to pay more than 9.5% of their income for coverage.  The penalties for failing to provide coverage start at $40,ooo, plus an additional $2,000 for every employee beyond 50.  If the coverage is not deemed affordable, the fine is even higher: $3,000 per worker.  The penalties are much stiffer than those for individuals who don't purchase insurance, and this is not accidental.  The fines make clear that for a business of over 50 employees, cutting corners with its full-time workers by not offering insurance is not a viable option.

So what's my point? I am going to go out on a limb and guess that most people would like to have health insurance. They don't choose to forgo it because they want to live life one health crisis away from bankruptcy; they are forced to forgo it because the premiums are simply too expensive.  The insurance exchange, and the requirement for businesses to provide health insurance provide less expensive outlets for Americans to purchase coverage.  But the way to get the most savings is to have the largest possible pool of insured people, in order to spread the risk among the most individuals.  The largest possible pool is everyone....ergo the mandate.  The purpose of the mandate is not to control Americans' lives; in fact, having health insurance allows Americans greater control over their own lives, by making their lives longer and healthier.  

The Affordable Care Act: Medicaid Expansion

 Wow, has it really been six weeks since my last post?  I took a position as a Summer Organizing Fellow with the Obama campaign back in June, and my spare time sort of evaporated. But the fellowship ends this week, and I'm back and ready to vent.  Let's start with something easy.....oh, forget it.  Let's jump right into the complex stuff.  Is the Medicaid expansion under the Affordable Care Act worth the cost?  I've inserted a lot of links, to keep this from being the world's longest blog post; thanks in advance for your patience.

As part of its objective to make health care more accessible to all Americans, the Affordable Care Act (ACA) provides assistance for lower-income Americans so that health insurance is more affordable.  Under the ACA, Medicaid will cover most Americans with income below 133 percent of the federal poverty level (about $15,000 for an individual, $20,300 for a couple), while tax credits will be available for individuals and families with income from 133 to 400 percent of the Federal poverty level who purchase coverage in the health insurance exchanges .

What will it cost?

Following the Supreme Court's decision allowing individual states to "opt out" of expanding Medicaid coverage for its residents, the Congressional Budget office (CBO) and Joint Commission on Taxation (JCT) now estimate that the cost to the federal government for the years 2012-2022  for Medicaid and the Children's Health Insurance Program (CHIP) will be $642 billion.  This estimate is $289 billion less than the March 2012 estimate, and takes into account the fact that several states will choose to not expand their Medicaid coverage, thus will receive fewer Federal dollars for Medicaid.  

In June, the Supreme Court ruled that the expansion of the Medicaid program under the ACA must be optional, allowing each state to choose whether or not to expand eligibility for coverage under its Medicaid program. Prior to the Court’s ruling, the Medicaid expansion would have been mandatory for all states that wanted to continue receiving federal matching funds for any part of their Medicaid program.  Now, states will continue to receive baseline Medicaid funds if they do not expand their Medicaid coverage; they just won't receive the expanded funding. 

Because of the Supreme Court's decision, the Congressional Budget office (CBO) and Joint Commission on Taxation (JCT) now estimate that the insurance coverage provisions of the ACA will have a net cost of $1,168 billion over the 2012–2022 period—compared with $1,252 billion projected in March 2012 for that 11-year period—for a net reduction of $84 billion.  The projected net savings to the federal government arise because the reductions in spending from lower Medicaid enrollment are expected to more than offset the increase in costs from greater participation in the health insurance exchanges. It breaks down into a $289 billion reduction in Medicaid/CHIP costs and a $210 billion increase in spending on the health care exchanges, as persons who would have qualified under the expanded Medicaid program, had their states opted to expand it, are now put into the general insurance market.

How will it be paid for?

Coverage for the newly eligible adults will be 100% funded by the federal government for three years, beginning in 2014, and will be phased down to 90% by 2020.   

Medicaid expansion, as well as the other provisions of the ACA, will be funded by several tax increases, most of which only affect those with incomes over $200,000 ($250,000 filing jointly), or those who purchase "Cadillac" health plans.  They include: 

 

A .9% increase in the Medicare tax on the incomes of those making more than $200,000, and a 3.8% tax on unearned income over $250,000 - if you've heard the inaccurate rumor of a 3.8% tax on all homes sold, it stemmed from this provision. (projected to raise $210.2 billion over 10 years)

An annual fee on health insurance providers (projected to raise $60 billion)

A 40% excise tax on insurance premiums over $10,200 for an individual or $27,500 for a family ($32 billion)

An annual fee on the manufacturers and importers of branded drugs ($27 billion)

A 2.3% excise tax on the manufacturers and importers of certain medical devices ($20 billion)

An increase from 7.5% to 10% the Ajusted Gross Income floor on medical expense deduction ($15.2 billion)

A limit on annual contributions to flexible spending accounts in cafeteria plans to $2500 ($13 billion)

The spending offsets include: 

Reducing funding for Medicare Advantage plans (projected savings of $132 billion over 10 years)

Reducing Medicare home health care payments (projected savings of $40 billion)

Reducing certain Medicare hospital payments (projected savings of $22 billion)

Note that these cuts are not reducing Medicare benefits to seniors, but are designed to reduce waste, fraud, and duplication. 

What's the return on investment for expanding Medicaid?

Prior to the Supreme Court ruling that Medicaid expansion must be optional for the states, the expansion was estimated to cover an additional 17 million Americans over the next ten years.   So far, seven states have said that they will not participate in the Medicaid expansion.  If only these seven states opt out, that number will be reduced by just over 4 milllion.  Of those 4 million, only 1 million will be eligible for tax credits to help subsidize the purchase of insurance through the health insurance exchange, leaving 3 million Americans still uninsured, who would have been covered by Medicaid if their states opted into the expansion.   However, even after these states opt out, 14 million more Americans will be covered by either Medicaid or subsidized private health insurance over the next ten years - people who had no insurance coverage at all prior to the ACA.  14 million people will no longer have to use the emergency room as their primary care physician, go without vital prescriptions, or suffer through illness or injury without seeking any medical care. 14 million Americans will no longer have to be terrified that they or their children will get hurt or sick. Does that seem like a small number?  It isn't if you're one of them...

Expanding Medicaid coverage will result in several areas of savings.  In 2010, uncompensated care cost hospitals in the US $39.3 billion.  It costs Texas hospitals alone about $5 billion a year (which makes it even more ironic that it's one of the states that is opting out).  It makes up nearly 6% of hospital annual expenses.  Some of this is reimbursed by a federal program that provides extra Mediciad and Medicare money to hospitals with a high proportion of low-income patients.  State laws regarding payment to hospitals for uncompensated care vary widely, and usually involve tax credits and not cash reimbursements.  If Medicaid is already tapped to make up for uncompensated care, shouldn't that money instead be used to insure Americans?

Additional savings are directly derived from the fact that more people will get preventive health care, prompt treatment, and access to prescription drugs, meaning more serious (read, expensive) care can be avoided. Being able to have a mole removed, a wound sutured, or a lump detected early can save tens of thousands of dollars in expensive treatment per patient. And more importantly, it can save lives.  

What's your point?

Is Medicaid expansion expensive?  Yes.  Will it be paid for? Largely.  Will it result in cost savings? Yes. Will it result in better quality and more affordable health care for a large number of US citizens?  Absolutely.  Currently Medicaid and Medicare are already tapped to help pay hospitals for uncompensated care; it only makes sense to use that money to help lower-income people get care before they need to go to the emergency room.  Currently, Americans too poor to afford insurance but too "rich" for Medicare are going without any care at all until they wind up seriously ill in an emergency room with something that could have been nipped in the bud.  Currently, people with chronic illnesses are "rationing" their own prescriptions because they can't afford to have them refilled on a regular basis.  Medicaid expansion should not be considered a risky financial move, or an unecessary expense in tough economic times; it should be considered vital to the health and welfare of our country especially in tough economic times.  

Vote Obama not Romney: Immigration

 Last Friday, President Obama issued an executive order to stop the deportation of certain young undocumented immigrants who entered the United States as children.  Under this new policy, people younger than 30 who came to the United States before the age of 16, pose no criminal or security threat, and were successful students or served in the military can get a two-year deferral from deportation. It will also allow these people - estimated at around 800,00 - to apply for work permits.  Why did he issue an executive order?  Because if he relied on Congress to craft and pass any version of the DREAM Act - proposed legislation that would have granted similar steps to staying in the country for the children of undocumented immigrants - he'd be waiting approximately forever.  These young people came here with their parents as young children, with no criminal intent, learned English, grew up with U.S. culture, and graduated from U.S. high schools.  The only country they know is the U.S., and sending them back en masse is not fair to them, nor to the country that gave them the dreams and skills they have today.

President Obama admitted that this is a stopgap measure, not a long-term cure for the problem of illegal immigration.  When he took office, his goal was to first step up deportation of those with a criminal record, and deal with securing the borders, and then take on broader legislation.  And in fact, no administration has deported more undocumented immigrants, although the exact number of those deported who are actually criminals remains in question. The broader legislation arm of Obama's strategy, however, has been hamstrung by Republican legislators quick to scream "Amnesty", leaving him no choice but to do an end-run around Congress and grant the reprieve that these young people deserve. Was it political?  Sure.  It stops Marco Rubio's attempt at a DREAM Act compromise in its tracks, and puts Romney in a corner on the issue of immigration.  But it was also, as President Obama himself put it, "the right thing to do".

Mitt Romney responded to the executive order by accusing the President of playing politics in issuing it only months before the election.  He also asserted that Obama has done little on immigration in the past three years. Romney did not, however, claim that Obama had overextended his authority by bypassing Congress, and he would not say whether or not he would leave the order in place if he defeats Obama in November.

Romney is in a tricky spot.  If he embraces Obama's policy, he risks alienating the conservatives and tea partiers he is trying so hard to woo, many of whom remain skeptical of his conservative credentials. If he criticizes it too strongly, he risks alienating Latino voters.  In fact, Romney is making a speech later this week at the annual convention of the National Association of Latino Elected and Appointed Officials, one day before President Obama addresses the same group.  He has quite a tightrope to walk; this should be good.

Republican Senator Marco Rubio, who had been drafting a GOP version of the Dream Act to help win over largely Democratic Hispanic voters, also condemned the President's action as blatantly political, and accused Obama of making a deliberate attempt to circumvent Congress.  But he's probably also irked that Obama's announcement made his own attempt at a blatantly political move moot.  And it's his party, which has blocked the DREAM Act, that is forcing Obama to do the circumventing in the first place.

Romney's immigration plan at the moment consists of "self-deportation", which means passing laws that would make life very difficult for undocumented immigrants and cause them to leave the United States "voluntarily".  It sounds like a reasonable alternative to rounding them up and shipping them out, except for the fact that such laws are bordering on inhumane.  They include barring undocumented immigrants from renting apartments, preventing them from obtaining water and heat service, and questioning children in school about the immigration status of their parents. It's an odd stance for someone whose family members settled in Mexico, and whose church calls for humane treatment of all immigrants, including the undocumented.

When it comes to illegal immigration, there is no easy solution.  If there were, we would have implemented it long ago.  The President's goal of deporting only those undocumented immigrants with a criminal record and leaving alone those with clean records and families in the U.S. has faltered.  However, the other option - Romney's self-deportation proposal - is a plan that involves using draconian laws to drive the undocumented back to Mexico by making their lives unbearable.  In addition, Romney doesn't even have the guts to say whether or not he would overturn President Obama's executive order, possibly because he's not sure to whom he should pander. In December 2011, Romney said that he unequivocally did not support the DREAM Act and would veto it, but in April of this year, he backed off, suggesting that a GOP version of the act was essential.  At least we know where the President stands on allowing certain immigrants to stay in the United States.  With Romney we don't even know that much, and we don't know what his overall policy will end up being.  It may depend on how badly he needs Hispanic support, and that is a terrible foundation on which to form any policy.

 

 

What's so bad about NATO, anyway?

 I'm writing this while hunkered down in an undisclosed location in downtown Chicago, stockpile of food and gas mask by my side.  Well, maybe not a gas mask.  But seriously, here in Chicago we are bracing for the upcoming NATO summit, which takes place May 20 and 21 at McCormick Place.  The visiting diplomats and dignitaries will bring traffic jams and parking bans, but the greater concern among city officials seems to be protests and protesters.  The topics of these protests are almost as numerous as the number of protesters themselves, but a few of them are actually protesting  against NATO.  But what is their outcry about?

NATO, short for North Atlantic Treaty Organization, was formed in 1949 as a collective defense system, whereby its member states agreed to mutual defense in response to outside military attack. There are 28 member countries, and an additional 22 countries participate in NATO's Partnership for Peace, which is a program designed to create trust between NATO and other states in Europe and the former Soviet Union.  The first secretary of NATO stated that its purpose was "to keep the Russians out, the Americans in, and the Germans down".  The member nations first became galvanized during the Korean War, responding to the threat of all Communist countries working together, and they built an integrated military structure under the direction of U.S. supreme commanders.  In 1955, West Germany joined NATO.  In response, the Soviet Union and Eastern European countries signed the Warsaw Pact, and thus the opposing sides of the Cold War.

The dissolution of the Warsaw Pact and the fall of the Soviet Union in 1991 removed NATO's main adversary and forced a redefinition of its role.  In 1993, NATO became involved in the Bosnian War, first by enforcing a no-fly zone, then by carrying out air strikes. Its actions helped bring the war to an end, and then NATO deployed a UN-ordered peacekeeping mission in the region to prevent flare-ups of violence. In 1999, NATO led a messier bombing attack on Kosovo, which resulted in heavy civilian casualties, but also caused Slobodan Milosevic to halt his crackdown on Albanians in Kosovo.  The 9/11 attacks caused NATO to invoke for the first time the article in its charter that an attack on one member country is an attack on all. NATO thus became involved in both the wars in Afghanistan and Iraq, in a training role in Iraq and a security role in Afghanistan.  In 2011, NATO intervened in the Libyan civil war by enforcing an arms embargo and a no-fly zone.  In these Middle Eastern conflicts, NATO strikes killed civilians, raising strong opposition and increased distrust in the NATO motives. 

So what's the beef with NATO? Many people opposed to NATO claim that it brings war and misery to everything it touches, and that there isn't even a need for the organization, now that the Cold War has ended.  At the time it was formed, the USSR was a "common enemy" to the member nations, and a collective defense seemed not only a good idea, but a necessary one.  Now that world conflicts no longer focus on the US vs. USSR, and international relationships have become more complex, NATO detractors claim that the conflicts in which it gets involved serve only to endanger soldiers and drain government coffers. European countries have expressed reluctance to continue the mission in Afghanistan, and many have pulled out or will do so soon.  If all 28 countries can't agree to act as one during a time of conflict, what's the point of continuing NATO? Additionally, NATO has been accused of war profiteering, particularly in Libya, where many companies stand to benefit from the "rebuilding" of the ravaged country.

NATO proponents, on the other hand, claim that there are still many ways in which the organization can be relevant in preserving international peace and security.  Some have suggested that NATO work closer to home and focus on threats to security in the trans-Atlantic arena in a more diverse way - cyber, energy, terrorism and infrastructure protection.  However, President Obama has said that the United States, which is the core member of NATO, is shifting its defense policy toward advancing strategic interests in Asia and the Pacific as a "top priority".  That would make NATO at best less relevant, at worst completely pointless.

I don't know which side is right.  What I've read about NATO's evolution on the internet is not enough for me to form an educated opinion. But it is obvious that global relations have changed dramatically since 1949, and it would seem that at the very least, an adjustment in NATO's objectives is in order.  That is part of what will be discussed at the summit.  Will the protesters have any effect on NATO policy?  That remains to be seen, but if nothing else, they will have made my commute a breeze today and on Monday, as local media have scared a good number of workers away from downtown.  It's a small victory, but I'll take it.  I'll use those extra minutes to read up on NATO.  Because if it's this important, we should know what we're dealing with, right? That was a hint, protesters...

 

J.P. Morgan's loss and future regulation

Last Thursday, J.P. Morgan Chase disclosed a $2 billion trading loss, incurred since the beginning of April. The loss came from a trading portfolio designed, ironically, to hedge against the risks the company takes with its own money. London-based employees are largely responsible for the loss, in particular a trader named Bruno Iksil, nicknamed the "London Whale" for a trading position so big that it affected the entire market. In a nutshell, here's what happened.  London is home to J.P. Morgan's "chief investment office", whose duty it is to hedge against the firm's risks.  It effectively acts as an insurance policy on the bank's investments.  Over the past few months, the CIO unit has staked out a very large position in credit default swaps, the same type of instrument that caused so much havoc in 2008.  Iksil essentially bet that corporate debt was becoming less risky as corporations were getting stronger. But he did so in a way that even a tiny hiccup in the index he was trading could be exploited by rival traders, and that is precisely what happened.  Iksil, however, was not a "rogue trader" taking crazy risks on his own, but  acted with the full knowledge and support of the bank and its executives...until after the damage was done.

To add some perspective, the Wall Street Journal says the quarterly loss for the CIO unit as a whole will be more like $800 million, meaning that the unit’s other trades have generated profits greater than $1 billion.  Also, J.P. Morgan as a whole will earn $4 billion this quarter.  Clearly, this loss will not sink J.P. Morgan Chase, but that's not really the point.  A $2 billion loss is a bad day no matter how big one is.  The point is: should a bank that takes commercial loans and gets federal insurance to protect those loans -- banks that you might open a checking account with, like J.P. Morgan Chase -- be allowed to make speculative bets on its own behalf?  If a smaller bank made a similar mistake and lost $2 billion, the Feds would likely have to step in to make sure customers' deposits are available.  Is this an appropriate gamble for a bank be making, or have  bank executives simply not learned any lessons from the 2008 crash?

Some say that this staggering loss is further evidence of the need for the yet-to-be implemented Volcker Rule.  The rule,  named for former Federal Reserve Chairman Paul Volcker, was included in the 2010 Dodd-Frank Wall Street reform law as a way to keep banks from putting federally insured deposits at risk by prohibiting proprietary trading.  Proprietary trading is the part of an investment bank that makes money for its own account, as opposed to making money for its investors.  Investment banks differ from commercial banks in that deposits made to commercial banks are insured by the FDIC.   But now that investment banks have in several cases merged with commercial banks, the line where consumers are put at risk becomes blurred.  But the Volcker law is just a proposal now, so any SEC investigation would focus instead on when bank executives learned about the losses, and what they said to investors.  Federal securities laws prohibit a company from making false or misleading statements that involve material information.  Silence, without a duty to disclose, is not misleading.  But J.P. Morgan was not silent.  In April, CEO Jamie Dimon and CFO Douglas L. Braunstein both commented that they were comfortable with J.P. Morgan's position.  Did those statements give a sense of false security to investors? After the losses came to light, Dimon adjusted his story, claimed that he "didn't have great information" regarding the trades, and that there were "many errors, sloppiness, and bad judgment". So at best, he had no idea what was going on in the CIO office, and no one who could stop the bleeding before it hit $2 billion was aware of it either.  Is this a sign that J.P. Morgan has gotten too big...not too big to fail, but too big for its executives to control?  But breaking up the big banks is a topic for another blog.

Since the financial crash of September 2008, Dimon has fought against any new federal regulations of Wall Street. As recently as last Wednesday, he spoke against them, saying that they would curtail economic growth.  But this incredible loss, which involved the same credit default swaps that caused the 2008 crash, should probably lead him - or at least lead Congress - to rethink the need for regulation.  Indeed, much of J.P. Morgan's recent success has relied on government intervention.  The Federal Reserve helped to facilitate its 2008 takeover of Bear Stearns by taking on $30 billion of Bear's assets.  In 2008, the FDIC started a program allowing banks to issue debt guaranteed by the FDIC.  J.P. Morgan took part in the program and had $40 billion outstanding in late 2009.  And of course, the bailout of Fannie Mae and Freddie Mac kept their assets from being completely written down.  This is hardly the time for bank executives to declare that they don't need government intervention.  Many of them owe their jobs to the steps taken by the federal government to keep more banks from collapsing.  And to quote Barney Frank, responding last week to the J.P. Morgan loss, “The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today.”

 

 

What a President believes, and why it matters

 Yesterday, in an interview with ABC's Robin Roberts, President Obama stated that after some thought and discussions with his family, he now supports same-sex marriage.  His statement comes less than a week after both Vice-President Joe Biden and Education Secretary Arne Duncan voiced their endorsement of same-sex marriage, and after the President has said that his position was evolving, so it doesn't come as a huge surprise to many.  The directness of his declaration did come as a bit of a shock; a pleasant one to some, and not so pleasant to others.  Starting at around 2pm Chicago time, Twitter and Facebook began to explode with comments of gratitude, pride, and sheer happiness that the President would take the political risk to express his own view on this issue.  Only a few hours later, the detractors started coming out, as we all knew they would. But why did he say this now, and what will be the ramifications?

First of all, the President in no way indicated that same-sex marriage would become part of his national agenda.  He did say that the issue should be left up to the states to decide, and that he did not support any federal actions on the issue.  Which is as it should be.  Marriage is not - and should not be - a part of  the U.S. Constitution.   Unfortunately, the fact remains that 31 states have banned same-sex marriage.  President Obama's endorsement does not negate any existing laws. Will it make people stop and think, possibly reconsider the fairness of those bans, and start the ball rolling towards repeal?  Well, you can lead a horse to water, but you can't make it think, and the same holds true for people.  But the short answer is yes, it might do just that.  But for those who fear that Obama is now going to foist same-sex marriage upon the entire United States, relax.  He has no intention of doing so.

Some people are suspicious when President Obama says he has changed his view on same-sex marriage.  Have they never, upon reflection, changed their minds on an issue?  Perhaps the problem is that they have never reflected.  It's perfectly legitimate for a person's opinion to "evolve" on an issue.  It's not flip-flopping; it's called growth, and given how the President said that talking with his family and seeing his gay staffers struggle helped to change his mind, I'm going to take him at his word that he went through that reflection and indeed honestly changed his mind.  Even heads of state are allowed to do that, you know.  

Others are claiming that, sincere or not, the President timed his statement for campaign purposes, in the hopes of gaining support in an election year.  It seems to me that Obama has at least as much to lose as he does to gain by sharing his opinion on such a controversial issue.  If this is really about election year pandering, it's certainly the riskiest kind.  The easy thing to do would have been to keep his mouth shut on this particular explosive topic until after the election, and use another issue for "pandering".   Biden's comments may or may not have forced his hand, but regardless,  this was likely not timed to get votes. 

But let's put politics aside for a moment.  No, really. Here is what it boils down to.  The President of the United States, one of the most powerful people in the world, and definitely one of the people who has the most to lose by speaking out on a controversial issue, has put aside what is politically expedient and spoken from the heart to publicly support same-sex marriage.  That, in the infamous words of  Vice-President Biden, is a big f-ing deal.  And it's pretty cool.  Same-sex marriage advocates should not waste energy worrying about his timing or his motives.  Take this energy and run with it.  Use it to open minds and change laws.  Trickle-down economics may not work, but trickle-down fairness actually stands a chance.

 

Austerity: coming to the United States?

 Although he would never dare label it as such, Paul Ryan's 2012 budget plan, unveiled last month, is an austerity budget, of the sort passed in several Eurozone countries in the past few years to help reduce their huge deficits.  There are two problems with the United States adopting Ryan's plan.  First, an austerity budget generally includes tax HIKES, which add to revenue and enhance the effect of spending cuts by chipping away at the deficit.  Ryan's budget instead includes tax CUTS, which reduce revenue, and cancel out spending cuts, bringing us to a net deficit reduction of zero.  Second, the steep spending cuts often simply do not work as planned.  Austerity budgets in general tend to depress economic growth, which slows consumer spending and costs jobs, and ultimately causes governments to lose even more money in tax revenues.  Additionally, the cuts disproportionately affect the poorest segments of the population.  The combination results in the unfortunate situation where the country is driven back into recession, and more citizens are in need of social services that are no longer being funded.  The experiences of the United Kingdom and Italy are cases in point.

In the United Kingdom, although deficit reduction is on target since austerity measures were passed a year ago, the economy shrank .2% in the final quarter of 2011, and again in the first quarter of 2012, meaning that Britain is officially in recession, which is one of the greatest dangers of austerity measures.  Despite the shrinking economy new measures were announced by  last week, which will reduce police forces, lower welfare payments, and cut up to half a million public sector jobs.  Prime Minister David Cameron still insists that Britain will continue on the austerity path, and that the country's ability to borrow is more important than anything else.  He also claims - arguably - that spending in the private sector is key to growth, and government must make it easier for the wealthy to unlock their capital.  Time will tell if he is correct, or if the British economy will continue to contract.

In Italy, prime minister Mario Monti took the other path, and decided last week that economic growth was more important than the austerity measures that threatened to plunge the country deeper into recession.  A 30 billion Euro ($39.6 billion) austerity plan rushed through at the end of last year is largely to blame for Italy's recession.  The goal of the shift from austerity to stimulus is to break the austerity-recession-austerity cycle faced by many Eurozone countries. 

After these cautionary tales, now back to the Ryan budget proposal. Under his plan, domestic discretionary spending - essentially everything but entitlement spending and defense - would be cut from 4% of GDP to 2.1%; the lowest level in over 50 years.  However, Ryan has failed to specifically state where those cuts would take place. It is safe to assume that safety net programs like housing vouchers and nutrition assistance for women and infants; most of the funding for the enforcement of consumer protection, environmental protection, and financial regulation; and practically all of the federal government’s civilian public investments, such as infrastructure, education, training, and research and development would need to be slashed.  Oh, and all these cuts will be basically cancelled out by lowering the top individual income tax rate to 25% and reducing the corporate income tax rate to 25% from its current 35%, while providing little or no tax relief for the middle or lower classes.  The proposal claims that many tax deductions and credits would be eliminated, but completely fails to state which ones.  I'd bet my mortgage deduction that, well, the mortgage deduction will be one of the first to go. That's a deduction, coincidentally or not, that helps the middle class at least as much, and probably more, as it does the wealthy.

Anyone who says that the Paul Ryan budget doesn't disproportionately burden lower-income Americans is simply wrong.  The cuts affect either job creation or direct assistance to lower-income Americans.  I haven't even touched on Ryan's proposed Medicare reform, which merits its own blog (coming soon).  Cutting social spending and giving tax breaks to big business does two things:  it stops the poor and middle classes from buying anything; and instead of encouraging businesses to re-invest in the economy, it encourages them to hold onto their wealth.  Which is sort of where we are right now.  Which is a good reason to go in another direction, the direction of stimulus.  Yes, we need to reduce our debt.  But why do we have to do it on the backs of average Americans?  That's actually not a rhetorical question; I'd love to hear an answer....

 

(You've gotta) fight for your right (to vote!)

For most Americans, being asked to show ID is not a big deal.  If I were asked to show my driver's license at my polling place, it wouldn't be a problem. It can be difficult to even imagine living without government-issued identification.  But according to a study by the Brennan Center of the NYU School of Law , as many as 10% of Americans do not have such IDs, and in a growing number of states they run the very real risk of not being able to cast a ballot.  Some say the solution is simply for these people to obtain an ID prior to Election Day.  But IDs are generally not free; therefore a person who otherwise has lived without government-issued identification must now essentially pay for the right to vote...otherwise known as a poll tax, illegal in all federal elections.  But the voter ID laws keep coming.  The number of states with laws requiring voters to show identification quadrupled in 2011.  Perhaps not surprisingly, only one of those states (Rhode Island) passed such a law with a Democratic legislature.  Random fact: in Texas, a conceal-carry gun license would be considered a suitable ID for voting, while a college ID is not.   

At least 15 states have introduced legislation that requires proof of citizenship (birth certificate or passport) in order to register to vote.  Having a passport, or having a birth certificate handy, is even more rare than having an ID among some segments of the population, and trying to track down a copy of one's birth certificate can be an onerous task, and again, can cost money.  Arizona's proof of citizenship requirement was just struck down on April 17 by the 9th Circuit Court of Appeals, which said that the requirement was in violation of the National Voting Rights Act.  The court upheld, however, the requirement to show ID at the polls.  The plaintiffs can appeal to the U. S. Supreme Court, which, if they take the case, would be a pivotal moment for the future of voting rights.

There are other changes being made to the voting process that could potentially affect people's ability to register or to get to the polls.  Lawmakers in half a dozen states made changes to the voter registration process in 2011.  These include laws restricting community voter registration drives.  Why?  Again, the claim is that these changes will reduce voter fraud, but there is no evidence of registration drives leading to increased fraud. Applications for voter registration are checked for accuracy before being entered into the registration system, and most fake applications are caught easily (i.e. applications from Jimmy John and Ben Dover will likely not be accepted).  What these laws most certainly do, however, is make it difficult for community organizations to help low-income and minority citizens register to vote.  In fact,  African Americans and Hispanics are twice as likely to register to vote through drives than are white voters. If these people do not have or intend to get a driver's license, the "Motor Voter" laws are of no help. Even the non-partisan groups League of Women Voters and Rock the Vote have suspended their voter registration drives in Florida for fear of violating the law and being subject to stiff fines.

Fortunately, many of these laws are coming under extra scrutiny, thanks to Section 5 of the Voting Rights Act. Section 5 states that the Department of Justice must  "preclear" any attempt to change “any voting qualification or prerequisite to voting, or standard, practice, or procedure with respect to voting..." in any "covered jurisdiction".  Covered jurisdictions are states, towns, or counties with an egregious history of discrimination against minority voters.  Newly enacted voter ID laws in South Carolina and Texas were blocked by the Justice Department under Section 5.  The law in Florida limiting registration drives, although not blocked, was challenged in court, and the Justice Department has stated in a court filing that the law may have a discriminatory intent, because it disproportionately affects the registration of minorities.

The fact is, most election fraud does not take place at the ballot box.  It happens at the ballot processing or counting stage.  Voter impersonation is very uncommon, yet it is the reason bandied about by all of the legislatures that have passed these voter laws.  It might or might not be a coincidence that every one of these new laws disproportionately affect the ability of minorities and low-income people to vote, but that will be up to the courts to decide.  The point is that the National Voting Rights Act prohibits any voting practice or procedure that has any discriminatory result. The 1982 amendment to the Act provides that proof of intentional discrimination is not required.  If it limits  access to the electoral process to any minority group, it can be prohibited.

Voting is a right granted to all citizens, not all citizens who have a driver's license, or all citizens who happen to have a copy of their birth certificate, or all citizens who can find a place to register.  We should be encouraging more people to vote, not making it more difficult.  The repressed voters just might vote out all of the officials who tried to keep them silent on Election Day.

 

Is there really a Republican war on women?

Democrats claim that the GOP has been attacking women's health and rights all year. Republicans retort that Democrats themselves are creating a false war on women...simply by calling it that.  So which is it? Well, this "war" did not begin with Democrats pointing fingers or mainstream media shrieking; it began with the sheer number of proposed and enacted laws that would limit women's reproductive freedoms.  It began with attempts to limit women's access to contraception, in the name of "religous freedom".  It began with the shrill calls to end all government funding of Planned Parenthood.  The rest of us are just calling these lawmakers out on their irrational urge to send womens rights and freedoms straight back into the 1950s.

In 2011, 135 provisions related to reproductive health and rights had been enacted in 36 states, compared with 89 such provisions in 2010 and 77 in 2009.  92 of those provisions - in 24 states - restricted access to abortion services.  In 2010, only 24 provisions restricted abortion.  Of this year's provisions, many require counseling prior to abortion (including telling the woman that a fetus is a person who can feel pain), limit insurance coverage of abortions, or require ultrasounds prior to abortions.  All of these may have a chilling effect on abortions, but they ignore the reasonable approach, that is, to prevent pregnancy in the first place through education and access to contraception. These laws instead intimidate women into carrying their baby to term by putting up obstacles to abortion.  Even worse are the proposed personhood amendments, which would essentially criminalize all abortions, forcing women to give birth against their will.  Like it or not, abortion is legal.  No one should be prevented from obtaining one if that is their choice. Those who say that requiring a waiting period, being forced to look at an ultrasound, and requiring counseling about how a fetus feels pain are merely steps to make sure a woman is fully informed are lying.  These are steps to dissuade women from having a legal medical procedure. I did mention that abortion is legal, didn't I?  If you don't believe in it, don't have one.  It's really that simple.  Your freedom to oppose abortion stops at my uterus.

Attacks on contraception, namely birth control pills, are even more egregious, considering the number of women who rely on the pill throughout their reproductive years - and the simple fact that the pill can lessen the need for the aforementioned abortions. In Arizona, where the weather is beautiful but the laws get ever more cray cray, legislators advanced a bill last month that would allow employers to fire women who use contraception to prevent pregnancy, if the employer has a moral objection to it.  Further, a female employee can be forced to prove that she uses birth control pills to treat a medical condition in order that they be covered by insurance. Say what?  Don't even try to give me the religious freedom argument for this one.  This bill would allow employers to force their own morals and beliefs onto their female employees. Not to mention that sharing one's medical history with one's employer is a huge invasion of privacy.  Fortunately, since not all Arizona lawmakers are insane, the bill was voted down earlier this month, but it was resurrected last week on a smaller scale, giving the freedom to deny contraceptive coverage to church-run affiliates, like universities and hospitals.  I'm not a fan of this compromise, either, since Catholic hospitals and universities have many non-Catholic employees (in fact, they are often so large that they must hire non-Catholic employees to have enough staff), and they provide secular services to people of all religions.  Given those facts, these organizations should also not be able to force their employees to conform to their beliefs.

 

Why are states even discussing bills like this right now?  I thought that following the 2010 elections, Republicans were going to be all about job creation, not procreation.  Yet between arguing over contraceptive coverage at the federal level, and limiting abortions at the state level, it seems that an inordinate amount of time has been spent on women's bodies in the past year.

I know that there are Republican women - and men - who are aghast at the extreme stance taken by some Congressmen, Presidential candidates, and state legislatures against women's rights to choice and privacy. Some of them are my friends...and some of them are elected officials. Even Republican Senator Lisa Murkowski of Alaska said as much.  "It makes no sense to make this attack on women," she said at a local Chamber of Commerce luncheon. "If you don't feel this is an attack, you need to go home and talk to your wife and your daughters."  She was joined by fellow Republicans Olympia Snowe and Kay Bailey Hutchison in criticizing the recent deluge of anti-choice legislation.  John McCain, when asked by Meet the Press' David Gregory last month if the war on women was real, was slightly less articulate, but seemed to understand the reason for the outrage.  "I think we have to fix that. I think that there is a perception out there because of how this whole contraception issue played out — ah, we need to get off of that issue, in my view."  So even some Republicans are acknowledging that this has gotten way out of hand.  I would really appreciate hearing more objections from the Republicans who get it, who understand that women are capable of making their own decisions, and that forcing one's own morals on all women is not considered an advancement to society.  Please, please let us hear your voices of reason.

Is there a war on women?  You bet.  But there's an election coming up, and women are perfectly capable of fighting right back with our votes.