FRANK FRITZ, HEALTHCARE DIRECTOR
If you are interested in hearing more from Frank and discussing your own opinions on healthcare policy, come to GW Roosevelt Institute’s Fireside Chat on the Affordable Care Act this Thursday, February 27th.
When discussing health care policy, a sometimes tempting line of thought emerges; instead of the government expanding its role in health care, it would be more efficient to allow the open market of consumers, providers and insurers find the best prices through competition. This is an appeal to empirical economics, as opposed to a more vague argument about freedom, basic rights, or national interests. So if it is an economic argument, what do economists think? Polarizing liberal economists such as Paul Krugman would reject it arguing instead for a British or Canadian-style government single payer system. Steven Brill, in a front page investigative article in Time Magazine, examined the American health care system—he found that while it is the most unregulated in the world, it is also the most expensive.
Why has the open market failed to provide the lower prices for health care? Is the solution to double down on our market based system? The field of healthcare economics simply does not support this approach. Over 50 years ago, economist and Nobel laureate Kenneth Arrow published “Uncertainty and the the Welfare Economics of Medical Care” in The American Economic Review. The crux of the paper is that health care is not a typical good; the market will not succeed because of numerous factors which when taken together lead to insurmountable market failure. Arrow notes “virtually all of the special features of this industry, in fact, stem from the prevalence of uncertainty.” The two essential points that complicate healthcare economics are as follows:
The Irregular Demand for Care
Excluding preventative care, health care is not a normal good, such as an automobile. The demand for medical services is irregular, because illnesses arise at unexpected times. It is difficult to compare prices between providers, because unlike shopping for a car, illness is almost always an unexpected expense that must be treated, lest the patient face a future loss of income.
Second, doctors are unique when it comes to purchasing a service. By their very nature, a doctor is expected to be more knowledgeable than a patient about health care. A great level of trust must exist between a doctor and their patient; healthcare professionals by their very nature are also much more invested in a patient’s welfare than typical service positions like a waiter or barber.
Third, when receiving care, a patient must deal with extraordinary uncertainty. It is impossible to “test-drive” a medical treatment, especially in cases such as a surgery. There is no guarantee that an expensive procedure will work, and even if it does, recovery times can differ greatly from patient to patient.
The Limits of Supply in the Healthcare market
Doctors, by their trade, are skilled individuals with a high barrier to entry. The licensing and education process to become a practitioner is long, difficult, and expensive. Because of this fact, the supply of doctors will always be limited due to difficulties in gaining certification, prices of medicine are always going to be difficult to control from a market perspective.
Arrow notes that when markets fail, “society...will recognize the gap, and nonmarket social institutions will arise attempting to bridge it”. This means the burden of funding health care must fall upon groups within a society, not just individuals. It is our role as members of a democratic society to formulate economically-sound public policy to improve the provision of health care.
KIMBERLY CHAN, ENERGY AND ENVIRONMENT DIRECTOR
Last week, the Agricultural Act of 2014 was passed by the House and signed by President Obama. The 959-page Farm Bill outlines reforms of everything related to agriculture and the economy and will run on a budget of $956 billion per year over the next decade. While its passage is being lauded as a great bipartisan effort, the bill contains gaping loopholes that will end up having serious consequences for those at the bottom.
The bill’s major cuts come mostly from gauging food stamps, known as the Supplemental Nutrition Assistance Program (SNAP). Citing “abuses” and food stamp fraud, the Bill cuts its $80 billion yearly spending by 1%, and prohibits recruitment activities which “persuade an individual to apply for program benefits or that promote the program”.
However, the bill does not tighten the belt for all Americans. The bill’s expanded crop insurance (Agricultural Risk Coverage) program will be run by “18 companies that are paid $1.4 billion annually by the government” planning to pay 62% of farmers’ premiums. A privacy protection clause in the bill ensures that the premium recipients will not be disclosed.
These reforms play out as a massive contradiction. The government is funding private companies with taxpayer money while taking a chunk of a vital lifeline for 47 million SNAP-reliant Americans. For instance, food stamps cuts would force recipients to consume cheaper, pre-prepared frozen products or GMOs instead of fresh produce. Cuts to food stamps that harm nutrition essentially amounts to a subsidizing of poor diets for millions of Americans, further adding to national problems like obesity and heart disease.
Expanding the crop insurance program while cutting from food stamps is a move that blatantly favours large agricultural corporations, landowners and insurance companies. The generous funding for crop insurance has raised concerns of misuse of non-arable land by groups who can afford it in order to claim extra insurance subsidies. A blurred line between business and politics is also at play here – The Environmental Working Group reports that 23 Members of Congress or their family members benefited from $6 million in taxpayer-funded farm subsidy payments between 1995 and 2011.
At the end of the day, the Farm Bill does little to close spending loopholes or reduce the wealth gap. Of the $40 billion in projected savings over ten years from ending direct payments, $27 billion will go right back into these insurance programs. The current congress is more than happy to claim a bipartisan “win” while leaving to the American people a deeply flawed bill.
ERIN AGNEW, DEFENSE AND DIPLOMACY DIRECTOR
The financial crisis of 2008 left the United States with a national unemployment rate skyrocketing from 4.6% to 10.2% in a matter of three years. Workers from across the country began to struggle to feed their families, make mortgage payments on time, and save for retirement. Congress began to struggle to stabilize the economy, preserve jobs, and stay competitive with our biggest trading partners in the European Union. But as Germany and the US experienced similar GDP growth rates post-recession, Germany’s unemployment rate fell lower than it had been pre-recession, leaving the US to play catch up, let alone keep up.
The first attempted fix in 2008 extended Unemployment Insurance benefits to the newly jobless for a full year and allowed those already receiving unemployment insurance to do so for seven weeks past the original six month period. The bill offered $6 billion of benefits to job seekers, while making a disproportionate $700 billion available in direct bridge loans to banks and automobile manufacturers, to boost domestic manufacturing.Much of this funding went to technological development, though, leaving re-hiring workers out of the equation and actually eliminating future positions even as productivity increased.
The industries which were offered loans accepted them and maxed out the allocated funds, while unemployment remained consistently high. In fact, recovery from the US’s latest recession and financial crisis has been slower than recovery from any crisis in the nation’s history. After most other recessions, growth in the two years following the recession was greater than the decline from the beginning to the lowest slump of the recession. Studies in 2010 and 2011 suggest that this pattern didn’t repeat in 2009 and 2010 because of insufficient or misapplied stimulus spending, or more intriguingly, uncertainty about economic policy.
When the EU banded together to address the crisis-exacerbated unemployment rate of 9.7%, it was with a focus on increasing the employment market and worker adaptability. With a series of specific guidelines for different countries’ needs, the EU encouraged all members to “promote innovative forms of labor organization”, “facilitate workers occupational transitions”, and ensure that the “tax burden on the low paid [is] reduced”. In a section focused on improving human capital, the 2008 act encouraged “openness and equality” in educational systems, which are “accessible to all”, and provide “diversity of training opportunities and possibilities for mobility”. In the last two years, 84% of Europeans polled say they are confident they will retain their current job, while 70% are confident they will have a job in two years (this includes those just entering the workforce).
When applied in Germany, one of the US’s key EU trading and diplomatic partners, the employment policy guidelines did wonders. To address worker adaptability, the Bundestag instituted the policy of Kurzarbeit. Translating to “short work”, it offers job security to workers and lower operating costs to employers. While US unemployment insurance works retroactively to offer financial support approximating a salary, Kurzarbeit pays workers 60% of lost income when hours are reduced more than 10%. This pay keeps workers in jobs which they sought during better economic times. It increases genuine leisure hours and allows workers to spend time with family rather than working two and three jobs.
Germany’s current unemployment rate has fallen to 5.2%, while the U.S. still struggles with a rate of 7.3%. And the 5,600,000 Americans who receive unemployment insurance benefits saw their income cut between 10% and 20% during last year’s sequester and halted again during the government shutdown. Germany clearly identified their policy goal as keeping their workers from becoming victims of their economic circumstances. Current US unemployment policy merely purports to sustain workers short term, while they seek out jobs that have not yet been created.
As it stands, even the assurance of a safety net while seeking employment is in question as the Senate process a bill to extend long term unemployment benefits again. Were US policymakers to take a page out of Germany’s fiscal book, we could see improvements in quality of life and decreases in unemployment overnight. A subsidized salary and limited working hours program like Kurzarbeit would keep workers in jobs and keep productivity high. Redirecting federal funds for corporate research and development towards increasing accessibility to higher and vocational education would help to create a pool of workers equipped to contribute and not overly burdened by debt. Extending unemployment insurance now will keep the bottom from falling out under 5,600,000 Americans. Restructuring the American approach to job security in the coming years could have us caught up, and keeping up with the competition.
Learn more about the U.S. Unemployment Insurance program and sign a petition urging Congress to extend benefits.
Our members watched the State of the Union last night together. Here are some of their thoughts:
"While I was pleased to hear the announcement of an increase in minimum wage for federally contracted workers through an executive order, President Obama must also put in place limitations on the payrolls of corporate executives, which will hold them accountable for funneling taxpayer money into their own pockets. That sort of change will not come from the corporate-controlled White House, so progressives must shift their focus to the grassroots, bottom-up approach."
--Yasemin Ayarci, Chapter President (@DCyasemin)
"Watching the webcast with the corresponding graphs and diagrams, I was glad to see more substantive policy and slightly less rhetoric than past addresses, but some statements on progressive causes still felt shallow. On education, I was very happy to see the backing of a pre-K expansion, but dismayed at the few new ideas presented on improving college affordability."
--David Meni, Vice President (@TheDavidMeni)
"Any congressional action this year on issues progressives care about will depend on passage in the Republican-controlled House. Last night’s speech sought important solutions to our upward mobility crisis once popular with conservatives: education reform, job training, infrastructure, and a tax overhaul. Despite many important issues left unmentioned, the solutions proposed to reduce inequality may have the support necessary get through the lower chamber--and a chance at helping alleviate the many structural economic challenges too many Americans face."
--Zach Komes, Policy Director (@ZachKomes)
"Another beautifully crafted address by President Obama but as a Progressive, I found alarming the lack of any mention about unchallenged rape endemic in the military & his comments on foreign policy were largely anodyne. In fact, the 'Pivot to Asia' was notably absent, unless this is effectively his apparent support for the Trans-Pacific Partnership. On that note, I wonder when Obama will elucidate the opaque contents of the TPP treaty."
--Francisco Alvarez, Energy and Environment Policy Center Member (@F_J_Alvarez)
"I felt that the President's agenda was too broad and scattered to achieve all, or even most, of the goals that he put forth. If he devoted more effort to a single issue and made that the single crusade of the year, it would have a better chance of actually leading to real, measurable good."
--Matthew Kasturas, Freshman Representative
"While I enjoyed President Obama’s encouraging overall tone about the importance of increasing opportunities for all Americans, I found some of his policy suggestions to be a little vague. For example, although the broad idea of gun control was mentioned, specifics about his gun control platform weren't present, which is disappointing considering the amount of school shootings that have taken place in the last month alone."
--Kinjo Kiema, Freshman Representative (@Captain_Kinj)
"I thought President Obama’s speech had several strong, substantive policy proposals. However, I sincerely hope that his 'All of the Above' energy policy prioritizes renewable sources such as solar and wind, and does not include the Keystone XL Pipeline."
--Eric Wolfert, Outreach Director (@EricWolfert93)
What did you think of the #SOTU? Comment below and let us know your perspective!
YASEMIN AYARCI, CHAPTER PRESIDENT
Do you know who the main employer of low-wage workers is? You might think Walmart or McDonalds, but it’s actually the President of the United States. Through federal contracts, the national government employs nearly 2 million workers, many of which are paid wages too low to support themselves and their families. All eyes are on President Obama’s State of the Union address tonight, where reports say he will announce an executive order to raise the minimum wage for federal contractors to $10.10 an hour by 2016.
The support for this move has been mounting: the vast majority of Americans support the wage raise, as doing so would improve our economy and create jobs. However, the main pressure pushing Obama to sign this order has come from below. Right in his backyard, Pentagon workers took to the streets in a strike to demand higher wages on Wednesday, following the footsteps of workers at the Ronald Reagan Building, Union Station, and Smithsonian museums. Disgruntled with their working conditions and living standards, many of these workers are hoping that their pressure will finally force the President to raise federal labor standards.
Low wages aren't just felt by federally contracted workers, like those in the District; the American taxpayer has been the biggest demographic paying the price. The federal government currently subsidizes various different services from private corporations through federal contracts, and billions of taxpayer dollars go to companies that pay their workers poverty-level wages. The progressive think tank Demos found that these private corporations have transferred nearly $24 billion in federal funds into executive pay, all while their workers are struggling to make a living. Further, as federal contractors continue to ensure that their workforce is not generating enough income to provide for life's basic necessities, employees are forced into taxpayer-funded government aid programs, like food stamps and Medicaid. In effect, taxpayers are paying the price for a system that rewards corporate executives and leaves workers with no other choice than continued poverty.
“Whatever executive authority I have to help the middle class, I’ll use it,” pledged Obama in a speech last July. Although $10.10 is not enough to pull people from poverty wages, President Obama can indeed use his powers to boost millions of workers into better living conditions with a stroke of a pen.
But with the vast majority of both political parties bought by the same corporations and wealthy donors, federally contracted workers should not rely so much on the President and the Democratic establishment for their well-being. Obama has not been short on his critiques of income inequality before, all while stuffing his cabinet with corporatists figures who have contributed to the growing inequality gap. It’s the taxpayers who will pay for an increase in the federal minimum wage; the President has not called on reforms that hold corporatists funneling money out of our government accountable. This is a band-aid move by a corporate controlled administration that has time and time again failed to make Wall Street and the banks pay for their destruction.
While I support any advances in the conditions of the working class, this movement must not be co-opted by false hope and temporary solutions. As revolutionary activist Nelson Mandela said, "[Poverty] is man-made and it can be overcome and eradicated by the actions of human beings." Mandela knew that South Africa’s majority could never achieve liberation without radical restructuring of wealth and power. Indeed, a rearrangement that puts the needs of workers first is the only solution to income inequality in the United States. Our nation’s federally contracted workers must continue to build their own independent political movement that fully works to address their struggles and the struggles of all workers.
RACHEL WHITBECK, EQUAL JUSTICE DIRECTOR
The revolving door of the American prison system has been well-documented in recent decades: Two thirds of released prisoners will later return to incarceration. This is largely due to the fact that many employers believe that if an ex-convict breaks the law while on the job, the employer might be faced with a lawsuit, and they therefore screen out any applications that checked “yes” on the question of whether the applicant has been convicted of a crime. This makes it difficult for people with criminal backgrounds to find employment, which contributes to the high prevalence of those who eventually find their way back in prison.
Today, 25 percent of adults—65 million nationwide—have criminal records. Those that must indicate their conviction record on a job application cannot indicate the nature of the crime—such as whether the conviction was a felony or a misdemeanor—and many of these ex-convicts have never served time in jail or prison. In fact, in 2011, 48 percent of inmates in American prisons were being held for drug offenses. While many employers screen out applicants with criminal records, Pamela Paulk of Johns Hopkins Health System claims that, in her experience, employees with criminal backgrounds tend to be the most motivated employees with a higher rate of retention than the average worker.
As of mid-2013 10 states and 50 localities have passed “Ban the Box” laws, which prohibit employers from including a checkbox inquiring whether the applicant has a criminal record in an initial screening process. In December 2010, the Council of the District of Columbia passed the Returning Citizens Public Employment Inclusion Act of 2010, which amended the District of Columbia Government Comprehensive Merit Personnel Act of 1978. The 2010 act decrees that the District government is prohibited from inquiring about criminal history on the application form for jobs that are “not covered” (a position for which a background check is not required by law); public employers may only ask an applicant about their criminal history only after the screening process, at which time the applicant is permitted to explain any criminal history. The District does not currently require private employers to undergo the same non-discrimination practices.
On November 5, 2013, NPR News’ Tell Me More program interviewed Madeline Neighly of the National Employment Law Project (NELP). As she states, the issue of inquiring about criminal backgrounds is partly a racial issue: A 2003 Princeton University study found that a white male without a criminal record had, on average, a 34 percent chance of receiving a call after applying for a position, whereas a white male with a criminal record had a 17 percent chance. For a black man, the percentages are drastically altered: He has a 14 percent chance at a callback without a criminal record, and only a five percent chance with one. As it is, 37.8 percent of American inmates were African American in 2011. In the District, if current trends continue, three out of four young African American men are likely to be incarcerated at some time. Neighly emphasizes that convicts who have served their sentences “really need a chance to reintegrate into their community.”
Truth is, many ex-convicts are the products of underprivileged neighborhoods and troubled families. If DC passes a more comprehensive law that 'bans the box' in private sector hiring practices, thousands of residents would find it easier to gain employment to support their own futures and stop the revolving door of American prisons.
The Ban the Box Coalition is currently pushing to pass the Human Rights for Ex-Offenders Act, which aims to end discrimination against people with criminal records by private employers and land lords (except where the crime directly relates to the job or housing offered).
Click here to sign the petition to support this act, and join the GW Roosevelt Institute and the DC community in taking further action to help pass this vital piece of legislation in the District.
OUR OFFICIAL BLOG
The Roosevelt Reader is a space where RI@GW members discuss innovative policy solutions to the pressing political issues facing the District, the nation, and the world.
WRITE FOR US
Your ideas matter. And we want to help broadcast them to the world. Learn more how to become a blog contributor.